UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


=5^ 


Tt- 


^^O^^ 


^gj^l                 i 

ii^ 

'^tPHJIH 

^^^VfBw^^^^^l 

^^iJiw^^^l 

-i2S3i^^5fl^^H^^^^^^^^^^^I 

^H 

^^^^^B 

■     ^B 

'^j^a^BB^^^^^^B 

A  TREATISE 


EQUITY  JURISPRUDENCE, 


AS   ADMINISTERED  IN 


THE  UNITED  STATES  OF  AMERICA; 

ADAPTED  FOR  ALL  THE  STATES, 

AND 

TO  THE  UNION  OF  LEGAL  AND  EQUITABLE  REMEDIES 

UNDER  THE  REFORMED  PROCEDURE. 
By  JOHN  NORTON  POMEROY,  LL.D. 


SECOND  EDITION, 

BY 

CARTER  PITKIN  POMEROY  and  JOHN  NORTON  POMEROY,  Jr., 

OF  THE   SAN  FRANCISCO  BAB. 


IN  THREE  VOLUMES. 

Vol.   II. 


SAN  FRANCISCO: 
BANCROFT-WHITNEY    COMPANY, 

Law  Publishers  and  Law  Booksellebu. 

1899. 


Elntered  according  to  act  of  Congress  in  the  year  1881,  by 

JOHN  NORTON  POMEROY, 
In  the  office  of  the  Librarian  of  Congress,  at  Washington, 


Entered  according  to  act  of  Congress  in  the  yesur  1892,  by 

ANNIE  R.  POMEROY, 
In  the  office  of  the  Librarian  of  Congress,  at  Washington. 


TABLE  OF  CONTENTS. 


SECTION    IV. 

COKCERNINO  PKRFORMANCB, 

$  578.  Rationale. 

§  579.  Definition. 

{§  5S0-583.  I.  Covenant  to  purchase  and  settle  or  convey. 

§  580.  General  rule:  Lechmere  v.  Earl  of  Carlisle. 

§  581.  Forms  of  covenant  to  which  the  rule  applies, 

§  582.  Special  rules. 

§  583.  Such  covenant  creates  no  lien. 

|§  584-586.  II.  Covenant  to  bequeath  personal  property. 

§  584.  General  rule:  Blandy  v.  Widmore;  Goldsmid  v.  Goldsmid. 

§  585.  Limitations  on  the  rule;  covenant  must  not  create  a  debt  in  life» 
time  of  deceased. 

§586.  A  legacy  not  a  performance;   distinction  between    "perform- 
ance" and  " satisfaction  of  legacy." 

§  587.  Presumption  of  performance  by  trustees. 

§§  588-590.  Meritorious  or  imperfect  consideration;  theory  of. 

§§  589,  590.  Defective  execution  of  powers,  relief  of. 

§  590.  Requisites  for  such  relief;  a  partial  execution  necessary; 


SECTION    V. 

COITCERNIXO   NOTICE. 

§  591.  Questions  stated.     Le  Neve  v.  Le  Neve. 

§  592.  Knowledge  and  notice  distinguished. 

§  593.  Kinds;  actual  and  constructive, 

§  594.  Definition. 

f§  595-G03.  Actual  notice. 

§  596.  When  shown  by  indirect  evidence. 

§  597.  What  constitutes;  rumors;  putting  on  inquiry,  ettt, 

|§  59S-602.  Special  rules  conoeming  actual  notice. 

§  G03.  Effect  of  knowledge  instead  of  notice. 

§§  604^609.  Constructive  notice  in  general. 

§  G05.  Jones  v.  Smith,  opinion  of  V.  C.  Wigram. 

§§  606,  G07.  ^Vhen  the  presumption  is  rebuttable;  due  inquiry, 

§  608.  When  it  is  conclusive. 

§  609.  Species  of  constructive  notice. 


IV 


TABLE   OF   CONTENTS. 


S§  610-G13.  1.  By  extraneous  facts;  acts  of  fraud,  negligence,  or  mistakei 
general  rule  as  to  putting  on  inquiry;  visible  objects,  etc 

§§  614-625.  2.  By  possession  or  tenancy. 

§§  61-4,  615.  General  rules,  En<:;lisli  and  American 

§§  616-G18.  Extent  and  effect  of  the  notice. 

§§  619-622.  Nature  and  time  of  the  possession. 

§§  623,  624.  Whether  the  presumption  is  rebuttable  or  not. 

§  625.  Possession  by  a  tenant  or  lessee. 

§§  626-631.  3.  By  recitals  or  references  in  instruments  of  title. 

§  626.  General  rules. 

§§  627-631.  Nature  and  extent  of  the  notice;  limitations;  instances,  etCt 

§§  632-640.  4.  By  lis  pendens. 

§  632.  Rationale:  Bellamy  v.  Sabino. 

§§  633,  634.  General  rales;  requisites. 

§§  635,  636.  To  what  kind  of  suits  the  rule  applies; 

§§  637,  63S.  "What  persons  are  affected. 

§§  639,  640.  Statutory  notice  of  lis  pendens. 

§§  641-643.  5.  By  judgments. 

§§  644-665.  6.  By  recording  or  registration  of  instrumentfli 

§§  645,  646.  (1)  The  statutory  system;  abstract  of  statutes. 

§§  647-649.  (2)  General  theory,  scope,  and  object  of  the  legislation. 

§§  650-654.  (3)  Requisites  of  the  record  in  order  that  it  may  be  a  notice. 

§  655.  (4)  Of  -what  the  record  is  a  notice. 

|§  656-653.  (5)  To  -whom  the  record  is  a  notice, 

§  657.  Not  to  prior  parties. 

§  658.  To  subsequent  parties  holding  under  the  same  source  of  title: 
effect  of  a  break  in  the  record. 

§§  659,  660.  (6)  Effect  of  other  kinds  of  notice  in  the  absence  of  a  record. 

§§  GG\-G6').  (7)  Vi'hat  kinds  of  notice  will  produce  this  effect. 

§  662.  English  rule. 

§§  6C3,  661.  Conflicting  American  rules;  actual  or  constructive  notice, 

§  6G5.  True  rationale  of  notice  in  place  of  a  record. 

§§  666-676.  7.  Notice  between  principal  and  agent. 

§§  666-6G9.  Scope  and  applications. 

§§  670-675.  Requisites  of  the  notice. 

§  670.  (1)  Notice  must  be  received  by  agent  during  his  actual  employ- 
ment. 

§§  671,  672.  (2)  And  in  the  same  transaction;  when  in  a  prior  transaction. 

§  673.  (3)  Information  must  be  material;  presumption  that  it  was  com* 
municated  to  the  principal. 

§§  674,  675.  Exceptions:  Agent's  own  fraud. 

§  676-  True  rationale  of  tliis  rule. 


SECTION  VI. 


CONCERNING   PRIORITIBS. 

§  677.  Questions  stated. 

f§  678-692.  First.  The  fundamental  principles. 

§§  679-681.  J.  Estates  and  interests  to  which  the  doctrine  applies. 

§  682.  II.  Equitable  doctrine  of  priority,  in  general. 


TABLE  OF  CONTENTS. 


§§  C  33-692. 

§CS3. 
§§  6S4-C32. 

§6S5. 
§§  GS6,  6S7. 
§3  GS3-G92. 

§CSS. 

§GS9. 
§§  C90-G02. 
§§  o03-73i. 
§§  G93-715. 

§603. 
§§  69-1-696. 

§694. 
§§  695-697. 

§§  698-702. 

§698. 

§§  699-701. 


§702. 
§§  703-715. 
§§  704-706. 

§704. 
§3  705,  706. 
§3  707-713. 

§707. 
§§  70S,  709. 
§i  710,  711. 

§712. 

§713. 
§§  714,  715. 

§714. 

§715. 
§§  716-732. 

§717. 
§§  718,  719. 

§719. 
§§  720-726. 

§720. 
§§  721,  722. 

§  723. 

§724. 

§  725. 

§726. 

§§  727-729. 

§  723. 


III.  Superior  and  equal  equities. 

When  equities  are  equal. 

Superior  equities  delined  and  described. 

1.  From  their  intrinsic  nature. 

2.  From  the  effects  of  fraud  and  negligence,/ 

3.  From  the  effects  of  notice. 
General  rules  and  illustrations. 
Notice  of  a  prior  covenant. 

Time  of  giving  notice,  and  of  what  it  consistflj 
Second.  Applications  of  these  principles. 
Assignments  of  things  iu  action. 
Dearie  v.  Hall. 

I.  Notice  by  the  assignee. 

Notice  to  debtor  not  necessary  as  between  assignor  and  assigne*. 
English  rule,  notice  to  debtor  necessary  to  deteruiiuo  the  pri- 
ority among  successive  assignees. 

II.  Diligence  of  the  assignee. 
General  rules:  Judson  v.  Corcoran. 

Assignment  of  stock  as  between  assignee  and  assignor,  and  the 
company,  judgment  creditors  of  assignor,  and  subsequent  par* 
chasers. 

Notice  to  the  debtor  necessary  to  prevent  his  subsequent  acta. 

III.  Assignments  of  things  in  action  subject  to  equities. 

1.  Equities  in  favor  of  the  debtor. 

General  rule:  assignments  of  mortgages;  kinds  of  defcnsea. 
Provisions  in  codes  of  procedure. 

2.  Equities  between  successive  assignors  and  assignees. 
Conflicting  decisions;  mode  of  reconciling. 

General  rule:  assignment  subject  to  latent  equities;  illustrations. 
"When  the  rule  does  not  apply;  effect  of  estoppel;  true  limits  of 

the  estoppel  as  applied  to  such  assignments. 
Subsequent  assignee  obtaining  the  legal  title  protected  as  a  bona 

fide  purchaser. 
Successive  assignments  by  same  assignor  to  different  assignees. 

3.  Equities  in  favor  of  third  persons. 

General  rule:  assignments  subject  to  such  equities. 
Contrary  rule:  assignments  free  from  all  latent  equities. 
Equitable  estates,  mortgages,  liens,  and  other  interests. 
Doctrine  of  priorities  modified  by  recording  acts. 

I.  Priority  of  time  among  equal  equities. 

Illustrations:  simultaneous  mortgages,  substituted  liens,  eto. 

II.  One  equity  intrinsically  the  superior. 
Prior  general  and  subsequent  specilic  lien. 

Prior  unrecorded  mortgage  and  subsequent  docketed  judgment. 

Same,  where  judgment  creditor  had  notice. 

Prior  unrecorded  mortgage  and  purchase  at  execution  sale  under 

a  subsequent  judgment. 
Purchase  money  mortgages. 
.Other  illustrations. 

III.  A  subsequent  equity  protected  by  obtaining  the  legal  title. 
Legal  estate  obtained  from  a  trustee. 


Vi  TABLE   OF   CONTENTS. 

§  729.     Legal  estate  obtained  after  notice  of  prior  equity, 

§  730.     IV.  Notice  of  existing  equities. 
|§  731,  732.     V.  Effect  of  fraud  or  negligence  upon  priorities. 
fi§  733,  734.     Assignments  of  mortgages,  rights  of  priority  depending  upoa 
them. 


SECTION  VII. 

CONCERNING    BONA    FIDE    PURCHASE    FOR    A    VALUABLE    CONSIDERATION    AM» 

WITHOUT  NOTICE. 

§  735.     General  meaning  and  scope  of  the  doctrine. 

§  736.     General  effect  of  the  receding  acts. 
8§  737-744.     First,  Rationale  of  the  doctrine. 

§  738.     Its  purely  equitable  origin,  nature,  and  operation. 

§  739.     It  is  not  a  rule  of  property  or  of  title. 
§§  740,  741.     General  extent  and  limits;  kinds  of  estates  protected. 
§§  742,  743.     Phillips  v.  Phillips;  formula  of  Lord  Westbury. 
§§  745-762.     Second.  What  constitutes  a  bona  fide  purchase. 
§§  746-751.     I.  The  valuable  consideration. 

§  747.     1.  What  is  a  valuable  consideration;  illustrations, 
§§  748,  749.     Antecedent  debts,  securing  or  satisfying;  giving  time,  etc. 
§§  750,  751.     2.  Payment;  eflfect  of  part  payment;  giving  security. 
§§  752-761.     II.  Absence  of  notice. 

§  753.     1.  Efifects  of  notice  in  general. 

§754.     Second  purchase  without  notice  from  first  purchaser  twzYA;  alao 
second  purchaser  with  from  first  purchaser  without  notice. 

§  755.     2.  Time  of  giving  notice;  English  and  American  rules. 

§  756.     Effect  of  notice  to  a  bona  fide  purchaser  of  an  equitable  interest 
before  he  obtains  a  deed  of  the  legal  estate. 
§§  757-761.     3.  Recording  in  connection  with  notice. 

§  758.     Interest  under  a  prior  unrecorded  instrument. 

§  759.     Requisites  to  protection  from  the  first  record  by  a  subsequent 
purchaser. 

§  7G0.     Purchaser  in  good  faith  with  apparent  record  title  from  a  grantor 
charged  with  notice  of  a  prior  unrecorded  conveyance. 

§  761.     Break  in  the  record  title;  when  purchaser  is  still  charged  with 
notice  of  a  prior  instrument. 

§  762.     III.  Good  faith. 
S§  763-778.     Third.  Effects  of  a  bona  fide  purchase  as  a  defense. 

§  764,     I,  Suits  by  holder  of  legal  estate  under  the  auxiliary  jurisdiction 
of  equity,  discovery,  etc. 

§  765.     Same:  exceptions  and  limitations. 
S§  766-774,     II,  Suits  by  holder  of  an  equitable  estate  or  interest  against  % 
purchaser  of  the  legal  estate. 

§  767.     Legal  estate  acquired  by  the  original  purchase. 

§  768.     Purchaser  first  of  an  equitable  interest,  subsequently  acquires 
the  legal  estate;  "  tabula  in  naufi-agio." 

§  769,     Extent  and  limits  of  this  rule. 

§  770.     Purchaser  acquires  the  legal  estate  from  a  trustee. 
f§  771-773.     This  rule  as  applied  in  the  United  States. 


TABLE  OF  CONTENTS.  Vll 

§  774.  Other  instances;  purchase  at  execution  sale;  purchase  of  thiagi 
in  action. 

§§775-778.  III.  Suits  by  holders  of  an  "equity." 

§  776.  For  relief  against  accident  or  mistake. 

§§  777,  778.  For  relief  from  fraud,  upon  creditors,  or  between  parties. 

§§  779-783.  Fourth.  Affirmative  relief  to  a  bonajide  purchaser. 

§  779.  General  rule. 

§§  7S0-7S2.  Illustrations. 

§  783.  Removing  a  cloud  from  title. 

§§  784,  785.  Fifth.  Mode  and  form  of  the  defense. 

§  78-4.  The  pleadings. 

§  785.  Necessary  allegations  and  proofs. 


SECTION  VIII. 

CONCERNINO    MERGEK. 

§  786.  Origin  and  nature  of  the  doctrine, 

787,  788.  First.  Merger  of  estates. 

§  787.  I.  The  legal  doctrine. 

§  788.  II.  The  equitable  doctrine. 

789-800.  Second.  Merger  of  charges. 

§  790.  I.  The  oll^ior  of  the  property  becomes  entitled  to  the  charge. 

§  791.  Same:  Intention  prevents  a  merger. 

§  792.  Time  and  mode  of  expressing  the  intention. 

§  793.  Conveyance  to  the  mortgagee;  assignment  to  the  mortgagor  or 
to  his  grantee. 

§  794.  Merger  never  prevented  when  fraud  or  wrong  would  result. 

§  795.  Life  tenant  becomes  entitled  to  the  charge. 

§  796.  II.  The  owner  of  the  land  pays  off  a  charge  upon  it. 

§  797.  Owner  in  fee  personally  liable  for  the  debt  pays  oflf  a  charge, 

§  798.  Owner  who  is  not  liable  for  the  debt  pays  oflf  a  charge. 

§  799.  Life  tenant  pays  off  a  charge. 

§  800.  Priorities  affected  by  merger. 

SECTION  IX. 

CONCERNING   EQUITABLE   ESTOPPEU 

8  801.  Nature  of  the  riglits  created  by  estoppel. 

§  802.  Origin  of  equitable  estoppel. 

§  803.  How  far  fraud  is  essential  in  equitable  estoppels. 

§  804.  Definition. 

§  805.  Essential  elements  constituting  the  estoppel. 

§  806.  Theory  that  a  fraudulent  intent  is  essential. 

§  807.  Fraudulent  intent  necessary  in  an  estoppel  aflfecting  the  leg»l 
title  to  land. 

808-812.  Requisites  further  illustrated. 

§  808.  The  conduct  of  the  party  estopped. 

§  809.  Knowledge  of  the  truth  by  the  party  estopped, 

§  810.  Ignorance  of  the  truth  by  the  other  party. 

§  811.  Intention  by  the  party  who  is  estopped. 


Vlll 


TABLE  OP  CONTENTS. 


§  812.  Tne  conduct  must  be  relied  upon,  and  be  an  mducement  for  the 

other  party  to  act. 

§  813.  Operation  and  extent  of  the  cstoppeL 

§  814.  As  applied  to  married  -women. 

§  815.  As  applied  to  infants. 

816-821.  Important  applications  in  equity. 

§  816.  Acquiescence. 

§  817.  Same:  as  preventing  remedies. 

§  818.  Same:  as  an  estoppel  to  rights  of  property  and  contract 

§  819.  As  applied  to  corporations  and  stockholders. 

§  820.  Other  instances  of  acquiescence. 

§  821.  Owner  estopped  from  asserting  his  legal  title  to  land. 


CHAPTER    THIED. 

CERTAIN   FACTS   AKD    EVENTS   WHICH   ARE    THE  OCCASIONS   OF    EQUITAB;-B 
PEIMAKY   OK   EEMEDIAIi   EIGHTS. 

§  822.     Introductory  paragraph. 

SECTION  I. 

ACCIDENT. 

§  823.  Definition.  '-•* 

§  824.  Rationale  of  the  jurisdiction. 

§  825.  General  limitations  on  the  jurisdiction. 

§§  826-829.  Instances  in  which  the  jurisdiction  does  not  exist. 

§  826.  Non-performance  of  contracts. 

§  827.  Supplying  lost  or  destroyed  records. 

§  828.  Other  special  instances. 

§  829.  Parties  against  whom  the  jurisdiction  is  not  exercised. 

{§  830-837.  Particular  instances  of  the  jurisdiction. 

§  831.  1.  Suits  on  lost  instruments. 

§  832.  Same:  instruments  not  under  seal. 

§  833.  2.  Accidental  forfeitures. 

§  834.  3.  Defective  execution  of  powers. 

§  835.  Powers  held  in  trust  will  be  enforced, 

§  836.  4.  Relief  against  judgments  at  law. 

§  837.  5.  Other  special  instances. 


SECTION   IL 


§  838.  Origin  and  purpose  of  this  jurisdiction. 

§839.  I.  Definition. 

8§  840-856.  II.  Various  kinds  of  mistakes  which  furnish  an  occasion  for 

relief. 

§§  841-851.  First.  Mistakes  of  law. 

§  842.  The  general  rule  and  its  limitations. 

§  843.  Mistake  as  to  the  legal  import  or  effect  of  a  transaction. 

§§  841-851.  Particular  instances  in  which  relief  will  or  will  not  be  granted 


TAELE   OF   CONTENTS. 


IX 


§  845.     Reformation  of  an  instrument  on  account  of  a  mistake  of  law. 

§  846.     Mistake  common  to  all  the  parties:  mistake  of  a  plain  rule. 

§  847.     Mistake  of  law  accompanied  with  inequitable  conduct  of   the 

other  party. 
§  848.     Same:  between  parties  in  relations  of  trust. 
§  849.     Relief  where  a  party  is  mistaken  as  to  his  own  existing  legal 

rights,  interests,  or  relations. 
§  850.     Compromises  and  voluntary  settlements  made  upon  a  mistake 

as  to  legal  rights. 
§  851.     Payments  of  money  under  a  mistake  of  law. 
§§  852-856.     Second.  Mistakes  of  fact. 

§  853.     How  mistakes  of  fact  may  occur. 

§  854.     In  what  mistakes  of  fact  may  consist. 

§  855.     Compromises  and  speculative  contracts. 

§  856.     Requisites  to  relief:   mistake  must  be  material  and  free  from 

culpable  negligence. 
6§  857-867.     III.  How  mistake  may  be  shown:  when  by  parol  evidence. 

§  858.     Parol  evidence  in  general  in  cases  of  mistake,  fraud,  or  surprise. 
§  859.     In  suits  for  a  reformation  or  cancellation:  character  and  effect  of 

the  evidence. 
§  860.     Parol  evidence  in  defense  in  suits  for  a  specific  performance. 
§  861.     Parol  evidence  of  mistake  on  the  plaintiff's  part  in  suits  for  a 

specific  performance:  English  rule. 
§  862.     Same:  American  rule:  evidence  admissible. 
§  863.     Evidence  of  a  parol  variation  which  has  been  part  performed. 
^  864-867.     Effect  of  the  statute  of  frauds  upon  the  use  of  parol  evidence 

in  equitable  suits. 
§  865.     Two  classes  of  cases  in  which  the  use  of  parol  evidence  may  be 

affected  by  the  statute. 
§  866.     General  docti-ine:  parol  evidence  of  mistake  or  fraud  admissible 

in  both  these  classes  of  cases. 
§  877.     Glass  v.  Hulbert:  examination  of  proposed  limitations  upon  this 

general  doctrine. 
§§■  808-871.     IV.  Instances  of  equitable  jurisdiction  occasioned  by  mistake, 
§  868.     When  exercised  by  way  of  defense. 

§869.     By  way  of  affirmative  relief :  recovery  of  meney  paid  by  mistake, 
§  870.     Affirmative  relief:  reformation  and  cancellation. 
§  871.     Conditions  of  fact  which  are  occasions  for  affirmative  relief. 


SECTION    III. 


ACTUAL     FRAUD. 

5  872.  Objects  and  purposes. 

§  873.  Description;  essential  elements. 

§  874.  Four  forms  and  classes  of  fraud  in  equity, 

§  875.  Nature  of  actual  fraud. 

g§  870-899.  First.     Misrepresentations. 

§  877.  I.  The  form:  an  afiirmation  of  fact. 

§  878.  Misrepresentation  of  matter  of  opinion. 

§  879.  II.  The  purpose  for  which  the  representation  is  made. 


X  TABLE   OF  CONTENTS. 

§  880.     Presumption  of  the  purpose  to  induce  action, 
§  881.     False  prospectuses,  reports,  and  circulars. 
§  882.     III.  Untruth  of  the  statement. 
§§  8S3-8S9.     IV.  The  intention,  knowledge,  or  belief  of  the  party  making 

the  statement. 
§  884.     The  knowledge  and  interest  requisite  at  law. 
§  885.     The  knowledge  or  intention  requisite  in  equity. 
§§  886-888.     Six  forms  of  fraudulent  misrepresentations  in  equity. 

§  889.     Requisites  of  a  misrepresentation  as  a  defense  to  the  specific  en- 
forcement of  contracts  in  equity. 
§§  890-897.     V.  Effect  of  the  representation  on  the  party  to  whom  it  ia 

made. 
§  890.     He  must  rely  on  it. 
§  891.     He  must  be  justified  in  relying  on  it. 
§  892.     "When  he  is  or  is  not  justified  in  relying  on  it. 
§  893.     Information  or  means  of  obtaining  information  possessed  by  the 

party  receiving  the  representation. 
§  894.     Knowledge  possessed  by  him;  patent  defects. 
§  895.     When  the  knowledge  or  information  must  be  proved  and  not 

presumed. 
§  896.     Words  of  general  caution. 
§  897.     Prompt  disaffirmance  necessary. 
§  898.     VI.  Materiality  of  the  misrepresentation. 
§  899.     Effects  of  a  misrepresentation. 
§§  900-907.     Second.  Fraudulent  concealments., 
§  901.     General  doctrine;  duty  to  disclose, 
§  902.     When  duty  to  disclose  exists. 
§  903.     Concealments  by  a  vendee. 
§  904.     Concealments  by  a  vendor. 
§  905.     Non-disclosure  of  facts  a  defense  to  the  specific  enfoixement  oj 

contracts  in  equity. 
§  906.     Concealments  by  buyers  on  credit. 

§  907.     Contracts  and  transactions  essentially  fiduciary;  suretj'ship, 
§§  90S-909.     Liability  of  principals  for  the  fraud  of  their  agents, 
§§  910-921.     Third.  Jurisdiction  of  equity  in  cases  of  fraud. 
§  911.     Fundamental  principles  of  the  jurisdiction, 
§  912.     The  English  doctrine, 
§  913.     Exception:  fraudulent  wills, 
§  914.     The  American  doctrine. 
§  915.     Incidents  of  the  jurisdiction  and  relief. 
§  916.     The  same;  plaintiff  partkeps  doli;  ratification. 
§  917.     The  same;  promptness;  delay  through  ignorance  of  the  fraud. 
§  918.     Persons  against  whom  relief  is  granted;  bona  fide  purchasers. 
§  919.     Particular  instances  of  the  jurisdiction;  judgments;  awards; 

fraudulent  devises  and  bequests;  preventing  acts  for  the  bero- 

fit  of  others;  suppressing  instruments. 
§  920.     The  same;  appointment  under  powers;  marital  rights;  trusts. 
S  921.     The  statute  of  frauds  not  an  instrument  for  the  accomplishment 

of  fraud. 


TABLE  OF  CONTEXTS. 


Zl 


SECTION  IV. 


CONSTUUCTIVE    FRAUD. 

§922.     Definition:  essential  element j. 

§  923.     Three  principal  classes. 
§§  924-942.     First.  Constructive  fraud  apparent  from  the  intrinsic  nature  and 
subject  of  the  transaction  itself. 

§  925.     I.  Inadequacy  of  consideration. 

§  926.     Inadequacy  pure  and  simple. 

§  927.     Gross  inadequacy  amounting  to  fraud. 

§  928.     Inadequacy  coupled  with  other  inequitable  incidents. 
§§  929-936.     II.  Illegal  contracts  and  transactions. 

§  930.     1.  Contracts  illegal  because  contrary  to  statute:  usury,  gaming, 
smuggling. 
§§  931-935.     2.  Transactions  illegal  because  opposed  to  public  policy. 

§931.  A.  Contracts  interfering  with  the  freedom  of  marriage;  marriage 
brokerage;  in  restraint  of  marriage;  rewards  for  man-iage; 
secret  contracts  in  fraud  of  marriage;  secret  contracts  to 
marry;  rewards  for  procuring  wills. 

§  932.     Agreements  for  a  separation. 

§  933.     B.  Conditions  and  limitations  in  restraint  of  marriage. 

%  934.  C.  Contracts  directly  belonging  to  and  affecting  business  rela- 
tions; restraint  of  trade;  interfering  with  bidding  at  auctions 
and  governmental  lettings;  puffers;  fraudulent  trade-marks; 
violating  policy  of  statutes  prescribing  business  methods; 
trading  with  alien  enemies. 

§  935.  D,  Contracts  affecting  public  relations;  interfering  with  the 
election  or  appointment  of  officers;  interfering  with  legisla- 
tive proceedings;  ditto  executive  proceedings;  ditto  judicial 
proceedings. 

§  936.     3.  Contracts  illegal  because  opposed  to  good  morals;  for  illicit 
intercourse;  champerty  and  maintenance;  compounding  with 
a  felony  or  preventing  a  prosecution. 
SI  937-942.     III.  Equitable  jurisdiction  in  case  of  illegal  contracts. 

§  937.     In  usurious  contracts;  usurious  mortgages. 

§  938.     In  gaming  contracts. 

§  939.     In  other  illegal  contracts;  explanation  of  maxim,  in  pari,  etc 

§  940.     In  pari  delicto,  general  rules. 

§  941.     In  pari  delicto,  limitations  on  general  rules. 

§  942.     Not  in  pari  delicto. 
§§  943-965.     Second.  Constructive  fraud  inferred  from  the  condition  and  rela- 
tions of  the  immediate  parties  to  the  transaction. 

§  943.     General  description  and  divisions. 
fi§  944-954.     I.  Transactions  void  or  voidable,  with  persons  wholly  or  partially 
incapacitated. 

§  945.     Coverture;  infancy. 

§  946.     Insanity. 

§  947.     Mental  weakness. 

§  948.     Persons  in  vinculis;  ditto  illiterate  or  ignorant. 

§  949.     Intoxication. 


XI 1 


TABLE  OF  CONTENTS. 


§  950.  Duress. 

§  951.  Undue  influence. 

§  952.  Sailors. 

§  953.  Expectants,  heirs,  reversioners. 

§  954.  Post  obit  contracts. 

955-965.  II.  Transactions  presumptively  invalid  between  persons  in  fidu- 
ciary relations. 

§  955.  Circumstances  to  which  the  principle  applies. 

§  956.  Tiie  general  principle. 

§  957.  Two  classes  of  cases  in  which  it  operates. 

§  958.  Trustee  and  beneficiary. 

§  959.  Principal  and  agent. 

§  960.  Attorney  and  client. 

§  961.  Guardian  and  ward. 

§  962.  Parent  and  child. 

§  963.  Other  relations:   executors  and  'administrators;   physician  and 
patient;  spiritual  advisers;  husband  and  wife;  partners,  etc. 

§  964.  Confirmation  or  ratification. 

§  965.  Acquiescence  and  lapse  of  time. 

I  966-974.  Third.  Frauds  against  third  persons  who  are  not  parties  to  tha 
transaction. 

§  967.  Secret  bargains  accompanying  compositions  with  creditors. 

§  968.  Conveyances  in  fraud  of  creditors. 

§  969.  The  consideration. 

§  970.  The  fraudulent  intent. 

§  971.  INIodes  of  ascertaining  the  intent. 

§  972.  Existing  creditors. 

§  973.  Subsequent  creditors. 

§  974.  Conveyances  in  fraud  of  subsequent  purchasers. 


PART    THIRD. 

THE  EQUITABLE  ESTATES,  INTERESTS,  AND  PREVIAIIY  EIGHTS 

RECOGNIZED  AND  PROTECTED  BY  THE 

EQUITY  JURISPRUDENCE. 

§  975.     Preliminary  paragraph. 

CHAPTER    FIRST. 

TEUSTS. 


SECTION   I. 

OKIGIN   OF   USES  AND   TRUST3. 
§  976.     The  testament  in  the  Pvoman  law. 
§  977.     Fideicomrnissa  in  the  Roman  law, 
§  978.     Origin  of  uses. 
§  979.     The  use  at  law. 
§  980.     The  use  in  equity. 


TABLE    OF    CONTENTS.  Xlll 

S  981.     Resulting  uses;  equital)le  theory  of  consideration, 
§  982.     Double  nature  of  property  in  land,  the  use  and  the  seisin. 
§983.     The  "statute  of  uses." 

§  984.     Kinds  of  uses  not  embraced  within  the  statute. 
§  985.     A  use  upon  a  use  not  executed  by  the  statute. 
§  986.     Trusts'after  the  statute;  effect  of  the  statute  in  the  American 
states. 

SECTION  II. 

EXPRESS  PRIVATE  TRU3T3 

§  987.  Classes  of  trusts. 

§§  998-990.  Express  passive  trissts. 

§  989.  Estates  of  the  two  parties;  liability  for  beneficiary'a  debts,  etc. 

§  990.  Rules  of  descent,  succession,  and  alienation. 

S§  991-995.  Express  active  trusts. 

§  992.  Classes  of  active  trusts. 

§  993.  Voluntary  assignments  for  the  benefit  of    creditors;    English 

doctrine. 

§  994.  The  same;  American  doctrine. 

§  995.  Deeds  of  trust  to  secure  debts. 

§§  996-999.  Voluntary  trusts. 

§997.  The  general  doctrine;  incomplete  voluntary  trusts  not  enforced. 

§  998.  When  the  donor  is  tlia  legal  owner. 

§  999.  When  the  donor  is  the  equitable  owner. 

§§  1000,  1001.  Executed  and  executory  trusts. 

§  1001.  Definition  and  description. 

§  1002.  Powers  in  trust. 

§§  1003-1005.  Legislation  of  various  states. 

§  1004.  Judicial  interpretation;  vali<lity  of  trusts. 

§  1005  Interest,  rights,  and  liabilities  of  the  beneficiary. 

SECTION  III. 

HOW   EXPRESS   TRUSTS   ARE   CREATED. 

§  1006.     Trusts  of  real  property;  statute  of  frauds;  writing  necessary. 

§  1007.  Written  declaration  by  the  grantor;  ditto,  by  the  trustee; 
examples. 

§  1008.  Trusts  of  personal  property  may  be  created  verbally;  what 
trusts  are  not  within  the  statute. 

§  1009.  Words  and  dispositions  sufficient  to  create  a  trust;  examples. 
§§  1010-1017.  Express  trusts  inferred  by  construction,  sometimes  improperly 
called  "implied  trusts." 

§  1011.     1.  From  the  powers  given  to  the  trustee. 

§  1012.     2.   Provisions  for  maintenance;  examples. 

§  1013.     3.  To  carry  out  purposes  of  the  will. 

§1014.     4.  From  "  precatory  "  words;  Knight  v.  Knight;  examples. 

§  1015.  Modern  tendency  to  restrict  this  doctrine;  in  the  United 
States. 

§  1016.  What  intention  necessary  to  create  the  trust;  the  general  cri- 
terion; examples. 

§  1017.     Objections  to  the  doctrine. 


§  1018. 

§  1019. 

§  1020. 

S§  1021-1024. 

§  1021. 

§  1022. 

§  1023. 

§1024. 

'   §  1025. 

§  1026. 

§  1027. 

§  102S. 

§  1029. 

XIV  TABLE    OF    CONTENTS. 


SECTION   IV. 
FUELIC   OR   CIIARrfABLB  TRUSTS. 
General  description. 

A  public,  not  a  private,  benefaction  requisite. 
What  are  charitable  uses  and  purpoaea:  "Statute  of  charl* 

table  uses." 
Clasises  of  charitable  qsea. 

1.  Religious  purposea. 

2.  Benevolent  purposeg. 

3.  Educational  purposes. 

4.  Other  public  purposes. 

Creation  of  the  trust:  certainty  or  uncertainty  of  the  objecl 

and  of  the  beneficiaries. 
Certainty  or  uncertainty  of  the  trustees. 
The  doctrine  of  cy-pres. 

Origin  and  extent  of  the  equitable  jurisdiction. 
Charitable  trusts  in  the  United  States. 


SECTION  V. 

tKUSTS   ARISING  BY  OPERATION    OF    LAW  —  RESULTING   AND   CONSTRUCTIVB 

TRUSTS. 
General  nature  and  kinds. 
First.     Resulting  trusts. 
First  form:  trusts  resulting  to  donor. 

1.  Property  convej'ed  on  some  trust  which  fails. 
Same;  essential  elements. 

2.  A  trust  declared  in  part  only  of  the  estate  conveyed. 

3.  In  conveyances  without  consideration. 
Parol  evidence. 

Second  form:  conveyance  to  A,  price  paid  by  B. 
Special  rules. 

Purchase  in  name  of  wife  or  child. 
Admissibility  of  parol  evidence. 
The  same;  between  family  relatives. 
Legislation  of  several  states. 
Interest  and  rights  of  the  beneficiary. 
Second.     Constructive  trusts. 
Kinds  and  classes. 

1.  Arising  from  contracts  express  or  implied. 

2.  Money  received  equitably  belonging  to  another. 

3.  Acquisition  of  trust  property  by  a  volunteer,  or  purcbasef 
with  notice. 

4.  Fiduciary  persons  purchasing  property  with  trust  funds. 

5.  Renewal  of  a  lease  by  partners  and  other  fiduciary  persons. 

6.  Wrongful  appropriation  or  conversion  into  a  dififerent  form 
of  another's  property. 

§  1052.     7.  Wrongful  acquisition  of  the  trust  property  bv  a  trustee  or 
other  fiduciary  person. 


§  1030. 

§§  1031-1043. 

§§  1032-1036. 

§  1032. 

§  1033. 

§  1034. 

§  1035. 

§  1036. 

§§  1037-1043. 

§  1038. 

§  1039. 

§  1040. 

§  1041. 

§  1042. 

§  1043. 

j§  1044-1058. 

§  1045. 

§  1046. 

§  1047. 

§1048. 

§  1049. 

§  1050. 

S  1051. 

TABLE    OP    CONTENTS.  XV 

§  1053.  8.  Trusts  ex  mal^Jtcio. 

§  1054.  (1)  A  devise  or  bequest  procured  by  fraud. 

S  1055.  (2)  Purchase  upon  a  fraudulent  verbal  promlia, 

I  1056.  (3)  No  trust  from  a  mere  verbal  promisa 

§  1057.  9.  Trust  in  favor  of  creditors. 

S  105S.  Rights  and  remedies  of  the  beneficiarios. 

SECTION  VI. 

POWERS,    DUTIES,    AND   LIABILITIES   OF   EXPRESS   TRCSTB£S 

8 1059.     Divisions. 

§  1060.     First.     Powers  and  modes  of  acting, 
f§  1061-1083.     Second.     Duties  and  liabilities. 
f§  1062-1065.     I.    To  carry  the  trust  into  execution. 

§  1062.     1.   The  duty  to  conform  strictly  to  the  directions  of  the  trust. 

§  1063.     2.    The  duty  to  account. 

§  1064.     3.   The  duty  to  obey  directions  of  the  court. 

§  1065.     4.   The  duty  to  restore  the  trust  property  at  the  end  of  the 
trust. 
S§  1066-1074.     11.   To  use  care  and  diligence. 

§  1067.     1.   The  duty  of  protecting  the  trust  property, 

§  1068.     2.    The  duty  not  to  delegate  his  authority. 

§  1069.     3.   The  duty  not  to  surrender  entire  control  to  a  co-trnsteo. 

§  1070.     4.   The  amount  of  care  and  diligence  required. 

§  1071.     5.  The  duty  as  to  investments. 

§  1072.     The  necessity  of  making  investments. 

§  1073.  Kinds  of  investments:  When  particular  securities  are  expressly 
authorized. 

§  1074.     The  same:  When  no  directions  are  given. 
§§  1075-1078.     III.  To  act  with  good  faith. 

§  1075.  1.  The  duty  not  to  deal  with  the  trust  property  for  his  own 
advantage. 

§  1076.     2.  The  duty  not  to  mingle  trust  funds  with  his  own. 

S  1077.  3.  The  duty  not  to  accept  any  position,  or  enter  into  any  re- 
lation, or  do  any  act  inconsistent  with  the  interests  of  the 
beneficiary, 

I  1078.     4.  The  duty  not  to  sell  trust  property  to  himself,  uor  to  buy 
from  himself. 
S§  1079-1083.     IV.  Breach  of  trust,  and  liability  therefor. 

§  1080.     Nature  and  extent  of  the  liability. 

§  lOSl.     Liability  among  co-trustees. 

§  1082.     Liability  for  co-trustees. 

§  1083.     The  beneficiary  acquiescing,  or  a  party  to  the  breach  of  traet. 

I  10S4.     Third.     The  trustee's  compensation  and  allowances. 

§  1085.     Allowances  for  expenses  and  outlays;  lien  therefor, 

S  1086.     Fourth.     Removal  and  appointment  of  trusteea, 

S  1087.     Appointment  of  new  trustees. 


XVI  TABLE  OF  CONTENTS. 

SECTION  VII. 

COEPORATION  DIRECTOKS   AND   OTHER  QCTASI  TRUSTEBS, 

§  1088.  Quasi  trustees;  fiduciary  persons. 

§  10S9.  Corporation  directors  and  ofBcers. 

§  1090.  Trust  relations  in  stock  corporations. 

§  1091.  Liability  of  directora  for' a  violation  of  their  trust. 

§  1092.  First  class:  Directors  guilty  of  fraudulent  misrepresentationB, 

etc. 

§1093.  Second  class:    C77<ra  I'ires  proceedings  of  directors. 

§  1094.  Third  class:     Wrongful  dealing  with  corporate  property. 

§  1093.  Fourth  class:    The  same;  the  corporation  refuses  to  sue. 

§  1096.  Special  classes. 

§  1097.  Guardians. 

CHAPTER  SECOND. 

ESTATES   AND   INTEBESTS   OF   MARRIED  WOMEIT* 

SECTION  I. 
THE  SEPARATE  ESTATE  OF  BIARRIED  WOMEK, 

§  1098.  Origin  and  general  nature. 

§  1099.  Statutory  legal  separate  estate  in  the  United  States. 

§  1100.  How  the  separate  estate  is  created;  trustees  not  neceSSfliyi 

§  1101.  The  same:  By  what  modes  and  instruments. 

§  1102.  The  same:  What  words  are  sufficient. 

§  1103.  What  property  is  included. 

I  1104.  Her  power  of  disposition. 

§  1105.  The  same  in  the  United  States. 

§  1 106.  Her  disposition  under  a  power  of  appointment. 

§  1107.  Restraints  upon  anticipation. 

§  1108.  What  words  are  sufficient  to  create  a  restraint* 

§  1 109.  Effect  of  the  restraint. 

§  1110.  End  of  the  separate  estate;  its  devolution  on  the  wife's  deatlL 

§  1111.  Pin-money. 

§  1112.  Wife's  paraphernalia. 

S  1113.  Settlement  or  conveyance  by  the  wife  in  fraud  of  the  marriage 

SECTION   II. 

THE  wife's   equity  TO  A  SETTLEMENT.' 

§  1114.  General  nature. 

§  1115.  Extent  of  the  wife's  equity:  to  what  property  and  against  what 

persons. 

§  1 116.  When  the  equity  does  not  arise, 

§  1117.  Amount  of  the  settlement. 

§  1118.  Form  of  the  settlement. 

§  1119.  Maintenance  of  wife. 

§1120.  Alimony. 


TABLE    OF    CONTENTS.  XVll 

SECTION  m. 

THE  CONTRACTS   OF   MAKRIED   "WOMEir. 

§1121.  The  general  doctriue. 

§  1122.  Ralionale  of  the  doctrine. 

§  1 123!  Extent  of  the  liability. 

§  1124.  For  what  contracts  her  separate  estate  is  liable. 

§  1125.  The  same;  the  American  doctrine. 

§1126.  To  what  contracts  the  American  doctrine  applieSi 


A  TREATISE 


ON 


EQUITY  JURISPRUDENCE. 


TREATISE 


oir 


EQUITY   JURISPRUDENCE. 


SECTION   IV. 

CONCERNING  PERFORMANCE. 

ANALYSIS. 

S  678.     SatioruiU, 

§579.     Definition. 
II  580-583.     I.    Covenant  to  purchase  and  settle  or  convey. 

§  580.     General  rule:   Lechmere  v.  Earl  of  Carlisle.    ■ 

§  581.     Forms  of  covenant  to  which  the  rule  applies. 

§  582.     Special  rules. 

§  583.     Such  covenant  creates  no  lien. 
S§  584^586.     n.    Covenant  to  bequeath  personal  property. 

§  584.     General  rule:   Blandy  v.  Widmore;  Goldsmid  T.  Goldsmid. 

§  585.     Limitations  on  the  rule;   covenant  must  not  create  a  debt  in  lifa< 
time  of  deceased. 

§  586.     A  legacy  not  a  performance;  distinction  between  "  performance  " 
and  "satisfaction  of  legacy." 

§  587.     Presumption  of  performance  by  trustees. 
§§  588-590.     Meritorious  or  imperfect  consideration;  theory  of. 
§§  589,  590.     Defective  execution  of  powers;  relief  of. 

§  590.     Requisites  for  such  relief;  a  partial  execution  necessary. 

§  578.  Rationale.  —  The  equity  of  Performance  has  a 
close  resemblance  to  that  of  Satisfaction,  and  the  two 
have  sometimes  been  confounded;  yet  there  is  a  clear 
and  essential  distinction  between  them.  Both,  however, 
as  well  as  the  doctrine  of  Election,  ultimately  rest,  as  it 
seems  to  me,  upon  that  broad  principle  of  equity  which 
refuses  to  admit  double  benefits  to  a  single  recipient,  by 
raising  a  presumption  that  only  one  benefit  was  intended. 


§  578  EQUITY   JURISPRUDENCE.  78S 

Where  A  is  under  a  prior  obligation  to  bestow  a  par- 
ticular kind  of  thing  upon  B,  and  he  afterwards  bestows 
upon  B  a  different  kind  of  thing,  the  question  arises, 
whether  the  latter  benefit  was  intended  as  a  substitute  for 
the  prior  obligation.'  The  whole  would  turn  upon  the 
donor's  intention,  although  that  intent  might  be  pre- 
sumed. If  the  second  benefit  was  thus  intended  as  a 
substitute,  it  would  be  a  satisfaction,  and  not  a  perform- 
ance; the  prior  obligation  would  be  satisfied,  but  not  per- 
formed. Equity  would  not  permit  the  recipient  to  claim 
both  benefits;  but  since  he  is  not  bound  to  accept  the 
satisfaction  of  the  obligation  existing  in  his  favor,  he  is 
entitled  to  elect  between  them.  On  the  other  hand,  where 
A  is  under  some  positive  obligation,  as  a  covenant,  to 
bestow  a  particular  kind  of  thing  upon  B,  in  a  certain 
specified  manner,  as  by  conveyance,  or  by  will,  and  in- 
stead thereof  he  either  voluntarily  bestows  the  same  kind 
of  thing  upon  B  in  a  different  manner,  or  else  permits 
the  same  kind  of  thing  to  devolve  upon  B  by  operation 
of  law,  as  by  descent,  or  by  succession,  there  is  clearly  no 
substitution,  and  therefore  no  satisfaction.  Equity,  how- 
ever, sees  in  such  a  transaction  no  indication  of  an  intent 
that  the  recipient  is  to  enjoy  double  benefits;  it  rather 
sees  a  contrary  intention.  If  the  benefit  actually  given 
to,  or  permitted  to  devolve  upon,  B  was  not  intended  to 
be  a  bounty,  and  was  not  a  substitute  for  and  satisfaction 
of  the  prior  obligation,  then  it  can  only  be  regarded  as  a 
performance,  and  A  must  be  presumed  to  have  intended 
to  perform  the  very  duty  which  he  owed  to  B.  In  such 
a  case  B  obtains  the  very  benefit  which  he  had  a  right  to 
demand,  —  the  fulfillment  of  the  very  obligation  existing 
in  his  favor,  —  and  he  has  therefore  no  election.  To  sum 
Tip:  In  satisfaction  a  different  kind  of  thing  is  given^ 
with  the  intention  that  it  shall  be  accepted  as  a  substitute 
for  and  in  lieu  of  the  benefit  due  by  the  terms  of  the 

'  See  quotation  from  Goldsmid  T.  Goldsmid,  1  Swanst.  211,  ante,  in  vol.  1^ 
note  1,  under  §  521. 


789  CONCERNING    PERFORMANCE.  §  579 

original  obligation;  and  the  donee  has,  in  general,  a  right 
of  election.  In  performance,  the  same  kind  of  thing  is 
either  conferred  in  a  different  manner,  or  is  left  to  de- 
volve by  operation  of  law,  with  the  intention  of  thereby 
fulfilling  the  very  terms  of  the  original  obligation;  and 
there  is  no  right  of  election  on  the  part  of  the  recipient. 
While  this  particular  doctrine  concerning  performance 
ultimately  rests,  in  my  opinion,  upon  the  equitable  prin- 
ciple of  antagonism  to  double  benefits,  it  is  undoubtedly 
the  immediate  and  direct  result  of  the  maxim,  Equity 
imputes  an  intention  to  fulfill  an  obligation.  To  this 
maxim  the  doctrine  has  generally  been  referred  by  text- 
writers  and  judges.* 

§  579.  Definition.  —  From  the  foregoing  analysis  it 
appears  that  the  equity  of  Performance  should  be  defined, 
or  rather  described,  as  follows:  When  a  person  has  defi- 
nitely bound  himself  to  do  a  certain  act,  by  which  a  par- 
ticular kind  of  thing  will  be  bestowed  upon  another  in  a 
specified  manner,  and  instead  thereof  he  either  bestows 
the  same  kind  of  thing  upon  the  obligee  in  a  different 
manner,  or  else  permits  the  same  kind  of  thing  to  de- 
volve upon  the  obligee  in  course  and  by  operation  of  law, 
so  that  what  is  thus  done  or  permitted  may  amount  to  a 
complete  or  partial  fulfillment  of  the  existing  obligation, 
then  the  party  will  be  presumed  to  have  done  or  per- 
mitted this  with  the  intention  of  performing  the  very 
obligation  itself  in  whole  or  in  part,  and  the  obligation 
will  be  thus  wholly  or  partially  performed,  as  the  case 
may  be.'  Equity  imputes  to  the  party  an  intention  of 
fulfilling  the  obligation  resting  upon  him,  rather  than  the 
intention  of  violating  that  duty,  or  of  conferring  a  mere 

*  For  an  explanation  of  the  maxim,  v.  Smith,  3  Atk.  323;  Sowden  v.  Sow- 
and  its  efifect  upon  this  and  other  den,  1  Brown  Ch.  582;  3  P.  Wms.  228, 
doctrines,  see  antCf  vol.  1,  §§  420-  note;  Goldsmid  v.  Goldsmid,  1  Swanst. 
422.  211.     The  detinition   given   by   some 

*  Wilcocks  V.  Wilcocks,  2  Vern.  writers  is,  as  it  seems  to  me,  faulty, 
658;  Blandy  v.  Widmore,  1  P.  Wms.  since  the  terms  are  so  broad  and  gen- 
324;  2  Vern.  709;  2  Lead.  Cas.  Eq:,  4th  eral  that  they  necessarily  include 
Am.  ed.,  833;  Lechmere  v.  Earl  of  satisfaction  as  well  as  performance. 
Carlisle,  3  P.  Wms,  211,  227;  Deacon  See,  for  example,  Snell'B  Equity,  193. 


§  680  EQUITY   JURISPRUDENCB.  790 

bounty.  Equity  thus  says,  not  only  that  a  man  should 
be,  but  that  he  is,  just  before  he  is  generous.  The  cases 
involving  this  doctrine  may  be  arranged,  for  purposes  of 
convenience,  into  two  classes:  1.  Where  a  person  cove- 
nants to  purchase  and  settle,  or  to  purchase  and  convey, 
lands,  and  he  afterwards  purchases  such  lands  without 
expressing  any  purpose  for  which  the  purchase  is  made, 
and  does  not  convey  or  settle  them  in  pursuance  of  his 
covenant;  2.  Where  a  person  covenants  to  leave  prop- 
erty by  will,  and  he  does  not  make  the  bequest,  but  on 
his  death  the  covenantee  receives  the  same  kind  of  prop- 
erty by  succession.  These  two  classes  will  be  examined 
separately. 

§  580.  I.  Covenant  to  Purchase  and  Settle  or  Convey, 
— Where  a  person  covenants  to  purchase  lands  and  settle^ 
or  to  purchase  lands  and  convey  them,  and  he  afterwards 
purchases  lands  answering  to  the  description,  —  that  is, 
of  the  same  estate  and  tenure,  —  without  expressing  the 
object  or  purpose  of  making  the  purchase,  and  he  does 
not  convey  or  settle  in  accordance  with  the  terms  of  his 
covenant,  but  dies,  leaving  the  lands  as  part  of  his  estate, 
and  they  devolve  by  descent  upon  the  covenantee  as  heir 
at  law,  then  the  purchase  and  suffering  the  lands  to 
descend  will  be  presumed  to  have  been  with  the  intention 
of  performing  the  covenant  in  whole  or  in  part;  the  ac- 
quisition of  the  lands  by  inheritance  will  be  a  total  or 
partial  performance,  as  the  case  may  be;  the  covenantee- 
heir  cannot  specifically  enforce  the  covenant,  so  far  as  it 
has  thus  been  performed,  against  the  covenantor's  estate.^ 

'  Wilcocks  V.  Wilcocks,  2  Vern.  and  accurate  statement  of  the  entire 
558;  2Lead.  Caa.  Eq.  833;  Lechmere  V.  doctrine;  subsequent  decisions  have 
Earl  of  Carlisle,  3  P.  Wms,  211;  Dea-  simply  repeated  and  applied  its  rea- 
con  V.  Smith,  3  Atk.  323;  Tooke  v.  soning.  I  shall  therefore  quote  frora 
Hastings,  2  Vern.  97;  Sowden  v.  Sow-  this  case  at  some  length;  there  is,  in 
den,  1  Brown  Ch.  582;  Wilson  v.  fact,  but  little  more  to  be  added  for  a 
Piggot,  2  Ves.  351,  35(3;  Mathias  v.  full  exposition  of  the  doctrine.  Lord 
Mathias,  3  Smale  &  G.  552;  Morning-  Lechmere,  upon  his  marriage,  cove- 
ton  V.  Keane,  2  De  Gex  &  J.  29'2.  nanted  to  lay  out,  within  a  year  after 
The  opinion  in  Lechmere  v.  Earl  of  the  marriage,  thirty  thousand  pounds, 
Carlisle,  3  P.  Wms.  211,  has  uni-  in  the  purchase  of  freehold  lands,  in 
formly  been  regarded  as  a  complete  possession,  with  the  consent  of  certaia 


791 


CONCERNING    PERFORMANCE. 


§581 


§  581.     Forms  of  the  Covenant.  —  The  doctrine  is  not 
confined  in  its  operation  to  any  particular  form  of  cove- 


trnstees  named.  The  lands  thus  pur- 
chased he  covenanted  to  settle  in  a 
certain  manner,  among  other  things, 
so  as  to  secure  an  income  of  eight 
hundred  pounds  for  his  wife,  and  with 
remainder  in  all  the  lands  to  his  eldest 
and  other  sons  in  tail,  remainder  to 
himself  and  his  heirs.  At  the  time  of 
his  marriage.  Lord  Lechmere  owned 
some  lands  in  fee.  After  his  marriage 
he  purchased  some  estates  in  fee  of 
about  five  hundred  pounds  per  annum, 
some  life  estates,  some  reversions  in 
fee-expectant  on  prior  life  estates,  and 
contracted  for  the  purchase  of  some 
other  estates  in  fee  in  possession. 
None  of  these  purchases  were  made 
after  consultation  with  or  with  con- 
sent of  the  trustees  named.  He  died 
intestate,  without  making  any  settle- 
ment. Mr.  Lechmere,  his  heir  at  law, 
to  whom  all  his  estates  in  fee  de- 
scended, filed  a  bill  for  a  specific  per- 
formance of  the  covenant,  praying 
that  the  administrators  be  compelled 
to  lay  out  thirty  thousand  pounds  of 
the  personal  estate  of  the  deceased  in 
purchase  of  lands,  as  agreed  by  the 
covenant.  The  master  of  rolls  de- 
creed in  favor  of  a  specific  perform- 
ance, holding  that  none  of  the  lands 
purchased  by  Lord  Lechmere,  and  in- 
herited by  the  plaintifi",  were  in  part 
performance  of  the  covenant.  On 
appeal,  this  decree  was  reversed  by 
Lord  Chancellor  Talbot,  so  far  as  re- 
lated to  the  estates  in  fee  purchased 
after  the  covenant  and  sufi'ered  to 
descend;  such  estates  were  to  be  con- 
sidered as  purchased  in  part  perform- 
ance of  the  covenant.  On  this  subject 
the  chancellor  said:  "  As  to  questions 
of  satisfaction,  where  they  are  properly 
80,  they  have  always  been  between 
debtor  and  creditor,  or  their  represent- 
atives. [This  statement  is  not  exactly 
accurate  as  the  doctrine  of  satisfaction 
is  now  understood.  See  preceding  sec- 
tion, on  satisfaction.]  As  to  Mr.  Lech- 
mere, I  do  not  consider  him  as  a 
creditor,  but  as  standing  in  the  place 
of  his  ancestor,  and  thereby  entitled 
to  what  would  have  vested  in  his  an- 
cestor. A  constructive  satisfaction 
depends  on  the  intention  of  the  party, 
to  be  collected  from  circumstances. 
[He  further  explains  "satisfaction."] 


But  I  do  not  think  the  question  of  sat- 
isfaction properly  falls  within  this 
case,  for  here  it  turns  on  what  was  the 
intention  of  Lord  Lechmere  in  the 
purchase  made  after  the  articles;  for  as 
to  all  the  estates  purchased  precndent 
to  the  articles,  there  is  no  color  vO  say 
they  can  be  intended  in  performance  of 
the  articles;  and  as  to  the  leaseholds 
for  life,  and  the  reversion  in  fee-ex- 
pectant on  the  estates  for  life,  it  can- 
not be  taken  they  were  purchased  in 
pursuance  of  the  articles,  because  they 
could  not  answer  the  end  of  them. 
But  as  to  the  other  purchases  (in  fee- 
simple  in  possession,  etc.),  though  con- 
sidered as  a  satisfaction  to  a  creditor, 
yet  they  do  not  answer,  because  they 
are  not  of  equal  or  greater  value  [i.  e., 
they  do  not  answer  as  a  sati.fjhction]. 
Yet  why  may  they  not  be  intended  aa 
bought  by  him  with  a  view  to  make 
good  the  articles?  Lord  Lechmere 
was  bound  to  lay  out  the  money  with 
the  liking  of  the  trustees,  but  there 
was  no  obligation  to  lay  it  out  all  at 
once,  nor  was  it  hardly  possible  to 
meet  with  such  a  purchase  as  would 
exactly  tally  with"  it.  But  it  is  said 
the  lands  are  not  bought  with  the  lik- 
ing of  the  trustees.  The  intention  of 
naming  trustees  was  to  prevent  un- 
reasonable purchases;  and  the  want  of 
this  circumstance,  if  the  purchases  are 
agreeable  in  other  respects,  is  no  rea- 
son to  hinder  why  they  should  not  be 
bought  in  performance  of  the  articles. 
It  is  objected  that  the  articles  say  the 
lands  shall  be  conveyed  immediately. 
It  is  not  necessary  that  every  parcel 
should  be  conveyed  as  soon  as  bought, 
but  after  the  whole  was  purchased,  for 
it  never  could  be  intended  that  there 
should  be  several  settlements  under 
the  same  articles.  Whoever  is  enti- 
tled to  a  performance  of  the  covenant, 
the  personal  estate  must  be  first  ap- 
plied so  far  as  it  will  go;  and  if  the 
covenant  is  performed  in  part,  it  must 
make  good  the  deficiency.  But  where 
a  man  is  under  an  obligation  to  lay  out 
thirty  thousand  pounds  in  lands,  and 
he  lays  out  part  as  he  can  find  pur- 
chases, which  are  attended  with  all 
material  circumstances,  it  is  more  nat- 
ural to  suppose  those  purchases  made 
with  regard  to  the  covenant  than  with- 


I  582 


EQUITY   JURISPRUDENCE, 


792 


nant.  It  applies  where  a  person,  at  the  time  owning  no 
real  estate,  covenants  to  convey  and  settle,  and  he  after- 
wards purchases  land,  but  does  not  convey  nor  settle  it;* 
where  the  covenant  is  merely  to  settle  lands;^  and  where 
the  covenant  is  to  pay  a  sum  of  money  to  trustees,  to  be 
laid  out  by  them  in  lands,  and  the  covenantor  afterwards 
purchases  an  estate  which  he  does  not  settle  nor  convey 
to  the  trustees.'  The  doctrine  has  also  been  extended  to 
the  case  where  the  obligation  to  purchase  and  settle  lands 
arose  from  a  statute.*  Wherever  such  covenants  are  per- 
formed in  whole  or  in  part  by  a  descent  of  the  lands  to 
the  covenantee,  they  are,  for  the  same  reason,  performed 
by  a  devise  of  the  lands  to  him  from  the  covenantor. 
§  582.    Special  Rules. —  The  following  special  rules  have 


out  it.  When  a  man  lies  under  an 
obligation  to  do  a  thing,  it  is  more 
natural  to  ascribe  it  to  the  obligation 
he  lies  under  than  to  a  voluntary  act 
independent  of  the  obligation.  Then 
as  to  all  the  cases  of  satisfaction,  though 
these  purchases  are  not  strictly  a  sat- 
isfaction, yet  they  may  be  taken  as  a 
step  towards  performance;  and  that 
seems  to  me  rather  his  intention  than 
to  enlarge  his  real  estate.  The  case 
of  Wilcocks  V.  Wilcocks,  2  Vern.  558, 
2  Lead.  Cas.  Eq.  833,  though  there 
are  some  circumstances  that  are  not 
here,  yet  it  has  a  good  deal  of  weight 
•with  me It  is  true,  a  settle- 
ment hath  not  been  made,  but  they 
were  bought  with  an  intention  to  make 
a  settlement,  and  you  can  make  one. 
The  same  will  hold  as  strong  in  the 
present  case,  that  these  lands  were 
bought  to  answer  the  purposes  of  the 
articles,  and  fall  within  that  compass; 
and  it  is  not  an  objection  to  say  they 
are  of  unequal  value,  for  a  covenant 
may  be  performed  in  part,  though  it  is 
not  so  in  satisfaction;  and  in  this  par- 
ticular I  differ  from  the  master  of 
rolls.  There  must  be  an  account  of 
■what  lands  in  fee-simple  in  possession 
■were  purchased  after  the  articles  en- 
tered into,  and  so  much  as  the  pur- 
chase-money of  such  lands  amounts  to 
must  be  looked  on  in  part  satisfaction 
(performance]  of  the  thirty  thousand 
pounds  to  be  laid  out  in  land  under 
the  articles,  and  the  residue  of  the 


thirty  thousand  pounds  must  be  made 
good  out  of  the  personal  estate."  In 
the  leading  case  of  Wilcocks  v.  Wil- 
cocks, 2  Vern.  558,  2  Lead.  Cas. 
Eq.  833,  A  covenanted  on  his  mar- 
riage to  purchase  lands  of  two  hun- 
dred pounds  a  year  value,  and  set- 
tle them  for  the  jointure  of  his  wife, 
and  to  his  first  and  other  sons  in  tail. 
He  purchased  lands  of  that  value,  but 
made  no  settlement,  and  on  his  death 
the  lands  descended  to  his  eldest  son. 
The  eldest  son  filed  a  bill  for  a  specific 
enforcement  of  the  covenant,  but  it 
was  held  that  the  purchase  and  de- 
scent were  a  full  performance,  so  that 
the  bill  stated  no  case  for  relief. 

»  Deacon  v.  Smith.  3  Atk.  323;  and 
see  Wellesley  v.  Wellesley,  4  Mylne  & 
C.  561;  but  see  observations  on  this 
case  in  Mornington  v.  Keane,  2  De 
Gex  &  J.  292. 

*  Tooke  V.  Hastings,  2  Vern.  97; 
Powdrell  v.  Jones,  2  Smale  &  G.  335. 

*  Sowden  v.  Sowden,  1  Brown  Ch. 
582;  3  P.  Wms.  228,  note. 

*  Tubbs  v.  Broadwood,  2  Russ.  & 
M.  487.  The  statute  in  this  case  was 
a  private  act  authorizing  a  tenant  for 
life  to  sell  a  settled  estate,  but  requir- 
ing him  to  lay  out  the  proceeds  in  the 
purchase  of  other  lands,  and  to  settle 
them  upon  the  same  uses.  He  bought 
lands,  but  died  without  making  any 
settlement  of  them. 

*  Wilson  V.  Piggott,  2  Ves.  351,  356^  1 
Watson's  Compendium  of  Equity,  609. 


793  CONCERNING  PERFORMANCE.  §  583 

been  settled  in  connection  with  all  these  forms  of  covenant, 
which  either  expressly  or  impliedly  look  to  a  future  pur- 
chase and  conveyance  or  settlement  of  lands  by  the  cove- 
nantor. Where  the  covenant  specifies  the  value  of  the 
lands  to  be  purchased,  a  purchase  of  less  value  operatei 
as  a  performance  pro  tanto}  In  such  a  covenant,  it  can- 
not be  presumed  that  lands  which  the  covenantor  owned 
at  the  time  of  making  it,  and  which  he  suffers  his  heir  to 
inherit,  were  intended  to  be  acquired  by  the  heir  in  per- 
formance of  the  obligation.^  Also,  if  the  covenantor  pur- 
chases property  of  a  different  nature  —  different  estate  or 
tenure  —  from  that  mentioned  in  the  agreement,  no  pre- 
sumption of  an  intention  to  perform  arises.'  A  provision 
that  the  purchase  is  to  be  with  the  consent  of  trustees 
named  is  not  material,  provided  that  the  purchase  is 
otherwise  a  proper  one,  and  conforms  to  the  terms  of  the 
covenant.* 

§  583.  No  Lien  Created.  —  A  covenant  to  purchase  and 
convey  or  settle,  or  to  convey  and  settle,  lands  generally, 
without  specifjdng  any  parcel  or  tract  of  land  in  particu- 
lar, although  it  may  give  rise  to  the  presumption  that  any 
particular  lands  subsequently  purchased  were  intended 
to  be  in  performance  of  the  obligation,  does  not  create 
a  lien  upon  such  lands  afterwards  purchased,  in  favor  of 
the  covenantee,  and  consequently  a  mortgagor  or  pur- 
chaser of  those  lands,  even  with  notice,  is  not  affected  by 
it;  the  covenantee  cannot  enforce  the  covenant  upon  the 
lands  in  the  hands  of  such  mortgagor  or  purchaser.'  In 
other  words,  while  the  purchase  by  the  covenantor  raises 

'  Lechmere  v.  Earl  of  Carlisle,  3  P.  *  Lechmere   v.    Earl  of    Carlisle,    3 

Wm3.   211;    Lechmere   v.    Lechmere,  P.  Wms.  211. 

Cas.  t.  Talb.  80;  Sowden  v.  Sowden,  *  Mornington  v.  Keane,  2  De  Gex  & 

1  Brown  Ch.  58-2;  3  P.  Wms.  228,  note.  J.  292;  Deacon  v.  Smith,  3  Atk.  323. 

*  Lechmere  v.  Earl  of  Carlisle,  3  P,  In  the  case  of   Mornington  v.  Keane, 

Wms.    211;   Lechmere    v.    Lechmere,  2  DeGex  &  J.  292,  the  subject  is  exam- 

Cas.  t.  Talb.  80;  aee  Wards  v.  Warde,  ined   with   great  care,  the   prior   de- 

16  Beav.  103.  cisions   are   all   compared,  explained, 

'  Lechmere  v.  Earl  of  Carlisle,  3  P.  and  limited,  especially  that  of  Roun- 

"Wms.    211;   Lechmere   v.    Lechmere,  dell  v.  Breary,  2  Vern.    482,  and  the 

Caa.  t.  Talb.  80;  Deacon  v.  Smith,  3  rule   as   stated   in    the    text    is    set- 

Atk.  323;   Pinnell   v.    Hallett,  Amb.  tied.      See  Pinch  v.  Anthony,  8  Al- 

106;  Att'y-Gen.  v.  Whoiwood,  1  Vea.  leu.  536. 
Sr.  534,  540. 


§  584  EQUITY   JURISPRUDENCE.  794 

a  presumption  that  he  intended  thereby  to  perform,  this 
presumption  may  be  overcome  or  destroyed  by  his  con- 
veyance of  the  land  to  a  third  person. 

§  584.  II.  Covenant  to  Bequeath  Property.  —  In  this 
second  class  of  eases  to  which  the  doctrine  applies,  if  a 
person  covenants  to  leave,  or  that  his  executors  shall  pay 
to  a  designated  individual,  a  sum  of  money,  or  a  part  of 
his  personal  estate,  and  the  covenantor  afterwards  dies 
intestate,  and  the  individual  becomes  entitled  to  a  dis- 
tributive share  of  the  personal  property,  equal  to  or 
greater  than  the  amount  agreed  to  be  left  or  paid,  then 
such  share  will  be  a  full  performance  of  the  covenant, 
and  the  beneficiary  cannot  claim  both;  if  the  share  is 
less  than  the  amount  agreed,  it  will  be  jpro  tanto  a  per- 
formance. In  order,  however,  that  the  case  may  fall 
within  the  doctrine,  and  the  distributive  share  be  a  total 
or  partial  performance,  the  covenant  must  be  such  that 
it  is  broken,  if  at  all,  at  or  after  the  covenantor's  death. 
That  the  devolution  of  the  share  is  a  performance  under 
these  circumstances,  and  not  a  mere  satisfaction,  is  ex- 
pressly held  in  several  of  the  decisions.^     The  covenants 

^  Blandy  v.  Widmore,  1   P.   Wins,  attending  upon  it,  will  take  a  provis- 

324;  2  Vern.  209;  2  Lead.  Cas.  Eq.,  4th  ion,  the  covenant  is  to  be  construed 

Am.  ed.,834,  842;  Lee  v.  D'Aranda,  3  with  reference  to  that.'    Considering 

Atk.    419;    Garthshore   v.    Chalie,    10  the  contract  as  made  with  that  refer- 

Ves.    1;     Goldsmid    v.    Goldsmid,     1  ence,  it   must    be  interpreted   as   in- 

Swanst.  211;   Barrett  v.  Beckford,  1  tended  to  regulate  what  the  widow  ia 

Ves.  Sr.  519;  1  P.  Wms.  3J4,  note  1;  to  receive;  and  consequently  when  the 

Thacker  v.  Key,  L.  R.  8  Eq.  408.     In  event  of   intestacy  ensues,  the  single 

Goldsmid  v.  Goldsmid,  1  Swanst.  211,  question  is.  Does  she  not  obtain  that 

which  was  a  case  of  intestacy,  because  for  which  slie  contracted?    If  the  ob- 

the  will  had  failed  to  be  operative,  the  ject  of  the  covenant  is,  that  the  execu- 

iiiaster  of  rolls,  Sir  Thomas  Plumer,  tors  of  the  husband  shall  pay  to  the 

after  commenting  upon  the  prior  au-  widow  a  given  sum,  and  in  her  char- 

thorities   cited  a'jove,  and   after  dis-  acter  of  widow,  created  by  the  same 

tinguishing  the  case  of  a  distributive  marriage  contract,  she  in  fact  obtains 

share  devolving  upon  the  covenantee  from  the  administrator  that  sum,  the 

from  that  of  a  legacy  bestowed  upon  court  is  bound  to  consider  that  as  pay- 

him,  said:  "Lord  Eldon,  in  Garthshore  ment  under  the  covenant.     These  are 

v.  Chalie,  10  Ves.  1,  speaking  of  Blandy  not  cases  of  an  ordinary  debt;  during 

V.    Widmore   and   other    cases,    says:  the  life  of  the  htisband  there  is  no  breach 

'These   cases  are  distinct  authorities  of  the  covenant,  no  debt;  the  covenant 

that  where   a   husband   covenants  to  is,  to  pay  after  his  death,  and  the  in- 

leave  or  to  pay  at  his  death  a  sum  of  quiry  is,  not  whether  the  payment  of 

money  to  a  person  who,  independent  the    distributive  share    is   a  satisfac- 

of  that  agreement,  by  the  relation  be-  tion,  but  a  question  perfectly  distinct, 

tween  them  and  the  provision  of  law  whether  it  is  a  perfor7nance." 


795  CONCERNING  PERFORMANCE.    §§  585,  586 

which  have  ordinarily  belonged  to  this  ciass  have  been 
those  made  b}'-  husbands  to  leave  money  or  property  to 
their  wives,  but  there  are  no  grounds,  upon  principle,  for 
confining  the  rule  to  this  particular  species  of  agreements. 

§  585.  Limitations  —  When  Covenant  Creates  a  Debt 
in  the  Lifetime  of  Deceased. —  The  courts  have  been  care- 
ful not  to  extend  the  rule  controlling  this  class  of  cases 
to  circumstances  in  which  the  reasons  for  it  do  not  apply. 
Where  the  covenant  is  such  that  it  must  be  performed 
during  the  covenantor's  lifetime,  and  the  breach  occurs 
before  his  death,  a  distributive  share  does  not  operate  as 
a  performance,  either  in  whole  or  in  part.  The  breach 
of  such  a  covenant  creates  an  ordinary  debt  due  from 
the  deceased,  and  it  is  well  settled  that  a  distributive 
share  of  the  debtor's  estate  devolving  upon  the  creditor 
cannot  be  treated  as  a  payment  of  his  demand.  An  illus- 
tration of  such  agreements  is  a  covenant  by  a  husband  to 
pay  a  certain  sum  to  his  wife  within  two  years  from  their 
marriage;  he  outlives  the  two  years,  and  dies  intestate^ 
without  having  made  the  payment,  and  leaving  a  large 
distributive  share  to  devolve  upon  her.  She  is  entitled 
both  to  her  distributive  share  and  to  the  sum  due  from 
the  estate  to  her  as  a  creditor.*  Also,  where  the  covenant 
is  not  to  leave  or  pay  a  certain  specified  sum  in  gross,  but 
is  to  give  an  annuity  for  life,  or  the  annual  interest  on  a 
named  amount  for  life,  the  doctrine  of  performance  has 
been  held  not  to  apply .^ 

§  586.  A  Legacy  not  a  Performance.  —  The  devolution 
of  a  distributive  share  in  performance  of  a  covenant  to 
pay  or  leave  money  at  the  covenantor's  death  should  be 
carefully  distinguished,  in  its  effects,  from  a  legacy.  If 
a  husband  has  made  such  a  covenant  to  leave  or  pay  to 
his  widow  a  certain  sum  of  money,  a  bequest  which  he 
may  give  to  her  simpliciter,  either  of  a  definite  amount 

*  Oliver  V.  Brickland,  cited  in  1  Ves.  *  Couch    v.    Stratton,   4   Ves.    391; 

Sr.l,  12;  3  Atk.  420,  422;  Lang  V.Lang,  Salisbury   v.  Salisburj',  6  Hare,  526; 

8  Sim.  451;  and  see  Garthshore  v.  Cha-  Young  v.  Young,  5  L  R.  Eq.  615. 
lie,  10  Ves.  1,  12,  per  Lord  Eldon, 


§  587  EQUITY   JURISPRUDENCE.  796 

or  of  the  whole  or  a  part  of  a  residue,  without  any  provis- 
ion in  the  will  expressly  showing  an  intention  on  his 
part  that  the  gift  was  to  be  in  payment,  will  not  operate 
as  a  performance  of  the  covenant;  a  legacy  is  prima  facie 
a  bounty,  and  gives  rise  to  a  presumption  that  the  testa- 
tor intended  to  increase  the  provision  made  for  his  widow 
by  the  covenant,  and  not  to  pay  and  discharge  it.*  This 
particular  situation  suggests  the  importance  of  distinguish- 
ing, in  general,  between  the  cases  of  performance,  discussed 
in  the  foregoing  paragraphs,  and  the  cases  of  satisfaction 
of  debts  by  legacies,  considered  in  the  preceding  section. 
The  essential  differences  between  satisfaction  and  perform- 
ance have  already  been  sufficiently  pointed  out.  The  in- 
stances of  satisfaction  of  debts  by  legacies  involve  and 
depend  upon  certain  presumptions  which  do  not  exist  in 
cases  of  performance.  "In  eases  of  satisfaction  [i.  e., 
satisfaction  of  debts  by  legacies],  the  presumption  will 
not  hold  where  the  thing  substituted  is  less  beneficial 
(either  in  amount,  or  certainty,  or  time  of  enjoyment,  or 
otherwise)  than  the  thing  contracted  for,  since  satisfac- 
tion implies  the  doing  of  something  equivalent,  and  the 
presumption  is  so  much  weakened  where  the  thing  substi- 
tuted is  not  equivalent  to  the  thing  contracted  for,  and  a 
part  satisfaction  will  not  be  intended;  whereas  in  cases 
where  the  thing  done  can  be  considered  as  a  part  perform- 
ance of  the  thing  contracted  for,  it  shall  be  so  taken.* 

§  587.  Presumption  of  Performance  by  Trustees. — 
There  is  another  and  quite  different  case,  which  has  some- 
times been  regarded  by  writers  and  judges  as  an  instance 
of  performance,  but  which  properly  belongs  to  trusts  aris- 
ing by  operation  of  law.  I  shall  therefore  briefly  men- 
tion it  in  this  connection;  its  full  discussion  will  be  found 
in  the  subsequent   chapter  upon  trusts.      Whenever  a 

'  See  Haines  v.  Mico,  1  Brown  Ch.  '  Note   of  Mr.    Cox    to  Blandy  v. 

129;  Devese  v.  Pontet,  1  Cox,  188,    It  Widmore,  1   P.    Wms.  324;   and  see 

should  be  remembered  that  there  are  no  remarks  in  Goldsmid  v.  Goldsmid.  I 

presumptions  against  double  portions  Swanst.  211,  220,  221;  also  ante,  aoo- 

between  a  husband  and  his  widow.  See  tiou  on  satisfaction, 
the  preceding  section  on  satisfaction. 


797  CONCERNING  PERFORMANCE.  §  588 

trustee  or  other  person  standing  in  fiduciary  relations, 
acting  apparently  within  the  scope  of  his  powers,  has 
trust  funds  in  his  hands,  which  he  ought,  in  pursuance 
of  his  fiduciary  duty,  to  employ  in  the  purchase  of  prop- 
erty for  the  purposes  of  the  trust,  and  he  does  purchase 
property  with  such  funds,  but  takes  the  title  thereto  in 
his  own  name,  without  any  declaration  of  trust,  then  a 
trust  with  respect  to  such  property  at  once  arises  in  favor 
of  the  original  cestui  que  trust  or  other  beneficiary.  Equity 
imputes  an  intention  to  fulfill  the  obligation  resting  upon 
the  trustee;  and,  independently  of  any  element  of  fraud, 
it  regards  the  trustee  as  intending  to  perform  the  obliga- 
tion, —  as  intending  to  act  in  accordance  with  his  fiduciary 
duty,  and  not  in  violation  thereof.  It  therefore  treats 
the  purchase  as  made  for  the  benefit  of  the  person  bene- 
ficially interested.  This  doctrine  is  one  of  wide  opera- 
tion, of  great  efficiency,  and  is  applied  to  every  variety  of 
persons  occupying  fiduciary  relations.^ 

§  588.  Meritorious  or  Imperfect  Consideration.  —  Closely 
akin  to  the  equity  of  performance,  and  properly  a  special 
instance  of  it,  is  that  of  meritorious  or  imperfect  consid- 
eration. Indeed,  all  cases  of  satisfaction  and  of  perform- 
ance have  been  treated  by  some  writers  as  applications 
of  this  equity.*     All  agreements,  so   far  as  the  binding 

*  See  ante,  vol.  1,  §  422.  Committees  of    Lunatics.  — Reid   t. 

rrtis/Swa.— Trench  v.  Harrison,   17  Fitch,  11  Barb.  399. 

Sim.   Ill;   Lench  v.   Lench,    10  Ves.  Agents. — Bridenbecker  v.  Lowell,  .32 

511;  Mathias  V.  Mathias,  3  Smale  &  G.  Barb.  10;  Robb'a  Appeal,  41  Pa.  St.  45. 

552;  Ouseley  v.  Anstruther,  10  Beav.  Partners.  —  Smith    v.    Burnham,    3 

461;  Deg  v.  Deg,  2  P.  Wms.  412,  414;  Sum.  4.35;  Oliver  v.  Piatt,  3  How.  3.33, 

Perry  v.  Phelips,  4  Ves.  108;  17  Ves.  401;  Homer  v.  Homer,  107  Mass.  82; 

173;    Schlaefer   v.    Corson,   52    Barb.  Settembre   v.    Putnam,    30   Cal.    490; 

510;  Ferris  v.  Van  Vechten,  73  N.  Y.  Jenkins  v.  Frink,  ,30  Cal.  586;  89  Am. 

113;    McLarren   v.   Brewer,   51    Me.  Dec.     134.       [An    agreement     among 

402.  mining  partners,  in  pursuance  of  which 

Exeaiiora    and      Administrators.  —  one  of  them  locates  a  claim  in  his  own 

White  V,  Drew,  42  Mo.   561;  Stow  v.  name,  is   a   familiar   instance    in   the 

Kimball,  28  111.  93;  Barker  v.  Barker,  Western  states:  Moritz  v.  Lavelle,  77 

14  Wis.  131.  Cal.  10;  11  Am.  St.  Rep.  229;  Hirbour 

Directors  of  Corporations. — Church  v.  Reeding,  3   Mont.    15;  Murley   v. 

V.  Sterling,  16  Conn.  388.  Ennis,  2  Col.  300;  Welland  v.  Huber, 

Ouardians.  — Johnson  v.  Dougherty,  8  Nev.  203.     See  further,  §  1049.] 

18  N.  J.  Eq.  406;  Bancroft  ▼.  Consen,  ^  gge    Adams'a   Equity,   pp.  97-106 

13  Allen,  50.  (230-244). 


§  589  EQUITY   JURISPEUDENCE.  798 

eflBcacy  of  their  promises  is  concerned,  must  be  referred 
to  one  or  the  other  of  three  causes,  —  a  valuable  considera- 
tion, a  mere  voluntary  bounty,  or  the  performance  of  a 
moral  duty.     The  first  alone  is  binding  at  law,  and  en- 
ables the  promisee  to  enforce  the  obligation  against  the 
promisor.     The  second,  while  the  promise  is  executory, 
is  a  mere  nullity,  both  at  law  and  in  equity.     The  third 
constitutes  the  meritorious  or  imperfect  consideration  of 
equity,  and  is  recognized  as  efifective  by  it  within  very 
narrow  limits,  although  not  at  all  by  the  law.     While  this 
species  of  consideration  does  not  render  an  agreement  en- 
forceable against  the  promisor  himself,  nor  against  any 
one  in  whose  favor  he  has  altered  his  original  intention, 
yet  if  an  intended  gift  based  upon  such  meritorious  con- 
sideration has  been  partially  and  imperfectly  executed  or 
carried  into  effect  by  the  donor,  and  if  his  original  inten- 
tion remains  unaltered   at   his   death,  then  equity  will, 
within  certain  narrow  limits,  enforce  the  promise  thus 
imperfectly  performed,  as  against  a  third  person  claiming 
merely  by  operation  of  law,  who  has  no  equally  meritori- 
ous foundation  for  his  claim.     The  equity  thus  described 
as  based  upon  a  meritorious  consideration  only  extends 
to  cases  involving  the  duties  either  of  charity,  of  paying 
creditors,  or  of  maintaining  a  wife  and  children.     This 
last   duty  of  maintaining  children  includes   persons   to 
whom  the  promisor  stands  in  loco  parentis}     The  specific 
cases  involving  these  three  kinds  of  duties  to  which  the 
doctrine  has  been  applied  by  courts  of  equity  are  the  sup- 
plying surrenders  of  copyholds  against  the  heir,^  and  the 
supporting  and  completing  defective  executions  of  powers, 
where  the  defect  is  formal,  against  the  one  who  would  be 
entitled  in  remainder.     Since  the  first  of  these  cases  does 
not  exist  under  our  law,  it  is  only  necessary  to  consider 
the  second. 

§  589.    Defective  Execution  of  Powers. — Where  the 

Se«  ante,  vol.  1,  §  556,  and  cases        *  Rodgera    v.    Marshall,     17    Ves. 
eited  in  notes.  294. 


799  CONCERNING  PERFORMANCE.  §  590 

defect  in  the  execution  is  merely  formal,  equity  will  sup- 
port, correct,  and  complete  the  defective  execution  of  pow- 
ers, as  against  a  remainderman  who  has  no  equally 
meritorious  claim,  on  behalf  of  the  classes  of  persons  in 
whose  favor  the  "  meritorious  consideration  "  exists, — that 
is,  on  behalf  of  charities,  purchasers,  creditors,  children,  or 
wives.  The  rationale  of  this  doctrine  is  the  following: 
Although  in  the  absence  of  a  valuable  consideration  there 
is  no  complete  obligation  resting  upon  the  promisor,  yet 
from  the  presence  of  the  meritorious  consideration  there 
is,  in  contemplation  of  equity,  as  between  the  meritorious 
beneficiary  and  the  remainderman  possessing  no  equally 
meritorious  claim,  a  quasi  obligation,  —  a  duty  binding  be- 
tween the  parties  thus  situated.  An  attempt  having  been 
made  to  execute  the  power,  which  is  only  formally  defective, 
equity  imputes  to  the  donee  in  making  the  attempt  an  in- 
tent to  fulfill  this  quasi  obligation.  An  intent  to  perform 
having  been  thus  shown  and  partly  accomplished,  a  court 
of  equity  carries  it  into  efiect  by  decreeing  a  complete 
performance.  The  case  is  thus  brought,  in  appearance 
at  least,  within  the  general  principle  concerning  perform- 
ance, and  the  equitable  maxim  which  underlies  that  prin- 
ciple. The  rationale  thus  described  may  be  exceedingly 
artificial;  it  may  be  in  reality  unsound  and  inconsistent 
with  other  established  principles;  but  notwithstanding 
these  objections,  the  doctrine  itself  is  firmly  settled  upon 
the  basis  of  authority.* 

§  590.  Requisites  —  A  Partial  Execution  Necessary.  — 
The  powers  which  the  doctrine  may  thus  enforce  are 
those  given  in  wills,  family  settlements,  and  other  similar 
instruments,  and  not  bare  authorities  conferred  by  law. 
In  the  first  place,  there   must  be  an  execution  of  the 

»  Holmes  v.  Goghill.  7  Ves.  499;  12  .3  Serg.  &  R.   108;   Innes  v.  Sayer,  3 

Ves.  206;   Reid  v.  Shergold,   10  Ves.  Macn.  &  G.  606;  7  Hare,  377  (in  favor 

370;  ToUett  v.  Tollett,  2  P.  Wma.  489;  of  a  charity);  Long  v.  Hewitt,  44  Iowa, 

Bradish  v.  Gibbs,  3   Johns,  Ch.  523;  363;  [American  Freehold  L.   Mtg.  Co. 

Scheuck  v.  EUingwood,  3   Edw.  Ch.  v.  Walker,  31  Fed.  Rep.  103;  Freeman 

175;  Dennison  v.  Goehring,  7  Pa.  St.  v.  Eacho,  79  Va.  43  (defective  execu- 

175;  47  Am.  Dec.  505;  Porter  v.  Turner,  tion  of  power  by  married  woman).] 


§  590  EQUITY   JURISPRUDENCE,  803 

power  by  the  donee  thereof  formally  defective,  or  a  con- 
tract amounting  to  such  a  defective  execution;  otherwise 
the  doctrine  does  not  apply.  If  there  has  been  no  execu- 
tion at  all,  the  court  cannot  interfere;  for  the  donee,  hav- 
ing an  option  by  the  very  terms  of  the  power,  has  shown 
an  intention  not  to  execute.  If  the  defect  is  substantial, 
and  not  formal,  the  court  cannot  relieve,  for  its  inter- 
position would  then  frustrate  the  intention  of  the  donor, 
that  the  power,  if  executed  at  all,  should  be  executed  in  a 
prescribed  manner,  or  by  specified  means.'  In  the  sec- 
ond place,  the  original  intention  of  the  donee  in  making 
the  defective  execution  must  continue  unaltered.  The 
fact  that  the  defective  appointment  is  left  untouched  is 
rather  evidence  that  the  donee's  intention  continued  un- 
changed, than  of  a  contrary  intent.  If,  however,  any 
subsequent  act  of  his  shows  a  change  of  his  original 
intent,  then  the  right  to  the  interposition  of  a  court  of 
equity,  for  the  purpose  of  completing  the  execution,  is 
gone,  since  the  court  interferes  only  to  carry  out  his  in- 
tention, and  never  to  relieve  in  opposition  to  that  inten- 
tion.^ Finally,  the  party  against  whom  the  completed 
execution  is  sought  must  not  have  an  equally  meritorious 
claim.  If,  therefore,  the  heir  at  law  or  remainderman  to 
whom  the  estate  would  pass  in  case  the  attempted  appoint- 
ment under  the  power  should  fail  is  a  child  or  even  a 
grandchild  wholly  unprovided  for,  the  relief,  it  seems, 
will  not  be  granted.  It  is  not  enough  to  defeat  the  equi- 
table right  to  an  enforcement  that  the  heir  is  disinherited 
by  his  own  immediate  ancestor,  for  if  he  has  been  pro- 
vided for  by  some  one  else,  his  claim  is  not  equally 
meritorious,  and  it  makes  no  difference  from  whom  the 

1  Tollett  V,  Tollett,  2  P.  Wms.  489;  3S  Md.  463;  [Cox  v.  Holcomb,  87  Ala. 

Reid  V.   Shergold,    10  Ves.  370;    Lip-  589;   13  Am.  St.  Rep.  79;  Williams  v. 

pennott  V.  Stokes,  6  N.  J.  Eq.   122;  Cudd,  26  S.  C.  213  (defective  execii- 

Drusadow  v.    Wilde,  63  Pa.  St.   170;  tion   of   a   statutory   power   given   to 

Bingham's    Appeal,    64   Pa.    St.    345;  married  wonien,  not  aided).    Compare 

[American   Freehold   L.  Mtg.   Co.  v.  Freeman  v.  Eacho,  79  Va.  43.] 

Walker,   31    Fed.    Rep.   103.]     As   to  »  Finch   v.    Finch,   15  Ves.  43,    51; 

statutory  powers,  see  Smith  v.  Bowes,  Antrobus  v.  Smith,  12  Ves.  39. 


801  CONCERNING    NOTICE,  §  591 

provision  came.  The  relative  amount  of  the  provisions, 
if  any,  made  for  different  children  in  such  cases  is  imma- 
terial, for  the  parent  himself  is  the  judge  of  the  amount 
proper  for  each  child.* 

SECTION  V, 
CONCERNING  NOTICE. 

ANALYSIS. 

I  591.  Questions  stated:  Le  Neve  ▼.  Le  Nera^ 

§  592.  Knowledge  and  notice  distinguished. 

§  593.  Kinds;  actual  and  constructive. 

§  59-t.  Definition. 

§§  595-603.  Actual  notice. 

§  596.  When  shown  by  indirect  evidence. 

§  597.  What  constitutes;  rumors;  putting  on  inquiry,  eto. 

S§  598-602.  Special  rules  concerning  actual  notice. 

§  603.  Effect  of  knowledge  instead  of  notice. 

§§  604-609.  Constructive  notice  in  general. 

§  605.  Jones  v.  Smith,  opinion  of  Wigram,  V.  C. 

§§  606,  607.  When  the  presumption  is  rebuttable;  doe  inqniry. 

§  608.  When  it  is  conclusive. 

§  609.  Species  of  constructive  notice. 

§§  610-613.  1.  By  extraneous  facts;   acts  of  fraud,  negligence,  or  mistake; 

general  rule  as  to  putting  on  inquiry;  visible  objects,  etc. 

§§  614-625.  2.  By  possession  or  tenancy. 

§§  614,  615.  General  rules,  English  and  American. 

§§  616-618.  Extent  and  effect  of  the  notice, 

§§  619-622.  Nature  and  time  of  the  possession. 

§§  623,  624.  Whether  the  presumption  is  rebuttable  or  not. 

§  625.  Possession  by  a  tenant  or  lessee. 

§§  626-631.  3.  By  recitals  or  references  in  instmments  of  title. 

§  621.  General  rules. 

§§  627-631.  Nature  and  extent  of  the  notice;  limitations;  instances,  etc 

§§  632-640.  4.  By  lis  pendens. 

§  632.  Rationale:  Bellamy  v.  Sabine. 

§§  633,  634.  General  rules;  requisites. 

§§  635,  636.  To  what  kind  of  suits  the  rule  applies. 

§§  637,  638.  What  persons  are  affected. 

§§  039,  640.  Statutory  notice  of  Ua  pendens, 

§§  641-643.  5.  By  judgments. 

§§  644-665.  6.  By  recording  or  registration  of  instmments. 

§§  645,  646.  (1)  The  statutory  system;  abstract  of  statutes. 

*  Rodgers  v.  Marshall,  17  Ves.  294;     v.  Martin,    34  Beav.    600;  Porter  T. 
Hills  V.  Downton,  5  Ves.  557;  Morse     Turner,  3  Sera.  &  R.  108. 
2  Eg.  JuB.— 51 


§591 


EQUITY   JURISPRUDENCE. 


802 


85  647-649.  (2)  General  theory,  scope,  and  object  of  the  legislation. 

S§  660-654.  (3)  Requisites  of  the  record,  in  order  that  it  may  be  a  notice. 

§  655.  (4)  Of  what  the  record  is  a  notice. 

S§  656-658.  (5)  To  whom  the  record  ia  a  notice. 

§  657.  Not  to  prior  parties. 

§  658.  To  subsequent  parties  holding  under  the  same  sonrce  of  title) 
e£fect  of  a  break  in  the  record. 

§§  659,  660.  (6)  Effect  of  other  kinds  of  notice,  in  the  absence  of  a  record. 

§§  661-665.  (7)  What  kinds  of  notice  will  produce  this  effect. 

I  662.  English  rule. 

§§  663,  664.  Conflicting  American  rules;  actual  or  constructive  notice. 

§  665.  True  raiionale  of  notice  in  place  of  a  record. 

§§  666-676.  7.  Notice  between  principal  and  agent. 

§§  666-669.  Scope  and  applications." 

§§  670-675.  Requisites  of  the  notice. 

§  670.  (1)  Notice  must  be  received  by  agent  during  his  actual  employ- 
ment. 

§§  671,  672.  (2)  And  in  the  same  transaction;  when  in  a  prior  transaction. 

§  673.  (3)  Information  must  be  material;  presumption  that  it  was  conir 
municated  to  the  principal. 

§§  674,  675.  Exceptions;  agent's  own  fraud. 

§  676.  True  rationale  of  this  rule. 

§  591.  Questions  Stated.  —  It  has  been  shown  in  the 
preceding  chapter  that  there  are  two  fundamental  prin- 
ciples or  maxims  affecting  to  a  greater  or  less  degree 
nearly  the  entire  body  of  equity  jurisprudence, —  nearly 
the  entire  administration  of  equitable  rights  and  reme- 
dies,—  namely,  where  there  are  equal  equities,  the  one 
which  is  prior  in  time  must  prevail,  and  where  there  are 
equal  equities,  the  law  must  prevail.  These  two  principles 
necessarily  find  their  most  important  application  in  cases, 
which  are  constantly  arising,  where  several  different,  and 
perhaps  successive,  equitable,  or  legal  and  equitable,  in- 
terests in  or  claims  upon  the  same  subject-matter  exist  at 
the  same  time,  and  there  is  a  contest  for  the  precedence 
among  the  respective  holders  of  these  interests  or  claims. 
It  has  also  been  shown  that  the  application  of  these  max- 
ims  turns  upon  the  question,  When  are  the  dififercnt  equi- 
ties simultaneously  subsisting  with  respect  to  the  same 
subject-matter  "  equal "?  or  on  the  other  hand,  what  ren- 
ders them  "  unequal,"  so  that  one  shall  have  an  essential 
inherent  superiority  over  another?     In  answering  this 


603  CONCERNING    NOTICE.  §  591 

question,  the  doctrine  of  Notice  plays  a  most  important 
part.  When  a  person  is  acquiring  rights  with  respect  to 
any  subject-matter,  the  fact  whether  he  is  so  acting  with 
or  without  notice  of  the  interests  or  claims  of  others  in 
or  upon  the  same  subject-matter  is  regarded  throughout 
the  whole  range  of  equity  jurisprudence  as  a  most  mate- 
rial circumstance  in  determining  the  extent  and  even  the 
existence  of  the  rights  which  he  actually  acquires.  In 
conformity  with  this  view,  the  general  rule  has  been  most 
clearly  established,  that  a  purchaser  with  notice  of  the 
right  of  another  is  in  equity  liable  to  the  same  extent 
and  in  the  same  manner  as  the  person  from  whom  he 
made  the  purchase.  The  same  rule  may  be  thus  expressed 
in  somewhat  different  language:  a  person  who  acquires  a 
legal  title  or  an  equitable  title  or  interest  in  a  given  sub- 
ject-matter, even  for  a  valuable  consideration,  but  with 
notice  that  the  subject-matter  is  already  affected  by  an 
equity  or  equitable  claim  in  favor  of  another,  takes  it 
subject  to  that  equity  or  equitable  claim.  On  the  other 
hand,  a  person  who  has  acquired  a  title,  and  paid  a  valu- 
able consideration,  without  any  notice  of  an  equity  actu- 
ally existing  in  favor  of  another,  may  by  that  means 
obtain  a  perfect  title,  and  hold  the  property  freed  from 
the  prior  outstanding  equity.  This  general  doctrine  was 
formulated  by  Lord  Hardwicke  in  a  celebrated  case  in  the 
following  emphatic  terms:  "  The  ground  of  it  is  plainly 
this:  that  the  taking  of  a  legal  estate,  after  notice  of  a 
prior  right,  makes  a  person  a  mala  fide  purchaser.  This 
is  a  species  of  fraud  and  dolus  malus  itself;  for  he  knew 
the  first  purchaser  had  the  clear  right  of  the  estate,  and 
after  knowing  that,  he  takes  away  the  right  of  another 
person  by  getting  the  legal  estate.  Now,  if  a  person  does 
not  stop  his  hand,  but  gets  the  legal  estate  when  he  knew 
the  right  was  in  another,  machinatur  ad  circumveniendum. 
It  is  a  maxim,  too,  in  our  law  that  fraus  et  dolus  nemini 
patrocinari  debent."  ^     Lord  Hardwicke  was  here  speaking 

» Le  Neve  v.  Le  Neve,  Amb.  436;  2  Lead.  Cas.  Eq.,  4th  Am.  ed.,  109, 


§  592  EQUITY   JURISPRUDENCE.  804: 

of  the  effect  of  an  actual  notice;  and  undoubtedly  it  is  an 
act  savoring  of  fraud  for  a  person  who  has  received  ac- 
tual, direct  notice  of  another's  right,  to  go  on  and  know- 
ingly acquire  the  property  in  violation  of  that  other's 
right.  But  on  the  other  hand,  to  base  the  entire  doctrine 
of  notice  upon  fraud,  to  regard  all  its  rules  as  inferences 
from  the  equitable  principle  against  fraud,  is,  in  my 
opinion,  to  ignore  the  plain  meaning  of  words,  and  to 
introduce  an  unnecessary  and  misleading  fiction  into  the 
subject.  Most  of  the  confusion  in  the  discussion  by  courts 
and  writers  has  resulted,  as  it  seems  to  me,  from  their 
acceptance  of  this  dictum  of  Lord  Hardwicke  as  univer- 
sally true,  and  from  their  attempt  to  treat  the  effects  of 
notice,  under  all  circumstances,  as  mere  instances  and 
results  of  fraud.  The  great  importance  of  the  subject 
having  thus  been  exhibited,  its  further  examination  will 
be  conducted  in  the  follow^ing  order:  1.  The  nature  of 
notice,  what  constitutes  it,  and  its  various  kinds  and 
classes;  2.  The  effects  of  notice,  and  especially  the  con- 
sequences of  notice  or  the  want  of  notice  in  determining 
priorities  among  equitable  claims  to  or  upon  the  same 
subject-matter. 

§  592.  Knowledge  and  Notice  Distinguished.  —  Before 
entering  upon  this  examination,  a  few  preliminary  obser- 
vations are  necessary,  to  clear  the  ground  and  to  explain 
the  exact  nature  of  the  questions  which  are  to  be  dis- 
cussed, and  of  the  conclusions  to  be  reached  by  such  dis- 
cussion. In  the  first  place,  it  is  of  the  utmost  importance 
to  distinguish  between  the  objects  and  purposes  for  which 
the  fact  of  notice  having  been  given  may  be  invoked. 
One  object  of  notice  may  be  simply  to  affect  the  priority 
of  a  right  which  the  one  receiving  it  has  acquired,  and 
to  subordinate  such  right  to  an  interest  in  the  same  sub- 
ject-matter held  by  another.  On  the  other  hand,  notice 
may  be  regarded  as  an  ingredient  or  badge  of  fraud,  as  a 
feature  which  renders  the  transaction  entered  into  by  the 
person  who  receives  it  fraudulent.     A  distinction  clearly 


^05  CONCERNING   NOTICE.  §  592 

■exists  between  these  two  purposes;  and  the  rules  which 
govern  the  nature  and  effect  of  notice  in  each  must  be 
different.     That  might  easily  be  sufficient  to  subordinate 
-a  person's  right  to  another  interest  which  would  at  the 
same  time  fall  far  short  of  stamping  his  conduct  with 
actual  fraud.    In  the  second  place,  it  should  be  most  care- 
fully borne  in  mind  that  the  legal  conception  of  "notice/* 
-as  contained  in  the  settled  doctrines  and  rules  of  equity, 
is  somewhat  artificial  and  even  technical.     In  this  purely 
legal  artificial  sense,  notice  is  by  no  means  synonymous 
with  knowledge,  although  the  effects  produced  by  it  are  un- 
doubtedly the  same  which  would  result  from  actual  knowledge. 
In  other  words,  while  the  doctrines  of  equity  on  the  sub- 
ject do  not  assume  that  notice  is  knowledge,  nor  even 
that  it  is  necessarily  followed  by  knowledge,  they  still 
often  impute  to  it  the  very  same   consequences  which 
would  flow  from  actual  knowledge  acquired  by  the  party. 
As  the  notice  spoken  of  by  the  rules  is  not  knowledge, 
there  may  be  notice  without  knowledge,  and  knowledge 
without  notice.     If  a  person.  A,  were  negotiating  with  B 
for  the  purchase  of  a  piece  of  land,  and  should  be  in- 
formed either  by  B  or  by  C  that  B  had  already  given  a 
•deed  or  mortgage  of  the  same  land  to  C,  such  information 
would  be  notice,  and  even  the  highest  kind  of  notice;  but 
A  would  not  thereby,  in   any  true  meaning  of  the  word, 
have  knowledge  of  the  deed  or  mortgage,  of  its  various 
provisions  and  legal  effect.     On  the  other  hand,  if,  before 
the  negotiation,  A  had  been  casually  shown  the  deed  or 
mortgage  itself  by  some  third  person  in  whose  possession 
it  happened  to  be,  had  been  permitted  by  such  person  to 
take  and  read  the  instrument,  had  carefully  examined  it, 
and  had  thus  become  familiar  with  all  of  its  provisions 
and  its  legal  effect,  he  would  not,  within  the  settled  mean- 
ing of  the  legal  term,  have  received  notice,  but  he  would 
most  certainly  have  obtained,  and  would  be  acting  with,  a 
complete  knowledge  of  the  instrument.     Again,  under  cer- 
tain circumstances,  if  A,  while  dealing  with  respect  to  a 


§  592  EQUITY    JURISPRUDENCE,  806 

piece  of  property,  deliberately  and  intentionally  refrains 
from  making  inquiries  concerning  outstanding  encum- 
brances or  claims  for  the  very  purpose  of  avoiding  any 
information,  he  is  charged  with  notice  of  the  encum- 
brances and  claims  which  are  actually  outstanding;  but 
he  certainly  does  not  acquire,  and  cannot  possibly  have, 
a  knowledge  of  such  prior  charges  or  interests.  The  record 
of  a  deed  or  mortgage,  when  regularly  and  properly  made, 
is  constructive  notice  to  subsequent  purchasers  and  en- 
cumbrancers; but  it  does  not  necessarily  convey  any 
knowledge  to  such  persons;  while  A,  in  purchasing  land 
from  B,  is  absolutely  and  conclusively  bound  by  the  proper 
record  of  a  prior  instrument  affecting  the  same  premises, 
he  may  be  acting  in  perfect  good  faith  and  in  most  com- 
plete ignorance  of  the  actual  existence  of  any  such  in- 
strument. If,  however,  before  making  the  purchase,  A 
had  examined  the  official  records,  and  had  there  discov- 
ered and  read  a  deed  or  mortgage  of  the  same  land  copied 
at  length  in  the  book  of  records,  but  under  such  circum- 
stances that  it  was  not  legally  entitled  to  be  recorded,  on 
account  of  a  defective  acknowledgment  or  other  irregu- 
larity, he  would  not  thereby  have  received  any  legal  notice 
within  the  true  meaning  of  the  term,  but  he  would  as 
certainly  have  obtained  a  full  knowledge  of  the  instrument. 
These  instances  are  sufficient  to  illustrate  the  distinction 
between  notice,  in  its  legal  and  somewhat  artificial  con- 
ception, and  knowledge,  and  to  show  that  one  may  exist 
without  the  other.  Unless  this  distinction  is  clearly  ap- 
prehended and  constantly  borne  in  mind,  much  of  the 
judicial  discussion  concerning  the  nature  and  effect  of 
notice  will  seem  to  be  confused  and  uncertain,  and  an 
irreconcilable  conflict  will  appear  among  many  of  the  de- 
cisions; the  distinction  renders  the  discussion  clear  and 
certain,  and  the  decisions  harmonious.  Whenever  the 
mere  notice,  in  its  strict  signification,  is  relied  upon,  even 
though  not  accompanied  or  followed  by  any  actual  knowl- 
edge, then,  from  considerations  of  policy  and  expediency. 


807  CONCERNING    NOTICE.  §  692 

the  same  effects  are  attributed  to  it  which  would  have  re- 
sulted from  actual  knowledge;  and  it  will  be  found  that 
what  constitutes  this  notice  is  determined  by  definite, 
precise,  and  even  somewhat  technical  rules.  Whenever, 
on  the  other  hand,  a  party  is  shown  to  have  obtained  an 
actual  knowledge,  even  though  there  has  been  nothing 
which  constitutes  a  notice  in  its  true  sense,  then  there  is 
no  longer  any  necessity  of  resorting  to  the  artificial  con- 
ception of  notice;  the  consequences  must  naturally  and 
necessarily  flow  from  an  actual  knowledge  of  facts  by  a 
party,  which  from  motives  of  expediency  are  attributed 
to  a  notice  of  the  same  facts  given  to  him,  in  the  absence 
of  actual  knowledge.  In  a  word,  among  the  complicated 
affairs  and  transactions  of  life,  it  is  often  necessary  that 
mere  "notice"  should  take  the  place  of  actual  knowledge; 
but  this  does  not  and  cannot  mean  that  actual  knowledge 
shall  not  produce  the  same  effects  upon  the  rights  of  par- 
ties which,  from  motives  of  policy,  are  given  to  its  repre- 
sentative and  substitute  notice.  This  conclusion  is,  as  it 
seems  to  me,  self-evident,  and  it  is  most  important;  it 
reconciles  at  once  all  the  confusion  and  conflict  of  opin- 
ion which,  it  must  be  confessed,  appear  in  some  of  the 
decisions,  and  it  has  the  support  of  the  ablest  judicial 
authority.  It  has  been  expressly  sanctioned  and  adopted 
as  the  settled  principle  upon  which  courts  of  equity  act, 
in  a  recent  case  by  one  of  the  ablest  of  modern  English 
equity  judges,  Lord  Cairns.  He  is  speaking  of  a  trustee 
dealing  with  the  trust  fund  in  his  hands,  and  acting  with 
knowledge,  but  without  the  true  notice,  actual  or  construct- 
ive, required  by  the  settled  rules,  of  an  encumbrance  on 
the  property  created  by  the  cestui  que  trust.  The  general 
language  which  he  uses  with  respect  to  these  particular 
facts  will  apply  to  all  cases  of  knowledge  as  distinct  from 
notice.  Lord  Cairns  says:  "All  I  can  do  is  to  apply  those 
principles  which  have  been  well  established  as  part  of 
those  principles  on  which  the  court  proceeds.  •  .  .  .  I  am 
bound  to  say  that  I  do  not  think  it  would  be  consistent 


§  592  EQUITY   JURISPRUDENCE,  808 

with  the  principles  upon  which  this  court  has  always 
proceeded,  or  with  the  authorities  which  have  been  re- 
ferred to,  if  I  were  to  hold  that  under  no  circumstances 
could  a  trustee,  without  express  notice  from  the  encum- 
brancer, be  fixed  with  knowledge  of  an  encumbrance  upon 
the  fund  of  which  he  is  the  trustee.  It  must  depend  upon 
the  facts  of  the  case.  But  I  am  quite  prepared  to  say  that 
I  think  the  court  would  expect  to  find  that  those  who  al- 
leged that  the  trustee  had  knowledge  of  the  encumbrance 
had  made  it  out,  not  by  any  r^videuce  of  casual  conversa- 
tions, much  less  by  any  proof  of  what  would  only  he  con- 
structive notice^  but  by  proof  that  the  mind  of  the  trustee 
has  in  some  way  been  brought  to  an  intelligent  appre- 
hension of  the  nature  of  the  encumbrance  which  has 
come  upon  the  property,  so  that  a  reasonable  man,  or  an 
ordinary  man  of  business,  would  act  upon  the  information, 
and  would  regulate  his  conduct  by  it  in  the  execution  of 
the  trust.  If  it  can  be  shown  that  in  any  way  the  trustee 
has  got  knowledge  of  that  kind,  —  knowledge  which  would 
operate  upon  the  mind  of  any  rational  man,  or  man  of 
business,  and  make  him  act  with  reference  to  the  knowledge 
he  has  so  acquired,  —  there  I  think  the  end  is  attained, 
and  that  there  has  been  fixed  upon  the  conscience  of  the 
trustee,  and  through  that  upon  the  trust  fund,  a  security 
against  its  being  parted  with  in  any  way  that  would  be 
inconsistent  with  the  encumbrance  which  has  been  cre- 
ated."* This  extract  states  what  is,  in  my  opinion,  the 
general  doctrine,  applied  here  to  a  trustee,  but  applicable 
to  all  persons  whose  rights  or  liabilities  can  be  affected 
by  notice  of  rights  belonging  to  others.  It  declares  that 
although  there  may  be  no  technical  "notice,"  not  even  a 
constructive  notice,  still  there  may  be  an  actual  knowledgCf 
acquired  in  modes  which  do  not  amount  to  notice;  and 
this  knowledge  may  produce  the  same  effects  which  the 
rules  of  equity  attribute  to  "  notice." 

»  Lloyd  V,  Banks,  L.  R  3  Cb.  488,  490,  per  Lord  Cairna. 


809  CONCERNING   NOTICE.  §  593 

§  593.  Kinds — Actual  and  Constructive.  —  Notice  has 
been  divided  by  judges  and  writers  into  the  two  main, 
classes,  —  "actual"  and  "constructive";  but  there  is  a 
great  diversity  of  opinion  among  text-writers  in  deter- 
mining what  particular  kinds  shall  come  within  each  of 
these  two  classes.  According  to  some,  "  constructive " 
notice  includes  those  instances  in  which  no  information 
of  the  existence  of  any  prior  right  or  claim  is  directly  or 
indirectly  communicated  to  the  party,  but  certain  facts 
are  shown  to  have  existed,  and  from  these  the  party  is 
conclusively  presumed  to  have  received  the  information, 
and  is  therefore  conclusively  charged  with  notice.  In 
other  words,  the  information  amounting  to  a  notice, 
although  not  in  fact  given,  is  inferred  as  a  conclusive 
presumption  of  the  law,  and  this  presumption  cannot  be 
rebutted  by  any  evidence  to  the  contrary.  All  other 
kinds,  according  to  this  theory,  are  "  actual."  This  latter 
class,  therefore,  embraces  many  degrees,  from  the  highest, 
where  a  positive,  personal  information  of  a  fact  is  directly 
communicated  to  the  party,  down  through  every  grade, 
in  which  the  notice  is  either  implied  hy  prima  facie  pre- 
sumptions of  law  from  certain  facts  shown  to  exist,  or  is 
inferred  as  an  argumentative  conclusion,  with  greater  or 
less  cogency,  from  evidence  which  is  perhaps  entirely 
circumstantial.  The  objections  to  this  mode  of  classifi- 
cation are  plain.  It  is,  in  fact,  no  classification;  it  groups 
under  the  head  of  "  actual "  notice  different  species  which 
have  no  common  features,  no  real  resemblance,  and  the 
name  "  actual "  is  an  evident  misnomer;  while  on  the 
other  hand  the  class  of  "  constructive  "  is,  from  its  defini- 
tion, necessarily  confined  to  a  very  few  species,  technical 
and  artificial  in  their  nature,  the  most  important  one 
being  wholly  the  creature  of  statute.  I  prefer  and  shall 
adopt  the  classification  approved  and  followed  by  many 
of  the  most  eminent  judges,  which  has  the  merit  of  sim- 
plicity, naturalness,  and  certainty.  According  to  this 
arrangement,   "  actual "    notice    embraces   all    those   in- 


§  594  EQUITY   JURISPRUDENCE.  810 

stances  in  which  positive  personal  information  of  a 
matter  is  directly  communicated  to  the  party,  and  this 
communication  of  information,  being  a  fact,  is  established 
by  evidence  directly  tending  with  more  or  less  cogency  to 
its  proof.  "  Constructive  "  notice  includes  all  other  in- 
stances in  which  the  information  thus  directly  commu- 
nicated cannot  be  shown,  but  the  information  is  either 
conclusively  presumed  to  have  been  given  and  received 
from  the  existence  of  certain  facts,  or  is  implied  by  a 
prima  facie  presumption  of  the  law  in  the  absence  of 
contrary  proof.' 

§  594.  Definition.  —  Judges  and  text-writers  have 
seldom  attempted  to  define  notice  in  the  abstract,  but 
have  generally  contented  themselves  with  specifying 
instances,  or  describing  its  kinds  and  efifects.  Within 
the  meaning  of  the  rules,  notice  may,  I  think,  be  cor- 
rectly defined  as  the  information  concerning  a  fact  actually 
communicated  to  a  party  by  an  authorized  person,  or 
actually  derived  by  him  from  a  proper  source,  or  else 
presumed  by  law  to  have  been  acquired  by  him,  which  in- 
formation is  regarded  as  equivalent  in  its  legal  effects  to 
full  knowledge  of  the  fact,  and  to  which  the  law  attributes 
the  same  consequences  as  would  be  imputed  to  knowledge. 
It  should  be  most  carefully  observed  that  the  notice  thus 
defined  is  not  knowledge,  nor  does  it  assume  that  knowl- 
edge necessarily  results.  On  the  other  hand,  the  informa- 
tion which  constitutes  the  notice  may  be  so  full  and  minute 
as  to  produce  complete  knowledge.^     Although  an  actual 

'  [In  Drey  v.  Doyle,  99  Mo.  459,  the  Notice  may  be  either  actual  or  con- 
court  commented  on  the  confusion  etructive. "  While  this  definition  has 
produced  by  the  erroneous  use  of  the  the  merit  of  extreme  brevity,  and  of 
terma  "actual"  and  "constructive"  correctly  preserving  the  distinction 
notice,  and  approved  the  definitions  between  notice  and  knowledge,  it 
given  in  the  text.]  lacks,  as  it  seems  to  me,  some  of  the 

*  Of    the  few   definitions    given   by  essential  elements  of  the  entire  legal 

text-writers,  the  following  are  exam-  conception:      2   Lead.    Cas.    Eq.,  4th 

pies:  The  English  editors  of  the  Lead-  Am.    ed.,    144.      Another    American 

ing  Cases  in  Equity  attempt  no  general  writer    says:     "Notice,    then,    in   its 

definition.    The  American  editor  says:  technical  sense,  is  the  legal  cognizance 

"  In  legal  parlance,  notice  is  informa-  of  a  fact.     It  differs  from  knowledge, 

tion  given  by  one  duly  authorized,  or  for     knowledge    may    exist    without 

derived  from   some  authentic  source,  notice,  and  there  may  be  notice  with- 


811  CONCERNING    NOTICE.  §  595 

knowledge  is  not  necessarily  assumed  to  result,  yet  in 
many  instances,  as  will  be  seen,  the  party  is  not  permitted 
to  show  this  fact,  but  the  same  consequences  follow  with 
respect  to  his  rights  and  interests  as  though  he  had  ob- 
tained real  knowledge.  The  correctness  of  the  definition 
which  I  have  formulated  will  appear  from  a  comparison 
of  all  the  cases  hereafter  cited  in  the  discussions  of  this 
section.  In  dealing  with  the  subject,  great  care  should 
be  taken  to  distinguish  between  notice  and  the  evidence 
by  which  it  is  established.  The  personal  communication 
of  information  which  constitutes  notice  is  a  fact  which 
may  be  proved  by  any  kind  of  competent  evidence  sub- 
mitted to,  weighed,  and  passed  upon  by  the  tribunal 
which  decides  matters  of  fact.  Whenever  the  notice  is 
inferred  by  a  conclusive  or  prima  facie  presumption  from 
certain  facts,  the  office  of  evidence  is  to  prove  the  exist- 
ence of  those  facts.  Notice  is  either  actual  or  construct- 
ive; but  the  legal  effect  of  each  kind,  when  established, 
is  exactly  the  same.* 

§595.  Actual  Notice. — Actual  notice  is  information 
concerning  the  fact, — as,  for  example,  concerning  the 
prior  interest,  claim,  or  right, —  directly  and  personally 
communicated  to  the  party.'  The  distinction  between 
actual  and  constructive  notice  does  not  primarily  depend 
upon  the  amount  of  the  information,  but  on  the  manner 
in  which  it  is  obtained,  or  assumed  to  have  been  obtained. 
In  actual  notice  information  is  not  inferred  by  any  pre- 
sumption of  law;  the  personal  communication  of  it  is  a 
fact,  and,  like  any  other  fact,  is  to  be  proved  by  evidence. 
The  information  may  be  so  full,  minute,  and  circumstan- 

out    any    actual    knowledge the   thing   itself.       Legal   cognizance 

Notice,    therefore,  in   the  sense   here  means  simply  legal  knowledge,  and  is 

used,  may  be  said  to  be  the  definite  the  effect  which  the   law  regards  as 

legal  cognizance,  either  actual  or  pre-  produced   by  notice.     [See  Cleveland 

sumptive,  of  a  right  or  title":   Bisp-  Woolen  Mills  v.  Sibert,  81  Ala.  140.] 

ham's  Equity,  325.    While  the  distinc-  *  Prosser  v.  Rice,  28  Beav.  68,  74. 

tion  between   notice   and   knowledge  •  "Notice  is  actual  when  the  pur- 

ia  here  distinctly  emphasized,  yet.  the  chaser  is  aware  of  the  adverse  claim 

definition  itself,  in  calling  notice  the  or  title,   or  has  such   information  as 

"  legal  cognizance  "  of  a  fact,  gives  the  would  lead  to  knowledge  ":    Am .  note 

efect  of  notice  rather  than  describes  in  2  Lead.  Cas.  Eq.,  4th  Am.  ed.,  144. 


§  596  EQUITY   JURISPRUDENCE.  812 

tial,  that  the  party  recei^'ing  it  thereby  acquires  a  com- 
plete knowledge  of  the  prior  fact  affecting  the  transaction 
in  which  he  is  then  engaged,  or  it  may  fall  far  short  of 
conveying  such  knowledge/  Again,  the  evidence  may  be 
so  direct,  positive,  and  overwhelming  as  to  establish  the 
fact  that  the  information  was  personally  given  and  re- 
ceived in  the  most  convincing  and  unequivocal  man- 
ner, or  it  may  be  entirely  indirect  and  circumstantial. 
Wherever,  from  competent  evidence,  either  direct  or  cir- 
cumstantial, the  court  or  the  jury  is  entitled  to  infer,  as  a 
conclusion  of  fact,  and  not  by  means  of  any  legal  presump- 
tions, that  the  information  was  personally  communicated 
to  or  received  by  the  party,  the  notice  is  actual.  In  short, 
actual  notice  is  a  conclusion  of  fact,  capable  of  being  es- 
tablished by  all  grades  of  legitimate  evidence.^ 

§  596.  When  Shown  by  Indirect  Evidence. —  It  is  ad- 
mitted by  all  text- writers  and  by  many  judges  that  much 
confusion  and  inaccuracy  of  language  are  exhibited  in 
the  decisions  concerning  actual  and  constructive  notice; 
notices  are  not  infrequently  called  "constructive,"  which 
are  really  "  actual,"  and  the  rules  governing  the  two  are 
confounded.'  That  the  party  has  knowledge  or  information 
of  facts  sufficient  to  put  him  upon  an  inquiry  has  often 
been  treated  as  peculiarly  the  characteristic  of  construct- 
ive notice.     In  truth,  however,  this  test  is  equally  appli- 

1  Williamson  v.   Brown,    15  N.   Y.  v.  Griffith,  1  Hoff.  Ch.  153;  Nelson  v. 

354.     Actual  notice  need  not  be  full,  Sims,  23  Miss.  383,  388;  57  Am.  Dec. 

circumstantial    information   of    every  144;  Curtis  v.  Blair,  26  Miss.  309,  328; 

material  fact  affecting  the  right  of  the  59  Am.  Dec.  257;  Bartlett  v.  Glascock, 

person  receiving  it;  it  is  enough  that  4  Mo.   62,   66;  Epley  v.  Witherow,  7 

it  be  information  directly  tending  to  Watts,   16.3,   J67;  Jaques  v.  Weeks,  7 

ehow  the  existence   of   the  fact,  and  Watts,    261,    274;    Blatchley   v.    Os- 

Bufficient  to  put  the  party  on  an  in-  born,    33    Conn.    2'26,    233;  Buck  v. 

quiry:  Barnes  v.  McClinton,   3  Penr.  Paine,   50  Miss.   648,   655;    Carter  v. 

&  W.  67;  23  Am.  Dec.  62;  Tillinghast  City  of  Portland,  4  Or.  339,  350,  per 

V.  Champlin,  4  R.  L  173,  215;  67  Am.  McArthur,  J.  (a  very  clear  and  accu- 

Dec.  510.  rate  statement  of  the  doctrine);  Speck 

«  Tillinghast  v.  Champlin,  4  R.  I.  v.  Riggin,  40  Mo.  405;  Maupin  v.  Em- 

173,   215;  67  Am.   Dec.   510;  Warren  mens,  47  Mo.  304,  306,  307:  Maul  v. 

V.    Swett,    31    N.    H.  332,   341.    .S42;  Rider,  59  Pa.  St.  167,  171,  172;  [Knapp 

Hull  V.  Noble,  40  Me.  459,  480;  But-  v.  Bailey,  79  Me.  195;  1  Am.  St.  Rep. 

trick  V.   Holden,    13    Met.    355,   357;  295.] 

Trefta  v.  King,   18  Pa.   St.   157,   160;         ^  Williamson   v.   Brown,   15  N.  Y. 

Rogers  v.  Jones,  8  N.  H.  264;  Griffith  354,  per  S.  L.  Selden,  J. 


813 


CONCERNING   NOTICE. 


§  596 


cable  to  every  instance  of  actual  notice  inferred  by  process 
of  rational  deduction  from  circumstantial  evidence.*    The 


'  [Knapp  V.  Bailey,  79  Me.  195;  1  Am. 
St. Rep. 295.]  The  confusion  mentioned 
in  the  text  is  easily  and  completely  dis- 
pelled and  the  necessary  distinctioa 
between  the  two  kinds  of  notice  is 
clearly  shown  by  a  brief  analysis  of 
their  essential  operation.  When  A  is 
dealing  with  B  for  the  purchase  of 
laud  which  he  knows,  sees,  or  is  told 
to  be  in  the  possession  of  a  stranger, 
C,  such  possession  does  not  show  or 
tend  to  show  that  any  information  or 
knowledge  of  C's  interest  was  directly 
and  personally  communicated  to  A; 
but  tJie  law  presumes  that  information 
of  C'a  real  interest  and  claim  was 
communicated.  But  the  presumption 
in  this  case  ia  rebuttable;  it  is  said 
that  A  ia  put  upon  an  inquiry;  if  he 
fails  to  make  any  inquiry,  or  to  pros- 
ecute it  with  reasonable  diligence, 
then  the  presumption  ia  absolute;  if 
he  does  prosecute  it  with  reasonable 
diligence,  and  does  not  discover  the 
truth,  then  the  presumption  is  over- 
come. But  it  should  be  observed 
that  the  jury  or  court  does  not  find 
the  existence  of  a  notice  as  a  conclu- 
sion of  fact  deduced  by  rational 
argument  from  the  fact  of  C's  pos- 
session; the  only  province  of  the  triers 
of  fact  in  this  case  is  to  determine  the 
nature,  extent,  and  effect  of  A's  in- 
quiry as  a  means  of  rebutting  the  pre- 
sumption. A  second  kind  of  con- 
structive notice  arises  from  recitals, 
atatements,  and  references  in  title 
deeds.  Here,  also,  it  is  very  plain 
that  there  is  nothing  tending  to  show 
direct  personal  information,  since  the 
party  is  affected  with  the  notice  al- 
though he  may  not  have  read  the  deed, 
and  even  though  he  may  not  have 
seen  it.  A  ia  the  grantee  in  a  deed 
of  conveyance.  From  the  mere  fact 
that  he  muat  derive  his  title  through 
that  instrument  and  through  the  line 
of  prior  conveyances,  he  ia  charged 
with  notice  of  all  that  they  contain  or 
refer  to.  Thia  fact  does  not  in  the 
least  tend  to  show  that  A  received 
any  direct  personal  information  of  a 
conflicting  interest  or  claim;  the  in- 
ierence  is  a  pure  presumption  of  law, 
"based  upon  considerations  of  general 
policy,  and  does  not  require  any  argu- 
mentative  deduction   from   evidence. 


A  third  instance  of  constructive  notice 
is  that  with  wliich  a  principal  la 
charged,  when  information  or  knowl- 
edge has  been  obtained  by  his  agent. 
When  this  particular  case  is  carefully 
considered,  it  will  be  perceived  that 
it  ia  governed  by  precisely  the  same 
principles  as  those  which  have  already 
been  examined.  The  meie  fad  that 
the  agent  has  acquired  information 
does  not  tend  to  show  that  the  in- 
formation has  been  directly  and  per- 
sonally communicated  to  the  princi- 
pal; nor  does  the  rule  depend  in  the 
slightest  degree  upon  such  an  assump- 
tion. That  information  constituting 
notice  is  imputed  to  the  principal  is 
entirely  a  presumption  of  law,  sup- 
ported by  considerations  of  expedi- 
ency, and  made  without  any  reference 
to  the  actual  fact.  The  last  instance 
of  constructive  notice  which  I  shall 
mention  is  that  resulting  from  regis- 
tration pursuant  to  statute.  The 
mere/aei  that  an  instrument,  of  which 
the  party  is  profoundly  ignorant,  has 
been  recorded,  certainly  does  not  tend 
to  show  that  he  Jias  received  any 
direct  personal  information  concerning 
it,  and  the  interest  or  claim  which  it 
creates.  The  presumption  arises  from 
the  positive  mandate  of  a  statute; 
there  is  no  occasion  for,  nor  even 
possibility  of,  any  conclusion  of  fact 
drawn  from  evidence  by  a  process  of 
argument. 

The  foregoing  instances  show  the 
rationale  of  the  operation  of  all  con- 
structive notices.  A  similar  analysis 
will  disclose  the  true  operation  of 
actual  notice.  When  A  is  dealing 
with  B  for  the  purchase  of  land,  and 
the  evidence  shows  that  A  is  directly 
and  personally  informed,  either  by  B 
or  by  C,  that  C  already  holds  a  con- 
veyance, or  mortgage,  or  encumbrance, 
or  possesses  an  easement  or  other 
charge  upon  the  same  premises,  the 
case  is  so  simple,  and  the  notice  is  so 
clearly  actual,  that  no  doubt  can  exist 
concerning  it.  Whenever  the  object 
ia  to  prove  that  A  haa  received  the 
same  kind  of  personal  information 
concerning  some  prior  interest  or  claim 
held  by  C,  but  the  fact  cannot  be 
shown  by  any  direct  evidence,  but 
must  be  established  by  indirect  and  cir- 


§596 


EQUITY    JURISPRUDENCE. 


814 


distinction  is  plain  and  natural.  In  all  cases  of  construct- 
ive notice,  there  is  no  evidence  which  directly  tends  to 
show  that  any  information  of  the  prior  conflicting  claim 
was  personally  brought  home  to  the  consciousness  of  the 
party  affected;  the  particular  facts  of  which  he  is  shown 
to  have  knowledge  do  not  directly  tend  to  show  such  in- 
formation; but  from  these  facts  the  legal  presumption 
arises,  either  conclusive  or  rebuttable,  that  the  informa- 
tion was  received.  In  all  cases  of  actual  notice  inferred 
from  circumstantial  evidence,  the  facts  proved  do  directly 
tend  to  show  that  information  of  the  prior  conflicting  claim 
was  personally  brought  home  to  the  consciousness  of  the 


cumstantial  evidence,  —  that  is,  must  be 
inferred  by  the  jury  or  court  as  a 
legitimate  deduction  from  such  evi- 
dence, —  the  notice  is  none  the  less 
actual;  it  is  to  be  inferred  as  a  con- 
clusion of  fact,  by  a  weighing  of  the 
evidence  and  process  of  argument, 
unaided  by  any  legal  presumplioTis. 
One  illustration  will  suffice.  A  pur- 
chased land  from  B.  A  third  person,  C, 
from  whom  B  obtained  the  property, 
has  a  claim  upon  it;  and  the  question 
is.  whether  A  took  with  notice  of  O's 
claim.  There  is  no  direct  evidence  of 
any  information  given  to  A  by  either 
B  or  C.  But  it  is  proved  that  A  is 
B's  son,  and  has  constantly  lived  in 
his  house  and  been  a  member  of  his 
family;  that  for  several  years  A  has 
been  acquainted  with  his  father's 
business  affairs,  and  has  taken  an  ac- 
tive part  in  their  management;  that 
A  was  familiar  with  the  transaction 
by  which  B  obtained  the  premises 
from  C,  and  aided  his  father  in 
negotiating  the  contract  with  C,  etc. 
If  from  these  and  similar  facts  a  notice 
should  be  inferred,  it  would  be  an  ac- 
tual notice,  and  not  constructive.  No 
legal  presumptions  would  aid  the 
court  or  jury;  they  would  simply  ar- 
rive at  the  conclusion,  by  a  process  of 
rational  argument,  that  at  some  time 
information  or  knowledge  of  C's  claim 
was  directly  and  personally  commu- 
nicated to  or  acquired  by  A,  in  exactly 
the  same  manner  as  a  jury  may  infer 
that  a  certain  man  and  woman  were 
at  some  past  time  actually  married, 
from  the  circumstantial  evidence  of 
their  cohabitation   and   holding  each 


other  out  to  the  world  as  husband  and 
wife.  The  only  question  of  law  in 
such  a  case  is,  whether  the  evidence  is 
sufficient  to  warrant  the  finding  of  fact 
that  information  or  knowledge  of  0*8 
claim  was  actually  acquired  by  A.  It 
is  true  that  many  cases  say,  under  such 
circumstances,  that  "  the  facts  proved 
are  sufficient  to  put  the  party.  A,  upon 
an  inquiry,  and  if  he  neglected  to  make 
a  due  inquiry  he  must  be  charged  with 
notice."  Such  a  mode  of  statement 
is  entirely  proper;  but  it  is  incorrect, 
misleading,  and  a  confounding  of  the 
two  kinds  of  notice,  to  say  under  such 
circumstances  that  if  the  party  neglects 
to  make  a  due  inquiry  he  is  presumed 
to  have  received  the  information  which 
constitutes  notice.  In  aJl  cases  of  in- 
formation constituting  actual  notice 
inferred  from  circumstantial  evidence, 
this  statement  that  "  the  facts  proved 
are  sufficient  to  put  the  party  upon  an 
inquiry,"  etc.,  is  simply  tantamount  to 
saying  that  the  facts  and  circum- 
stances, when  uncontradicted  and  un- 
explained, are  sufficient  evidence  to 
warrant  a  finding  that  the  information 
was  directly  and  personally  acquired 
by  the  party,  but  that  the  facts  and 
circumstances  may  be  sufficiently  ex- 
plained by  the  party's  showing  that  he 
did  make  a  reasonable  inquiry,  and 
did  seek  for  information,  but  failed  to 
obtain  it.  By  such  means  the  conclu- 
sion which  would  otherwise  have  been 
drawn  from  the  unexplained  circum- 
stances is  overcome  and  negatived. 
For  illustrations  of  these  positions, 
see  cases  cited  in  the  next  following 
note. 


S15 


CONCERNING    NOTICE. 


§  596 


party.  The  court  or  jury  infers  from  the  facts  proved,  by 
a  process  of  rational  deduction,  but  without  the  aid  of  any 
legal  presumption,  that  such  information  was  actually  re- 
ceived. In  weighing  this  evidence,  the  tribunal  may 
properly  ask  whether  the  facts  proved  were  sufficient  to 
put  the  party  upon  an  inquiry,  so  that,  if  he  went  on  with 
the  transaction  without  making  any  inquiry,  his  actual 
receipt  of  information  and  consequent  notice  is  a  legiti- 
mate or  necessary  conclusion;  or  whether,  on  the  other 
hand,  he  prosecuted  an  inquiry  to  such  an  extent  and  in 
such  a  manner  that  his  actual  failure  to  acquire  informa- 
tion is  a  just  inference  of  fact.'     A  careful  examination 


'  In  a  large  number  of  American 
cases  the  discussion  concerning  actual 
notice  has  arisen  upon  an  interpreta- 
tion of  a  statutory  provision  which 
expressly  requires  "actual  notice  "of 
a  prior  unrecorded  deed  or  encum- 
brance, in  order  that  it  may  have 
priority  over  a  subsequent  deed  or 
mortgage  which  is  first  put  on  record. 
In  a  few  of  the  states  the  courts  have 
interpreted,  the  intention  of  the  legis- 
lature as  demanding  that  the  personal 
information  of  the  unrecorded  instru- 
ment should  be  proved  by  direct  evi- 
dence, and  as  excluding  all  instances 
of  actual  notice  established  by  cir- 
cumstantial evidence.  In  most  of  the 
states,  however,  where  this  statutory 
clause  is  found,  the  courts  have  de- 
fined the  "  actual  notice "  required 
by  the  legislature  aa  embracing  all 
instances  of  that  species  in  contradis- 
tinction from  "constructive  notice," 
—  that  is,  all  kinds  of  actual  notice, 
whether  proved  by  direct  evidence  or 
inferred  as  a  legitimate  conclusion 
from  circumstances.  Whichever  view 
of  the  statute  be  taken,  these  decis- 
ions are  all  useful  in  describing  the 
nature  of  actual  notice,  and  especially 
in  distinguishing  actual  notice  proved 
by  circumstantial  evidence  from  con- 
structive notice.  See  Brinkman  v. 
Jones.  44  Wis.  498,  517,  519,  521, 
523;  Brown  v.  Volkening,  64  N.  Y. 
76,  82,  83;  Lambert  v.  Newman,  56 
Ala.  623,  625;  Helms  t.  Chadbourne, 
45  Wis.  60,  70,  per  Cole,  J.;  Chicago 
etc.  R.  R.  Co.  V.  Kennedy,  70  111.  350, 
361,  per  Walker,  J.;  Shepardson  v. 
Stevens,  71  HI.  646;  Erickson  v.  Raf- 


ferty,  79  111.  209,  212;  Reynolds  v. 
Ruckman,  35  Mich.  80;  Loughridge 
V.  Bowland,  52  Miss.  546,  653,  555; 
Trefts  V.  King,  18  Pa.  St.  157,  160; 
Rogers  v.  Jones,  8  N.  H.  264;  Griffith 
V.  Griffith,  1  HoflF.  Ch.  153;  Nelson  v. 
Sims,  23  Miss.  383,  388;  57  Am.  Dec. 
144;  Barnes  v.  McClinton,  3  Penr.  &  W. 
67;  23  Am.  Dec.  62;  Bartlett  v.  Glas- 
cock,  4  Mo.  62,  66;  Epley  v.  With- 
erow,  7  Watts,  163,  167;  Jaques  v. 
Weeks,  7  Watts,  261,  274;  Buttrick 
V,  Holden,  13  Met.  355,  357;  Curtis 
V.  Blair,  26  Miss.  309,  328;  59  Am. 
Dec.  257;  Hull  v.  Noble,  40  Me.  459, 
480;  W^arren  v,  Swett,  31  N.  H.  332, 
341;  Tillinghast  v.  Champlin,  4  R.  I. 
173,  215;  67  Am.  Dec.  510;  Buck  v. 
Paine,  50  Miss.  648,  655;  Carter  v. 
City  of  Portland.  4  Or.  339.  350;  Prin- 
gle  V.  Dunn,  37  Wis.  449,  460,  461, 
465;  19  Am.  Rep.  772;  Parker  v. 
Kane,  4  Wis.  1;  65  Am.  Dec.  283; 
Shotwell  V.  Harrison,  30  Mich.  179; 
Munroe  v.  Eastman,  31  Mich.  283; 
Eck  V.  Hatcher,  68  Mo.  235;  Maupin 
V.  Emmons,  47  Mo.  304,  306,  307; 
Parker  v.  Foy,  43  Miss.  260,  266;  65 
Am.  Rep.  484;  Wailes  v.  Cooper,  24 
Miss.  208,  228;  [Urquhart  v.  Leverett, 
69  Ga.  92;  Hunt  v.  Dunn,  74  Ga.  124.] 
In  the  recent  and  very  instructive 
case  of  Brinkman  v.  Jones,  44  Wis. 
498,  the  question  was,  whether  a  gran- 
tee had  sufficient  notice  of  a  prior  un- 
recorded deed  to  defeat  his  own  re- 
corded conveyance.  The  court  were 
called  upon  to  interpret  the  Wisconsin 
statute,  which  requires  "actual  notice  " 
under  such  circumstances;  and  it  dis- 
cussed in  a  very  full  and  accurate  man« 


§  596 


EQUITY   JURISPRUDENCE, 


816 


of  the  cases  concerning    notice  inferred    from  circum- 
stances will  show  that  in  a  large  proportion  of  them  the 


ner  the  true  meaning  and  operation  of 
actual  notice.  Taylor,  J.,  said  (p.  519): 
"The  actual  notice  required  by  the 
statute  is  not  synonymous  with  actual 
knowledge.  We  think  the  true  rule  is, 
that  notice  must  be  held  to  be  actual 
when  the  subsequent  purchaser  has  ac- 
tual knowledge  of  such  facts  as  would 
put  a  prudent  man  upon  inquiry  which, 
if  prosecuted  with  ordinary  diligence, 
would  lead  to  actual  notice  of  the 
right  or  title  in  conflict  with  that 
which  he  is  about  to  purchase.  When 
the  subsequent  purchaser  has  knowl- 
edge of  such  facts,  it  becomes  his  duty 
to  make  inquiry,  and  he  is  guilty  of 
bad  faith  if  he  neglects  to  do  so,  and 
consequently  ho  will  be  charged  with 
the  actual  notice  he  would  have  re- 
ceived if  he  had  made  the  inquiry.  We 
are  aware  that  this  construction  of  the 
etatute  is  in  conflict  with  the  later 
decisions  in  Massachusetts  and  Indi- 
ana, and  with  the  definition  given  to 
the  term  by  Story  in  his  Equity  Ju- 
risprudence, section  399:  Parker  v. 
Osgood,  3  Allen,  487;  Dooley  v.  Wol- 
cott,  4  Allen,  406;  Sibley  v.  Leffing- 
well,  8  Allen,  584;  White  v.  Foster, 
102  Mass.  375;  Lamb  v.  Pierce,  113 
Mass.  72;    Crasson   v.  Swoveland,  22 

Ind.  428,  434 These  cases  all 

proceed  upon  the  theory  that  actual 
notice  and  actual  knowledge  mean 
the  same  thing."  The  court  also  cites 
decisions  from  many  other  states  by 
which  the  same  interpretation  is  given 
to  similar  statutes,  and  the  same  mean- 
ing attributed  to  "actual  notice."  It 
is  admitted,  however,  that  no  mere 
"constructive  notice"  to  the  subse- 
quent purchaser  would  avail,  under 
such  a  statute,  to  defeat  his  rights 
under  an  instrument  first  recorded. 
In  the  following  cases  substantially 
the  same  test  is  laid  down,  namely: 
"A  knowledge  of  such  facts  and  cir- 
cumstances as  would  put  an  ordinarily 
prudent  man  upon  an  inquiry."  It 
is  true  that  in  some  of  these  opinions 
the  language  of  the  court  appears  to 
connect  this  test  with  constructive 
notice  only;  but  a  closer  examination 
will  show  that,  whatever  be  the  lan- 
guage used,  the  judge  really  has  in 
mind  and  is  speaking  of  those  instances 
of  actual  notice  which  are  inferred  from 


circumstantial  evidence.  See  Lambert 
V.  Newman,  56  Ala.  623;  Helms  v. 
Chadbourne,  45  Wis.  60;  Chicago  etc. 
R.  R.  Co.  V.  Kennedy,  70  111.  350; 
Shepardson  v.  Stevens,  71  111.  646; 
Loughridge  v.  Bowland,  52  Miss.  546; 
Barnes  v.  McCiinton,  3  Penr.  &  W. 
67;  23  Am.  Dec  62;  Warren  v. 
Swett,  31  N.  H.  332;  Buttrick  v. 
Holden,  13  Met.  355,  —  all  of  which 
are  cited  supra.  In  the  recent  case 
of  Brown  v.  Volkening,  64  N.  Y. 
76,  the  kind  and  amount  of  notice 
required  to  defeat  the  precedence 
obtained  by  the  first  recording  of  a 
subsequent  conveyance  was  discussed. 
The  statute  of  New  York  does  not  in 
express  terms  require  the  notice  to  be 
actual.  The  notice  relied  upon  was 
constructive,  arising  from  the  fact  of 
possession  by  a  third  person;  and  the 
precise  point  decided  was  confined  to 
the  kind,  nature,  purposes,  and  ex- 
tent of  the  possession  necessary  under 
such  circumstances  to  raise  a  legal 
presumption  and  to  constitute  a  suf- 
ficient constructive  notice.  In  the 
course  of  his  opinion,  however,  Allen, 
J.,  speaks  of  actual  notice  in  the  fol- 
lowing language,  which  fully  corrob- 
orates the  positions  of  the  text  (p. 
82):  "Actual  notice  of  a  prior  unre- 
corded conveyance,  or  of  any  title, 
legal  or  equitable,  to  the  premises,  or 
knowledge  or  notice  of  any  facts  which 
should  put  a  prudent  man  upon  in- 
quiry, impeaches  the  good  faith  of  the 
subsequent  purchaser.  There  should 
be  proof  of  actual  notice  of  prior  title 
or  prior  equities,  or  circumstances  tend- 
ing to  prove  such  prior  rights,  which 
aS"ect  the  conscience  of  the  subsequent 
purchaser.  Actual  notice  of  itself  im- 
peaches the  subsequent  conveyance. 
Proof  of  circumstances  short  of  actual 
notice,  which  should  put  a  prudent  man 
upon  inquiry,  authorizes  the  court  or 
jury  to  infer  and  find  actual  notice." 
This  passage  of  Mr.  Justice  Allen's 
opinion  exactly  adopts  the  reasoning 
and  conclusions  as  given  in  the  text. 
It  declares  that  when  a  court  or  jury 
find  notice  as  a  conclusion  of  fact 
from  circumstances  tending  to  show 
it,  which  should  put  a  prudent  man 
upon  inquiry,  such  notice  is  actual  as 
truly  as  though  it  was  proved  by  direct 


817  CONCERNING    NOTICB.  §  597 

notice  was  actual,  and  not  constructive;  and  that  one  or 
the  other  of  the  following  questions  was  in  reality  con- 
sidered and  determined  by  the  court:  1.  It  being  shown 
that  the  party  had  been  informed  of  certain  facts,  and  it 
further  appearing  that  he  had,  notwithstanding  such  in- 
formation, and  without  making  any  inquiry  respecting 
its  truth,  gone  on  and  completed  the  transaction,  whether 
the  court  or  jury  were  warranted  in  inferring  as  a  legiti- 
mate conclusion  from  the  evidence  that  he  had  also  re- 
ceived that  direct,  personal  information  concerning  the 
existence  of  a  prior  conflicting  claim  which  the  law  calls 
"  actual  notice."  2.  It  being  shown  that  the  party  had 
been  informed  of  certain  facts,  and  it  further  appearing 
that  he  had  thereupon  made  inquirj'  respecting  the  truth 
of  such  information  before  he  completed  the  transaction, 
whether  the  court  or  jury  were  warranted  in  inferring  as 
a  legitimate  conclusion  from  the  whole  evidence,  either 
that  he  had  or  had  not  received  that  direct  personal  infor- 
mation which  constitutes  actual  notice.* 

§  597.  What  Constitutes  It:  Rumors;  Putting  on  In- 
quiry, etc.  —  A  purchaser,  or  person  obtaining  any  right 
in  specific  property,  is  not  afifected  by  vague  rumors, 
hearsay  statements,  and  the  like,  concerning  prior  and 
conflicting  claims  upon  the  same  property;  and  the  rea- 
son is,  that  such  kind  of  reports  and  statements  do  not 
furnish  him  with  any  positive  information,  any  tangible 
clew,  by  the  aid  of  which  he  may  commence  and  success- 
fully prosecute  an  inquiry,  and  thus  discover  the  real 
truth;    his  conscience  is  therefore  not  bound.'     On  the 

evidence.     It  is  actual,  and  not  con-  man  v.  Jones,  44  Wis.  498,  is  Maupin 

ptructive,  because,  although   inferred  v.  Emmons,  47  Mo.  304,  306,  307. 

from  circumstances,  it  is  inferred  by  '  See  the  cases  cited  in  the  last  pre- 

mere  process  of  argument,  and  not  by  ceding  and  in  the  next  following  notes, 

means  of  any  legal  presumptions.     If  '  Woodworth  v.   Paige,  5  Ohio  St. 

the  party  thus  put  upon  inquiry  ne-  70;    Lamont  v.  Stimson,  5  Wis.  443; 

gleets  to  prosecute   the   inquiry,   the  Shejiard    v.    Shepard,    {id   Miss.    173; 

conclusion   of   fact  is   then   absolute,  Doyle  v.  Teas,  4  Seam.  202;  Butler  v. 

since  the  circumstances  are  left  un.ex-  Stevens,  26  Me.  484;  Jaquea  v.  Weeks, 

plained  and  the  natural  inference  from  7  Watti5,  261.  267;  Wilson  v.   McCul- 

them  is  left  unanswered  and  unweak-  lough,  23   Pa.   St.  440;   62  Am.  Deo. 

ened.     To  the  same  effect   as  Brink-  347;   Jollaad   v.   Staiubridge,  3   Yea. 
2  Eq.  Jue.  — 52 


§  597  EQUITY    JURISPRUDENCE.  818 

other  hand,  the  proposition  is  established  by  an  absolute 
unanimity  of  authority,  and  is  equally  true  both  in  its 
application  to  constructive  notice,  and  to  actual  notice 
not  proved  by  direct  evidence  but  inferred  from  circum- 
stances, that  if  the  party  obtains  knowledge  or  information 
of  facts  tending  to  show  the  existence  of  a  prior  right  in 
conflict  with  the  interest  which  he  is  seeking  to  obtain, 
and  w^hich  are  sufficient  to  put  a  reasonably  prndent  man 
upon  inquiry,  then  it  may  be  a  legitimate,  and  perhaps 
even  necessary,  inference  that  he  acquired  the  further 
information  which  constitutes  actual  notice.     This  infer- 
ence is  not,  in  case  of  actual  notice,  a  presumption,  much 
less  a  conclusive  presumption,  of  law;  it  may  be  defeated 
by  proper  evidence.     If  the  party  shows  that  he  made  the 
inquiry,  and  prosecuted  it  with  reasonable  diligence,  but 
still  failed  to  discover  the  conflicting  claim,  he  thereby 
overcomes   and   destroys  the   inference.     If,  however,  it 
appears  that  the  party  obtains  knowledge  or  information 
of  such  facts,  which  are  sufficient  to  put  a  prudent  man 
upon  inquiry,  and  which  are  of  such  a  nature  that  the 
inquiry,  if  prosecuted  with  reasonable  diligence,  would  cer- 
tainly lead  to  a  discovery  of  the  conflicti7ig  claim,  then  the 
inference  that  he  acquired  the  information  constituting 
actual  notice  is  necessary  and  absolute;  for  this  is  only 
another  mode  of  stating  that  the  party  was   put  upon 
inquiry;  that  he  made  the   inquiry  and  arrived  at  the 
truth.     Finally,  if  it  appears  that  the  party  has  know^ledge 
or  information  of  such  facts  sufficient  to  put  a  prudent 
man  upon  inquiry,  and  that  he  wholly  neglects  to  make 
any  inquiry,  or  having  begun  it  fails  to  prosecute  it  in  a 
reasonable  manner,  then,  also,  the   inference  of  actual 
notice  is  necessary  and  absolute.     These  three  proposi- 
tions substantially  embrace  all  instances  of  actual  notice 
proved  by  circumstantial  evidence,  and  they  are  illustrated 

478;   [SatterfieW   v.  Malone,  35  Fed.     suspicion:   Simms  v.    Morse,   2  Fed. 
Rep.  445:  Grundies  v.  Reid,   107  111.     Rep.  325.] 
304.     Nor  ia  ha  affected  by  a  mere 


819 


CONCERNING    NOTICE. 


§  598 


by  a  vast  number  of  decisions,  each  depending  upon  its 
own  particular  circumstances.* 

§  598.  Special  Rules. — The  general  rules  formulated 
in  the  foregoing  paragraphs  apply  to  all  species  of  actual 
notice.  The  inquiry  next  presents  itself,  whether  any 
more  particular  rules  have  been  established  which  deter- 
mine the  existence  or  non-existence  of  actual  notice  under 
special  conditions  of  fact.  Since  actual  notice  is,  by  its 
very  definition,  a  conclusion  of  fact  inferred  from  evidence 
more  or  less  convincing,  it  is  plain  that  each  case  must, 


1  Spofford  V.  Weston,  29  Me.  140; 
Warren  v.  Swett,  31  N.  H.  332,  341; 
Nute  V.  Niite,  41  N.  H,  60;  Blaisdell 
V.  Stevens,  16  Vt.  179,  186;  Stafford 
V.  Ballou,  17  Vt.  329;  McDaniels  v. 
Flower  Brook  etc.  M.  Co.,  22  Vt.  274; 
Stevens  v.  Goodenough.  26  Vt.  676; 
Blatchley  v.  Osborn,  33  Conn.  226, 
233;  Sigourney  v.  Miinn,  7  Conn.  324; 
Peters  v.  Goodrich,  3  Conn.  146;  Rari- 
tau  Water  etc.  Co.  v.  Veghte,  21  N.  J. 
Eq.  46.3,  478:  Hoy  v.  Bramhall.  19 
N.  J.  Eq.  563;  97  Am.  Dec.  687;  Wil- 
liamson  v.  Brown,  15  N.  Y.  354,  362; 
Swarthoutv.  Curtis,  5  N.  Y.  ,301;  55 
Am.  Dec.  345;  Pendleton  v.  Fay,  2 
Paige,  202;  Danfortli  v.  Dart,  4  Duer, 
101;  Jackson  v.  Caldwell,  1  Cow.  622; 
Hawley  v.  Cramer,  4  Cow.  717;  Par- 
rish  V.  Brooks,  4  Brewst.  154;  Kerns 
V.  Swope,  2  Watts,  75;  Jaques  v. 
Weeks,  7  Watts,  261.  274;  Epley  v. 
Witherow,  7  Watts,  16.3,  167;  Bellas 
V.  McCarthy,  10  Watts,  13;  Randall 
V,  Silverthorne,  4  Pa.  St.  173;  Trefts 
V.  King,  18  Pa.  St.  157,  160;  Ringgold 
V.  Bryan,  3  Md.  Ch.  488;  Stockett  v. 
Taylor,  3  Md.  Ch.  537;  Bunting  v. 
Ricks,  2  Dev.  &  B.  Eq.  130;  .32  Am. 
Dec.  699;  Gibbes  v.  Cobb,  7  Rich.  Eq. 
54;  Maybin  V.  Kirby,  4  Rich.  Eq.  105;- 
Center  v.  Bank,  22  Ala.  743;  Mc- 
Gehee  v.  Gindrat,  20  Ala.  95;  Ringgold 
V.  Waggoner,  14  Ark.  69;  Bartlett  v. 
Glascock,  4  Mo.  62,  66;  Doyle  v.  Teas, 
4  Scam.  202;  Hoxie  v.  Carr,  1  Sum. 
193;  Hinde  v.  Vattier,  1  McLean,  110; 
7  Pet.  252;  Lambert  v.  Newman,  56 
Ala.  623,  625;  Helms  v.  Chadbourne, 
45  Wis.  60,  70;  Brinkman  v.  Jones,  44 
Wis.  498,  519;  Chicago  etc.  R.  R.  v. 
Kennedy,  70  111.  350,  361 ;  Shepardson 
V.  Stevens,  71  111.  646;  Erickson  v. 
Rafferty,  79  111.  209,  212;  Reynolds  v. 


Ruckman,  35  Mich.  80;  Loughridge 
V.  Rowland,  52  Miss.  546,  555;  Brown 
V.  Volkenin^,  64  N.  Y.  76,  82;  Chicago 
V.  Witt,  75  111.  211;  Buck  v.  Paine,  50 
Miss.  648.  655;  McLeod  v.  First  Nat, 
Bank,  42  Miss.  09,  112;  Parker  v.  Foy, 
43  Miss.  260;  55  Am.  Rep.  484;  Carter 
V.  City  of  Portland,  4  Or.  339,  350, 
per  ^IcArthur,  J.  (a  very  clear  and 
accurate  statement  of  the  doctrine); 
Pringle  v,  Dunn,  37  Wis.  449,  465;  19 
Am.  Rep.  772;  Shotwell  v.  Harrison, 
30  Mich.  179;  Munroe  v.  Eastman,  3i 
Mich.  283;  Eck  v.  Hatcher,  58  Mo. 
235;  Maul  v.  Ridej-,  59  Pa.  St.  167, 
171,  172;  Lawton  v.  Gordon,  37  Cal. 
202,  205.  [See  also  the  following  re- 
cent  cases:  Lovejoy  v,  Raymond,  58 
Vt.  509;  Jackson,  L.,  &  S.  R.  R.  v. 
Davison,  65  Mich,  417;  Gale  v.  Harby, 
20  Fla.  171;  Sensenderfer  v.  Kemp,  83 
Mo.  581;  Lang  Syne  Min.  Co.  v,  Ross, 
20  Nev,  127;  19  Am.  St.  Rep.  337; 
Hains  v.  Hains,  69  Mich.  581;  Spence 
V.  Mobile  etc.  R'y  Co.,  79  Ala.  576; 
Woodbury  v.  Bruce,  59  Vt.  624;  TJyer 
V.  Taylor,  50  Ark.  314;  Biddinger  v. 
Wiland,  67  Md.  359;  Woodall  v.  Kelly, 
85  Ala.  368;  7  Am.  St.  Rep.  57;  Mor- 
gan's Appeal,  126  Pa.  St.  500;  Cannon 
V,  Handley.  72  Cal.  133;  Smith  v, 
Ayer,  101  U.  S.  320;  Bocock's  Ex'rs  v. 
Alleghany  C.  &  I.  Co.,  82  Va.  913;  3 
Am.  St.  Rep.  128;  Ellis  v.  Horrman, 
90  N.  Y.  466;  Montgomery  v.  Keppel, 
75  Cal.  128;  7  Am.  St.  Rep.  125;  Kent 
V.  Mellu.s,  69  Mich.  71;  Marbury  v, 
Ehlen,  72  Md.  206;  20  Am.  St.  Rep. 
467:  McMasters  v.  Edgar,  22  W.  Va. 
673;  Leake  v.  Watson,  58  Conn.  332; 
18  Am.  St.  Rep.  270;  Simmons  v. 
Oliver,  74  Wis.  633;  Stokes  v.  Riley, 
121  111.  166;  Cain  v.  Cox,  23  W.  Va.  594; 
Bradford  v.  Hall,  36  Fed.  Rep.  801.] 


§  599  EQUITY    JURISPRUDENCE.  820 

to  a  great  extent,  depend  upon  its  own  circumstances;  and 
the  results  collected  and  arranged  from  the  decisions  must 
therefore  he  regarded  as  illustrations  of  the  general  doc- 
trines heretofore  described,  rather  than  as  additional  and 
more  definite  rules.  It  is  possible,  however,  to  reach  some 
conclusions  from  a  comparison  and  classification  of  judi- 
cial opinions,  which  will  afford  great  practical  aid  in 
applying  these  general  rules  to  particular  cases.  The 
whole  inquiry  is  reduced  to  the  examination  of  two  en- 
tirely distinct  questions,  which  should  not  be  confounded, 
namely:  What  kind  of  information  personally  communi- 
cated to  a  party  constitutes  the  actual  notice  proved  by 
direct  evidence  ?  What  facts  are  sufficient  to  put  a  party 
upon  an  inquiry,  so  that,  if  not  overcome  by  contrary 
proofs,  they  would  constitute  the  actual  notice  inferred 
from  circumstantial  evidence  ? 

§  599.  Same — Kind  and  Amount  of  Information  Neces- 
sary. —  In  the  first  of  these  two  inquiries,  it  is  assumed 
that  some  information  is  shown  by  direct  evidence  to 
have  been  personally  communicated  to  the  party,  and 
the  sole  question  is,  What  kind  or  amount  of  such  in- 
formation will  constitute  actual  notice,  and  so  bind  his 
conscience?  Whenever  A  is  dealing  concerning  certain 
property  with  B,  who  acts  as  owner,  grantor,  vendor,  or 
mortgagor,  as  the  case  may  be,  a  definite  statement  made 
to  A  by  a  third  person,  C,  that  he  has  or  claims  some 
conflicting  interest  or  right,  legal  or  equitable,  in  the 
subject-matter,  is  a  sufficient  actual  notice  to  affect  A's 
conscience.  The  statement  need  not  be  so  full  and  de- 
tailed that  it  communicates  to  A  complete  knowledge  of 
the  opposing  interest  or  right;  it  is  enough  that  it  is  so 
definite  as  to  assert  the  existence  of  an  interest  or  right 
as  a  fact.*     Under  the  same  circumstances,  if  A  is  in- 

'  Epley  V.  Witherow,  7  Watts,  163,  ley  v.  Osborn,  33  Conn.  226,  233;  Rey- 

167;  Jaquea  v.  Weeks,  7  Watts,  261,  nolds   v.    Ruckman,  35   Mich.    80   (a 

27i;  Barnes  v.  McClinton,  3  Penr.  &  W.  case  in  which  it  was  held  that  no  no- 

67;  23  Am.  Dec.  62;  Bartlett  v.  Glas-  tice  had  been  given);  Ponder  v.  Scott, 

cock,  4  Mo.  62,  66;  Nelson  v.  Sims,  6  44  Ala.  241,  244',  245  (case  in  which 

Miss.  383, 388;  57  Am.  Dec.  144;  Blatch-  no  notice  was  held  to  have  been  given). 


821  CONCERNING    NOTICE.  §  599 

formed  by  the  grantor  or  vendor,  B,  that  the  subject- 
matter  is  encumbered,  or  is  subject  to  an  outstanding 
lien  or  equitable  claim,  or  that  he  himself  has  not  for 
any  reason  a  title  free  and  perfect,  such  information  is 
actual  notice;  it  need  not  state  all  the  particulars,  nor 
impart  complete  knowledge  of  the  conflicting  interest, 
incumbrance,  or  right;  it  is  enough  that  A  is  reasonably 
informed,  and  has  reasonable  grounds  to  believe,  that 
the  conflicting  right  exists  as  a  fact.'  Of  course  the 
statement  by  B  may  be  so  vague  and  uncertain,  or  it 
may  be  so  accompanied  by  additional  explanatory  or 
contradictory  matter,  that  it  does  not  afiect  the  con- 
science of  the  purchaser,  A,  and  does  not  amount  to  an 
actual  notice.'^  Wherever,  under  the  circumstances  above 
described,  information  given  by  the  grantor  or  vendor 
with  whom  the  purchaser  is  dealing,  or  by  the  holder  of 
the  conflicting  claim  or  right,  would  constitute  an  actual 
notice,  the  same  information  may  be  communicated  by  a 
relative  or  friend  of  either  of  these  persons,  and  would 
then  operate  in  like  manner  as  actual  notice,  provided 
the  party  so  represented  was  prevented  by  absence,  sick- 
ness, or  other  disability  from  making  the  communication 
in  his  own  person  and  on  his  own  behalf.' 

»  Hudson  V.  Warner,  2  Har.  &  G.  Kelly,  85  Ala.  368;  7  Am.  St.  Rep.  57; 

415;  Price  v.  McDonald,   1  Md.  403;  Jackson,  L.,  &  S.  R.  K  Co.  v.  Davison, 

54  Am.  Dec  657;  Russell  v.  Petree,  10  65  Mich.  417.] 

B.  Mon.  184,  186;  Reynolds  v.  Ruck-  »  Buttrick  v,  Holden,  13  Met.  355, 
man,  35  Mich.  80  (example  of  no  no-  357;  Curtis  v.  Blair,  9  Miss.  309,  328; 
tice);  Chicago  v.  Witt,  75  III.  211  59  Am.  Dec.  257;  Chicago  v.  Witt,  75 
(ditto,  no  notice);  Ponder  v.  Scott,  44  111.  211;  Ponder  v.  Scott,  44  Ala.  241, 
Ala.  241,  244,  245  (notice  merely  of  an  244,  245;  [Satterfield  v.  Malone,  35 
intention  to  execute  a  deed  is  not  no-  Fed.  Rep.  445;]  and  see  post,  §  601, 
tice  of  the  contents  of  the  deed  after-  where  the  question  is  more  fully  ex- 
wards  executed).    Definite  information  amined. 

of  a  conflicting  claim  communicated  *  Butcher  v.  Yocum,  61  Pa.  St.  168, 
by  a  third  person,  neither  the  claim-  171;  100  Am.  Dec.  625;  Mulliken  v. 
ant  nor  the  party  with  whom  the  pur-  Graham,  72  Pa.  St.  484;  Ripple  v.  Rip- 
chaser  is  dealing,  who  speaks  from  his  pie,  1  Rawle,  386.  In  Butcher  v.  Yo- 
own  positive  knowledge,  may  amount  cum,  61  Pa>  St.  168,  100  Am.  Dec.  625, 
to  the  knowledge  which  supersedes  it  was  said  not  to  be  essential  that  notice 
and  takes  the  place  of  a  mere  notice,  of  an  equitable  interest  should  come 
This  question  is  fully  examined  in  a  form  the  party  interested  or  his  agent; 
subsequent  paragraph.  See  Butcher  it  may  come  aliunde,  provided  it  be  of 
V.  Yocum,  61  Pa.  St.  168,  171;  100  Am.  a  character  likely  to  gain  credit.  A 
Dec.  625;  Lawton  v.  Gordon,  .37  Cal.  person  about  to  purchase  land  from  a 
202,  205,  206.     [See  also  Woodall  v.  widow  in  whom  the   legal   title  was 


600 


EQUITY    JURISPRUDENCE. 


822 


§  600.  Same  —  What  Circumstances  Suflacient.  —  The 
second  question  is,  What  facts  are  sufficient  to  put  the 
party  upon  an  inquiry,  so  that  he  may  thereby  be  charged 
with  the  actual  notice  inferred  from  circumstantial  evi- 
dence ?  Among  the  facts  to  which,  as  evidence,  such  force 
has  been  attributed  are:  Close  relationship,  personal  inti- 
macy, or  business  connections  existing  between  the  pur- 
chaser and  the  party  with  whom  he  is  dealing,  or  between 
him  and  the  holder  of  the  adverse  claim;*  great  inade- 
quacy of  the  price,  which  may  arouse  the  purchaser's  sus- 
picion, and  put  him  upon  an  inquiry  as  to  the  reasons  for 
selling  the  property  at  less  than  its  apparent  value;*  the 
sight  or  knowledge  of  visible  material  objects  upon  or 
connected  with  the  subject-matter,  which  may  reasonably 
suggest  the  existence  of  some  easement  or  other  similar 


vested  was  informed  by  the  grand- 
father of  her  minor  children  that  the 
equitable  title  had  been  in  her  de- 
ceased husband,  and  was  then  in  hia 
heirs.  The  grandfather  was  held  a 
proper  person  to  give  notice,  and  the 
purchaser  was  bound  by  it  as  an  actual 
notice.  In  Ripple  v.  Ripple,  1  Rawle, 
386,  a  notice  was  given  by  an  uncle  of 
the  person  interested.  But  -per  contra, 
see  Woods  v.  Farmere,  7  Watts,  382, 
387;  32  Am.  Dec.  772,  per  Gibson,  C. 
J. ;  JoUand  v.  Stainbridge,  3  Ves.  478, 
per  Lord  Loughborough.  [In  John  v. 
Battle,  58  Tex.  591,  public  notice  given 
at  a  bankrupt  sale,  of  a  trust  estate 
claimed  in  the  land  by  the  wife  of  the 
baulcrupt,  was  held  sufficient  to  charge 
purchasers  at  the  sale.] 

'  It  is  hardly  to  be  supposed,  how- 
ever, that  notice  could  be  inferred 
from  mere  relationship  or  intimacy, 
without  avy  other  circumstances:  Til- 
linghast  v.  Champlin,  4  R.  L  173,  204, 
215;  67  Am.  Dec.  510;  Spurlock  v. 
Sullivan,  36  Tex.  511;  Trefts  v.  King, 
18  Pa.  St.  157,  160;  Phillips  v.  Bank 
of  Lewistown,  18  Pa.  St.  394,  404; 
Hoxie  V.  Carr,  1  Sum.  173,  192;  Flagg 
V.  Mann,  2  Sum.  480;  Dubois  v.  Barker, 
4  Hun,  80,  86;  6  Thomp.  &  C.  349 
(mere  relationship  of  grantee  to  gran- 
tor, without  any  other  evidence,  not 
sufficient  ground  from  which  to  infer 


notice  of  a  conflicting  equitable  claim); 
Reynolds  v.  Ruckman,  35  Mich.  80 
(knowledge  of  a  partnership  existing 
between  a  grantor  and  another  held 
not  sufficient  to  charge  grantee  with 
notice). 

^  Peabody  v.  Fenton,  3  Barb.  Ch, 
451;  Hoppin  v.  Doty,  25  Wis.  573 j 
Beadles  v.  Miller,  9  Bush,  405  (case 
in  which  inadequacy  of  price  was  held 
not  sufficient  notice  of  grantor's  fraud- 
ulent design,  so  as  to  invalidate  a 
conveyance  as  against  the  grantor's 
creditors);  [see  also  Fisk  v.  Burson, 
71  Cal.  428,  where  inadequacy  of  price 
and  other  facts  were  held  not  great 
enough  to  amount  to  notice;]  Eck  v. 
Hatcher,  58  Mo.  235  (case  in  which 
inadequacy  of  price  and  other  circum- 
stances were  held  a  sufficient  notice 
of  grantor's  fraud,  etc.);  Hoppin  v. 
Doty,  25  Wis.  573,  591  (a  grantee 
bought  for  one  hundred  dollars  land 
which  he  knew  to  be  worth  two  thou- 
sand dollars;  held  a  notice  of  the  gran- 
tor's defects  of  title,  fraudulent  intent 
in  conveying,  etc.).  [And  the  fact  that 
a  conveyance  by  a  husband  to  his 
wife  was  voluntary  is  sufficient  to 
put  a  subsequent  purchaser  on  inquiry 
as  to  whether  the  conveyance  was  in 
fraud  of  the  (.'ranter's  creditors:  Mil- 
holland  v.  Tiffany,  64  Md.  455.J 


823 


CONCERNING    NOTICE. 


§600 


right.^  The  irregular,  defective,  or  improper  recording 
of  aa  instrument,  although  clearly  not  a  constructive 
notice  under  the  statute,  may  be  sufficient  to  put  a  pur- 
chaser upon  inquiry,  and  so  constitute  an  actual  notice; 
and  the  inspection,  perusal,  or  knowledge  of  a  writing 
which  purported  to  be  a  certified  or  official  copy  of 
the  instrument  thus  defectively  or  improperly  recorded 
should  produce  the  same  effect,  although  upon  this  par- 
ticular point  there  seems  to  be  some  conflict  of  judicial 
opinion.  It  has  even  been  held  that,  under  special  cir- 
cumstances, a  jury  or  court  might  assume  as  an  inference 
of  fact,  in  the  absence  of  any  positive  evidence,  that  a  pur- 
chaser examined  the  public  records,  and  thus  obtained 
information  amounting  to  an  actual  notice  from  a  con- 
veyance  imperfectly  recorded,  or   improperly  recorded. 


through  some  defect.^ 

'  Thus  structures  upon  land  dis- 
tinctly  visible  to  the  purchaser  have 
been  held  sufficient  to  put  him  on  an 
inquiry,  and  to  constitute  notice  to 
him  of  an  existing  easement:  Rari- 
tan  Water  Power  Co.  v.  Veghte,  21 
N.  J.  Eq.  463,  478;  Hoy  v.  Bramhall, 
19  N.  J.  Eq.  563;  Randall  v.  Silver- 
thorn,  4  Pa.  St.  173;  [Fresno  C.  &  I. 
Co.  v.  Rowell.  80  Cal.  114;  13  Am.  St. 
Rep.  112.]  The  fact  that  there  were 
fourteen  chimney-pots  on  the  top  of  a 
house,  but  only  twelve  flues  in  the 
house,  was  held  to  be  notice  to  the 
purchaser  of  an  easement  for  the 
passage  of  smoke,  held  by  an  adjoining 
owner:  Hervey  v.  Smith,  22  Beav. 
299;  and  see  Davies  v.  Sear,  L.  R. 
7  Eq.  427;  Blatchley  v.  Osborn,  33 
Conn.  226,  233.  In  Paul  v.  Conners- 
ville  etc.  R.  R.,  51  Ind.  527,  530,  it 
was  held  that  a  grantee  of  land  with 
a  graded  railroad  track  openly  across 
it,  having  embankments  and  excava- 
tions plainly  to  be  seen  by  the  pur- 
chaser, takes  with  actual  notice  of  all 
the  rights  in  the  land  possessed  by 
the  railroad  company;  and  a  warranty 
deed  from  his  grantor  cannot  affect 
those  rights. 

^  Kerns  v.  Swope,  2  Watts,  75; 
Hastings  v.  Cutler,  24  N.  H.  481. 
In  Kerns  v.  Swope,  2  Watts,  75,  a  deed 
of  laud  lying  in  two  counties  was  re- 


corded in  only  one  of  these  counties, 
80  that  the  record  was  not  a  construct- 
ive notice  with  respect  to  the  portion 
of  land  situate  in  the  other  county. 
The  court  held,  in  an  elaborate  opinion 
by  Chief  Justice  Gibson,  that  a  jury 
might  infer,  as  a  conclusion  of  fact, 
that  the  purchaser  examined  the  rec- 
ord3,andsobecame  acquainted  with  the 
prior  conveyance  afifecting  the  title  to 
the  whole  land  in  both  counties.  The 
court  further  held  that  an  inspection  by 
the  purchaser  of  a  paper  which  pur- 
ported to  be  a  certified  or  official  copy 
of  a  deed  improperly  recorded  on  ac- 
count of  a  defective  acknowledgment, 
where  the  copy  disclosed  this  defect, 
was  not  a  fact  from  which  actual  notice 
could  be  inferred,  because  it  was  noc 
sufficient  to  put  the  purchaser  on  an  in- 
quiry. This  decision  seems  to  be 
unsound;  at  least,  its  correctness  is 
very  doubtful;  it  seems  to  misinterpret 
the  nature  of  facts  sufficient  to  put  a 
purchaser  upon  inquiry,  and  to  con- 
found them  with  absolute  and  com- 
plete knowledge.  Hastings  v.  Cutler, 
24  N.  H.  481,  holds,  much  more  con- 
sistently, aa  it  seems  to  me,  that  the 
inspection  of  a  writing  which  purports 
to  be  a  certified  copy  of  a  recorded 
deed,  although  it  shows  that  the  rec- 
ord was  improperly  made,  because  the 
deed  was  defectively  acknowledged,  ia 


§  601  EQUITY    JURISPRUDENCE.  824 

§  601.  Same  —  Effect  of  Explaining  or  Contradicting 
the  Information  Given.  —  In  concluding  this  branch  of 
the  discussion,  the  important  question  remains  to  be 
considered,  How  far  may  a  party  rely  upon  the  whole  of 
the  information  given  or  statement  made  to  him  in  a 
case  of  actual  notice?  In  other  words,  when  information 
is  given  or  a  statement  is  made  to  a  purchaser  which, 
standing  alone,  would  be  actual  notice,  or  at  least  would 
be  sufficient  to  put  him  ]upon  an  inquiry,  but  this  is  ac- 
companied by  further  explanatory  or  contradictory  dec- 
larations which  tend  to  nullify  or  destroy  the  effect  of 
the  former  language,  how  far  may  the  purchaser  accept 
and  act  upon  the  entire  communication?  or  how  far  is  he 
affected  by  that  portion  which  tends  to  show  the  existence 
of  a  prior,  outstanding,  and  conflicting  claim?  If  the 
only  information  given  to  the  purchaser  concerning  the 
existence  of  an  outstanding  claim,  contract,  or  equity 
affecting  the  property  is  communicated  by  a  third  per- 
son,—  a  stranger  having  no  interest  in  the  matter, — 
9.nd  this  person  also  states  that  such  contract  has  been 
rescinded,  or  such  claim  or  equity  has  been  abandoned  or 
discharged,  and  no  longer  exists,  the  purchaser,  it  seems, 
may  rely  on  the  whole  communication;  it  is  not  suffi- 
cient, in  the  absence  of  special  reasons  for  believing  the 
former  part  and  rejecting  the  latter,  to  put  him  upon  an 
inquiry,  and  does  not  therefore  amount  to  an  actual 
notice.  This  conclusion  results  from  the  obvious  fact 
that  such  an  informant  has  no  personal  interest  to  de- 
ceive the  purchaser  by  misrepresenting  or  concealing  the 
truth.*      When,  however,  the   grantor,  vendor,  or  mort- 

a  fact  sufficient  to  put  the  purchaser  357;   Curtis  v.   Blair,    26   Miss.    309, 

on  an  inquiry,  so  that  if  he  neglected  328;    59    Am.    Dec.    257;    Rogers   v. 

to   make  a  proper  inquiry,  the  infer-  Wiley,   14  111.  65;  56  Am.  Dec.  491; 

■euce  of  actual  notice  would  be  neces-  Williamson  v.  Brown,  15  N.  Y.  354, 

aarv.     See  Pringle  v.  Dunn,  37  Wis.  360.     In   Pringle   v.    Dunn,   37    Wis. 

449",   461-464,  19  Am.  Rep.   772,  and  449.  465,   467,   19  Am.  Rep.  772,  one 

Partridge  v.  Smith,  2  Bias.  183,  185,  purchaser  "had  heard  that  there  was 

1 86,  as  to  the  notice  given  by  a  defect-  a  defective  railroad   mortgage  on  the 

ive  record.  premises,  but  did  not  look  for  it,  be- 

'  In   re   Bright's   Trusts,    21    Beav.  cause  his  abstract   did  not  show  it." 

430;  Buttrick  v.  Holden,  13  Met.  355,  Another  purchaser  of  a  parcel  of  the 


825  CONCERNING    NOTICE.  §  601 

gagor  admits  that  his  title  was  defective  or  encumbered, 
or  that  there  was  some  outstanding  claim  upon  or  equity 
in  the  propert}',  or  makes  any  other  communication 
which,  unexplained,  would  constitute  an  actual  notice, 
but  adds  a  further  declaration  to  the  effect  that  such 
defect  has  been  cured,  or  encumbrance  removed,  or  claim 
or  equity  rescinded  and  destroyed,  the  purchaser,  accord- 
ing to  the  weight  of  authority,  is  not  warranted  in  accept- 
ing and  relying  upon  this  explanation  or  contradiction; 
the  information  obtained  under  such  circumstances  and 
from  such  a  source  is  suflBcient  to  put  a  prudent  man 
upon  an  inquiry.  The  reason  of  this  is  plain.  The 
informant  is  under  a  strong  personal  interest  to  misrep- 
resent or  conceal  the  real  facts.  While  the  former  branch 
of  his  communication  is  made  against  his  interest,  and  is 
therefore  more  likely  to  be  true,  the  latter  part  is  in  con- 
formity with  his  personal  interest,  and  is  essentially  un- 
trustworthy.* Finally,  a  purchaser  is  fully  warranted  in 
accepting  and  acting  upon  the  statements  or  conduct  of 
the  person  who  holds  or  asserts  a  conflicting  interest, 
claim,  or  right,  if  he,  when  interrogated  upon  the  sub- 
ject, either  keeps  silence,  or  denies  the  existence  of  any 
claim,  or  affirmatively  declares  it  to  be  of  a  certain  kind 
and  amount;  such  a  person,  even  if  not  absolutely  es- 

land    "knew  by  report"   that   there  In   Chicago  v.  Witt,    75   111.    211,    a 

was  snch  a  mortgage,  etc.     Both  were  grantee,  some  time  before  the  coovey- 

held  charged  with  actual  notice;  but  ance   was   executed,  was   told  by  the 

it  does  not  appear  in  the  report  of  the  grantor  that  he  was  not  then  able  to 

csise  from  trJwm   the  purchasers   ob<  make  a  good  title,  but  that  in  a  short 

tained  the  information.  time  he  would  be  able.     It  was  held 

*  Hudson  V.  Warner,  2  Har.  ft  G.  that  no   notice   of  an   adverse   unre- 

415;  Price  v.  McDonald,  1  Md.  403;  corded  deed  of   the  same  land  could 

54  Am.  Dec  657;  Russell  v.  Petree,  be  inferred:  Ponder  v,  Scott,  44  Ala. 

10  B.   Mon.   184;  Bunting  v.  Ricks,  2  241,  244,  245.     [In  Simpson  v.  Hinson, 

Dev.  &  B.  Eq.  130;  32  Am.  Dec.  699;  88  Ala.  527,  a  second  mortgagee  was 

Littleton   v.  Giddings,   47   Tex.    109;  held  not  chargeable  with  notice  of  a 

[Manasses  v.  Dent,  89  Ala.  565.]    This  prior    unrecorded    mortgage    on    the 

rule,  however,  is  not  pushed  so  far  by  same  property,  because  on  making  in- 

the  courts  as  to  work  real  injustice  to  quiry  of  the    mortgagor  whether   the 

innocent   purchasers  who   have   been  first  mortgagee  did  not  hold  a  mort- 

manifestly  deceived  and  misled.     See  gage   against   him,    he  was   informed 

Jones  V.  Smith,  1  Hare,  43;  Rogers  v,  that  he  did,  but  that  it  was  on  other 

Jones,  8  N.   H.  264:  Curtis  v.   Blair,  property  only.] 
26  Miss.  309,  328;  59  Am.  Dec.  257. 


§   602  EQUITY    JUKISPRUDENCE.  826 

topped  from  afterwards  setting  up  any  claim,  or  a  claim 
dififerent  from  his  representations,  would  certainly  bo 
debarred  from  afterwards  alleging  that  the  purchaser 
was  put  upon  an  inquiry,  and  was  charged  with  notice.* 
If  a  purchaser,  having  been  put  upon  an  inquiry,  prose- 
cutes it  with  reasonable  and  due  diligence,  without  dis- 
covering any  adverse  right,  the  inference  of  an  actual 
notice  received  by  him  is  overcome  and  destroyed.* 
What  is  a  due  inquiry  in  these  instances  of  actual  notice 
inferred  from  circumstantial  evidence  must,  to  a  great 
extent,  depend  upon  the  particular  facts  of  each  case.  It 
is  well  settled,  however,  that  mere  examination  of  the 
record,  and  finding  no  adverse  title  or  claim  recorded,  is 
not  due  inquiry  by  one  who  has  been  put  upon  inquiry 
by  circumstances  tending  to  show  the  existence  of  a  con- 
flicting title,  claim,  or  right.' 

§  602.  Same  —  By  Whom  and  when  Information  must 
be  Given. —  Such  being  its  general  nature,  it  is  impossible 
to  define  by  a  single  formula  what  will  amount  to  an  ac- 
tual notice  sufficient  to  afi'ect  the  conscience  of  the  party 
receiving  it,  and  courts  have  not  attempted  to  lay  down 
any  such  criterion;  each  case  must,  to  a  considerable  ex- 
tent, depend  upon  its  own  particular  circumstances.  The 
following  ancillary  rules,  however,  bearing  upon  the  ques- 

*  McGehee  v.  Gindrat,  20  Ala.  95;  29  Mich.  162,  was  distinguished.  In 
Massie  v.  Greenhow's  Ex'rs,  2  Pat.  &  Pringle  v.  Dunn,  37  Wis.  449,  465, 
H.  255;  and  see  the  following  Eng-  467,  19  Am.  Rep.  772,  a  purchaser 
lish  authorities:  Ibbotsoa  v.  Rhodes,  "who  had  heard  that  there  was  a  de- 
2  Vern.  554;  Pearson  v.  Morgan,  2  fective  railroad  mortgage  on  the  preni- 
Browa  Ch.  388;  Bridge  v.  Beadon,  ises,  but  did  not  look  for  it,  because 
L.  R.  3  Eq.  664;  Lee  v.  Howlett,  2  his  abstract  did  not  show  it,"  and 
Kay  &  J.  531;  Burrowes  v.  Locke,  10  another,  who  "knew  by  report"  that 
Ves.  470;  Slim  v.  Croucher,  1  De  Gex,  there  was  such  a  mortgage,  but  made 
F.  &  J.  518;  Barry  v.  Croskey,  2  no  further  examination, were  both  held 
Johns.  &  H.  1,  21;  1  Dart  on  Vendors,  charged  with  actual  notice:  Brinkman 
c.  3,  sec.  1,  pp.  88,  89.  v.  Jones,  44  Wis.  498,  519.     Littleton 

*  See  casea  cited  ante,  under  §§  596,  v.  Giddings,  47  Tex.  109,  holds  that 
597.  looking  at  the  records  and  inquiring 

'  In  Shotwell  v.  Harrison,  30  Mich,  of  the  grantor  is  not  enough,  when  au 
179,  and  Munroe  V.  Eastman,  31  Mich,  inquiry  among  the  neighbors  would 
283,  it  was  held  that  a  purchaser  who  have  led  to  the  truth;  also,  that  a  no- 
has  such  notice  of  a  prior  unrecorded  tice  given  to  a  person  who  was  actually 
deed  cannot  rely  upon  a  mere  search  interested  in  the  purchase,  although 
of  the  records  without  any  other  in-  not  named  as  a  grantee  in  the  convey- 
quiry;  the  case  of  Barnard  v.  Campau,  auce,  is  notice  to  the  grantee  himself. 


827  CONCERNING    NOTICE.  §  602 

tion,  have  been  well  settled.  Where  an  actual  notice  is 
relied  upon,  in  order  to  be  binding  it  must  come  from 
some  person  interested  in  the  property  to  be  afTected  by 
it;  and  it  is  said  that  it  must  be  given  and  received  in 
the  course  of  the  very  transaction  itself  concerning  the 
property  in  which  the  parties  are  then  engaged.  As  a 
necessary  consequence,  no  mere  vague  reports  from  stran- 
gers, nor  mere  general  statefnents  by  individuals  not 
interested  in  the  property,  that  some  other  person  claims 
a  prior  right  or  title,  will  amount  to  an  actual  notice  so 
as  to  bind  the  conscience  of  the  party;  nor  will  he  be 
bound  by  a  notice  given  in  some  previous  and  distinct 
transaction,  which  he  might  have  forgotten.*  It  should 
be  most  carefully  observed  that  the  decisions  here  re- 
ferred to,  and  the  rules  which  they  sustain,  are  dealing 
exclusively  with  the  artificial  conception  of  an  actual 
notice,  which  is  regarded  as  affecting  the  conscience  of 
the  party,  and  producing  results  upon  his  rights  in  the 

'  See  Sugden  on  Vendors  and  Pur-  (rnmors);  Buttrick  v.  Holden,  13  Met, 

chasers,  755;  Barnhart  V.  Greenshields,  355,    357;    Curtis  v.    Blair,  26    Miss. 

9  Moore  P.  0.  C.  18,  36;  Natal  Land  309,  328;  59   Am.  Dec.  257;    Peebles 

etc.  Co.  V.  Good,  L.  R.  2  P.  C.  121,  129;  v.  Reading,  8  Serg.  &  R.  484;  Miller 

Butcher  v.  Stapely,  1  Vera.   363;  Jol-  v.  Creason,  5    Watts  &  S.  284;  Epley 

land  V.  Stainbridge,  3   Ves.  478;  Fry  v,     Witherow,    7    Watts,    163,     167; 

V.  Porter,   1    Mod.  300;  Wildgoose  v.  Jaques  v.  Weeks,  7  Watts,   261,  267, 

Wayland,  Goulds.   147,  pi.  67.     That  274;  Woods  v.  Farmere,  7  Watts,  382, 

mere  vague   statements,  rumors,  and  387;  32  Am.  Dec.  772;  Hoodv.  Fahne- 

reports  coming  from  third  persons  not  stock,  1  Pa.  St.  470;  44  Am.  Dec.  147; 

interested  in  the  transaction,  or  from  Churcher  v.  Guernsey,  39  Pa.  St.  84; 

any   other    unauthentic    source,    and  Wilson  v.  McCullough,  23  Pa.  St.  440; 

even   vague,    uncertain,    and    wholly  62  Am.  Dec.  347;  Van  Duyne  v.  Vree- 

geaeral    statements,    coming    from   a  land,  12  N.  J.  Eq.  142,  155;  Butler  v. 

person  interested  in  the  subject-mat-  Stevens,  26  Me.  484;  Lament  v.  Stim- 

ter,  such  as  the  vendor  or  the  claim-  son,  5  Wis.  443;  Rogers  v.  Haskings, 

ant   himself,  will    not   amount   to  an  14  Ga.  166;  Maul  v.  Rider,  59  Pa.  St. 

actual  notice,  and  will  not   bind   the  167,    171,    172  (general   rumors);   but 

conscience  of  a  purchaser,  is  decided  as  to  notice  not  coming  from  the  party 

or  laid  down  by  way  of  a  dictum  in  a  interested,    see    Curtis    v.    Mundy,   3 

multitude  of  cases:  Chicago  v.  Witt,  Met.    405;    MuUiken    v.  Graham,    72 

75111.  211  (insufficent  statement  from  Pa.  St.  484,  490.     That  an  actual  no- 

a  grantor  to  the  purchaser);   Lough-  tice  given  in  a  prior  transaction  is  not 

ridge  v.  Rowland,  52  Miss.  546,   555  notice  in  a  subsequent   and   different, 

(rumors,  suspicions,  etc.);  Reynolds  v.  one,  see  Lowther  v,   Carlton,  2   Atk. 

Ruckman,    35   Mich.    80    (facts    not  242;  Fuller   v.    Benett,  2    Hare,  394, 

amounting    to    notice);     Lambert    v.  404;   Boggs  v.  Varner,  6  Watts  &  S. 

Newman,  56  Ala.  623,  625,  626  (vague  460;  Meehan  v.  Williams,  48  Pa.    St, 

evidence  of  conversations);  Parker  v,  238;  Bank  of  Louisvillt  V.  Curren,  36 

Foy,  43  Miss.  260,  266;  55  Am.  Rep.  Iowa,  556. 
484;  Wailea  v.  Cooper,  24   Miss.  208 


§  603  EQUITY   JURISPRUDENCE.  828 

same  manner  and  to  the  same  extent  as  though  it 
amounted  to  full  knowledge,  although  it  may  perhaps 
fall  far  short  of  such  a  consummation.  The  question  as 
to  the  consequences  of  such  knowledge  acquired  in  some 
other  manner  or  from  some  other  source  is  therefore 
left  untouched. 

§  603.  EfiFect  of  Knowledge.— What,  then,  is  the  effect 
of  actual  knowledge  of  the  prior  fact,  interest,  claim,  or 
right,  acquired  previously,  or  in  an  entirely  dififerent 
transaction,  or  from  a  stranger  or  person  having  no  inter- 
est in  the  property,  or  even  in  an  accidental  and  fortuitous 
manner?  The  answer,  on  principle,  is  very  clear  and  cer- 
tain. It  was  shown  in  a  former  paragraph  that  the  con- 
ception of  notice  was  introduced,  and  the  rules  concerning 
it  were  established,  from  considerations  of  policy  and  ex- 
pediency based  upon  the  common  experience  of  mankind. 
Notice,  even  when  actual,  is  not  necessarily  equivalent  to 
knowledge;  but  the  same  effects  must  be  attributed  to  it 
which  would  naturally  flow  from  knowledge.  It  is  treated 
as  a  representative  of,  or  substitute  for,  actual  knowledge, 
and  is  therefore  in  its  essential  nature  inferior  to  knowl- 
edge. It  necessarily  follows  that  whenever  a  party  has 
obtained  a  full  knowledge,  although  not  in  accordance 
with  the  rules  which  define  the  nature  of  notice,  and  regu- 
late the  mode  of  its  being  given  and  received,  there  is 
no  longer  any  need  of  invoking  the  legal  conception  of 
notice;  the  rules  concerning  it  no  longer  apply;  the  very 
fact  for  which  it  is  intended  as  a  substitute  has  been  more 
perfectly  accomplished  in  another  manner.  To  sum  up 
in  one  statement,  if  the  party  has  in  any  way  obtained  the 
full  knowledge,  those  same  results  must  necessarily,  and 
even  in  a  higher  degree,  be  attributed  to  it  —  the  very 
substance  itself — which  are,  from  motives  of  general 
policy,  attributed  to  notice  as  its  representative  and  sub- 
stitute. The  conclusion  thus  reached,  upon  principle,  is 
supported  by  the  weight  of  judicial  authority,  and  it  will 
reconcile  much,  if  not  all,  of  the  apparent  confusion  and 


829  CONCERNING   NOTICB.  §  603 

conflict  of  opinion  upon  this  subject  to  be  found  in  some 
of  the  decisions.*     Of  course  the  knowledge  here  spoken 
of  must  be  something  more  than  the  mental  condition 
produced  by  rumors,  casual  conversations,  and  the  like, — 
more  than  any  constructive  notice,  —  more  even  than  the 
mere  actual  notice  defined  and  permitted  by  the  rules.     It 
must  appear  that  the  mind  of  the  party  charged  with  the 
knowledge  has  been  brought  thereby  to  an  intelligent  ap- 
prehension of  the  nature  of  the  prior  fact,  interest,  claim, 
01  right,  so  that  a  reasonable  man,  or  an  ordinary  man  of 
business,  would  act  upon  the  information,  and  would  regu- 
late his  conduct  by  it  in  the  transaction  or  dealing  in 
which  he  is  engaged.'     In  accordance  with  principle,  and 
as  a  conclusion    from    the   decided  cases,  the   following 
proposition  may  be  formulated:   If  it  can  be  shown  that 
•:.he  party  has  in  any  way,  from  any  person  or  source,  by 
&nj  means  or  method,  for  any  purpose,  although  not  in 
pursuance  of  the  rules  which  regulate  the  giving  of  notice, 
obtained  or  derived  actual  and  full  knowledge  of  the  kind 
above  described,  concerning  the  prior  fact,  interest,  claim, 
or  right, — that  is,  a  knowledge  which  would  operate  upon 
the  mind  of  any  rational  man,  or  man  of  business,  and 
make  him  act  with  reference  to  the  knowledge  he  has  so 
acquired  in  the  transaction  or  dealing  in  which  he  is  en- 
gaged, —  then  the  same  results  must  follow  from  the  knowl- 
edge so  obtained  which  would  follow  from  an  actual  notice 
communicated  in  the  manner  required  by  the  rules  gov- 
erning notice;  in  other  words,  the  conscience  of  the  party 
having  the  knowledge  is  affected  by  it  in  the  same  man- 
ner and  to  the  same  extent  as  it  would  be  affected  by  an 

*  It  cannot  be  claimed  that  the  views  used  interchangeably,  as  though  they 
contained  in  the  text  are  expressly  were  exactly  equivalent.  However 
adopted  by  all  the  decided  cases,  great  an  appearance  of  conflict  there 
There  ia  unfortunately  a  great  lack  of  may  be,  the  reasoning  and  conclusions 
precision  and  accuracy  in  the  language  of  the  text  will,  in  my  opinion,  produce 
of  too  many  judicial  opinions;  actual  a  consistent  and  harmonious  system, 
and  constructive  notice  are  sometimes  See  the  cases  cited  in  the  next  follow- 
not  discriminated;  notice  and  the'  evi-  ing  note  but  one  under  this  paragraph, 
dencc  by  which  it  is  shown  are  often  '  Lloyd  v.  Banks,  Li  Ri  3  Ch.  488, 
confounded;  knowledge  and  notice  are  490,  per  Lord  Cairns. 


603 


EQUITY    JURISPRUDENCE. 


830 


actual  notice.'  It  sometimes  happens  that  by  a  positive 
rule  of  the  law  an  actual  and  technical  notice  is  necessary, 
in  order  to  put  a  person  in  default,  or  to  perfect  some  legal 
right,  and  then  knowledge,  however  complete,  will  not 
supersede  or  take  the  place  of  the  notice.  Actual  knowl- 
edge, however,  will  generally  have  the  same  effect  as  notice 
in  controversies  concerning  priority;  but  it  is  especially 
important  in  determining  the  existence  of  good  faith;  it 


»  Lloyd  V.  Banks,  L.  R.  3  Ch.  488, 
490,  per  Lord  Cairns;  Matter  of  Lei- 
man,  32  Md.  225,  244;  Price  v.  Mc- 
Donald, 1  Md.  403;  54  Am.  Dec.  657; 
Winchester  v.  Baltimore  etc.  R.  R.,  4 
Md.  231;  [Manasses  v.  Dent,  89  Ala. 
365;]  Johns  v.  Scott,  5  Md.  81  (actual 
knowledge  of  a  prior  unrecorded 
deed);  Brown  v.  Wells,  44  Ga.  573, 
575  (grantee's  actual  knowledge  that 
his  grantor  was  a  mere  squatter 
without  color  of  title  defeated  his 
own  title,  although  he  had  con- 
tinued in  possession  under  it  for  seven 
years);  Pringle  v.  Dunn,  37  Wis.  449, 
465-4G7;  19  Am.  Rep.  772  (the  prem- 
ises being  encumbered  by  a  prior  un- 
recorded mortgage;  one  subsequent 
purchaser  of  a  portion  of  them  "had 
heard  that  there  was  a  defective  rail- 
road mortgage  upon  the  premises,  but 
did  not  look  for  it,  because  his  abstract 
did  not  show  it" ;  another  purchaser  of 
a  dififereut  portion  "knew  by  report" 
that  there  was  such  a  mortgage;  both 
~vere  held  charged  as  though  they  had 
received  an  actual  notice);  Joues  v. 
Lapham,  15  Kan.  540,  545,  546  (pur- 
chaser of  the  legal  estate  with  full 
knowledge  of  an  outstanding  equitable 
Interest,  claim,  or  lien);  Virgin  v. 
Wingfield,  54  Ga.  451,  454,  and  cases 
cited  (full  knowledge  has  the  effect  of 
notice,  and  is  evidence  of  fraud  on  the 
part  of  the  grantee  or  purchaser); 
Blatchley  v.  Osborn,  33  Conn.  226, 
233  (actual  knowledge  of  an  existing 
easement);  Butcher  v.  Yokum,  61  Pa. 
St.  168,  171;  100  Am.  Dec.  625  (it  is  not 
essential  that  information  should  come 
from  the  party  or  his  agent;  it  may 
come  aliunde,  provided  it  be  of  a  char- 
acter likely  to  obtain  credit;  knowledge 
was  obtained  from  the  grandfather  of 
the  equitable  title  belonging  to  infant 
heirs,  by  a  purchaser  of  the  legal  title 
from  the  widow);   Lawton  v.  Gordon, 


37  Cal.  202,  205,  206  (a  person  about 
to  purchase  land  was  told  by  the  re- 
corder that  the  intended  grantor  had 
already  given  a  deed  of  the  property 
to  another  person,  which  had  been 
filed  for  record,  but  afterwards  taken 
away  from  the  office  before  recording. 
Held,  a  sufficient  knowledge;  such  in- 
formation need  not  come  from  a  person 
interested  in  the  property.  The  court 
expressly  placed  the  decision  upon  the 
distinction,  as  laid  down  in  the  text, 
between  actual  knowledge  obtained  in 
any  authentic  manner,  and  the  tech- 
nical, actual  notice).  See  also  Dicker- 
son  V.  Campbell,  32  Mo.  544  (where  a 
clerk  of  a  court  obtained  knowledge  of 
prior  equities  through  his  familiarity 
with  the  records);  Curtis  v.  Mundy, 
3  Met.  405,  407,  per  Putnam,  J.; 
Stevens  v.  Goodenough,  26  Vt.  676; 
Mulliken  v.  Graham,  72  Pa.  St.  484, 
490;  Henry  v.  Raiman,  25  Pa.  St.  354; 
64  Am.  Dec.  703;  Phillippa  v.  Bank 
of  Lewistown,  18  Pa.  St.  394,  404;  Mc- 
Kinney  v.  Brights,  16  Pa.  St.  399;  56 
Am.  Dec.  512;  Van  Duyne  v.  Vreeland, 
12N.  J  Eq..  142,  155;  Rupert  V.  Mark, 
15  111.  540;  Cox  v.  Milner,  23  111.  476; 
Hankinson  v.  Barbour,  29  111.  80.  [And 
a  prior  mortgagee  who,  pending  the  ne- 
gotiations for  his  mortgage,  acquires 
knowledge  that  the  property  offered 
as  security  belongs  to  a  third  person, 
and  was  to  be  purchased  by  the  mort- 
gagor, and  that  negotiations  for  its 
purchase  were  then  pending,  is  charged 
with  notice  of  the  terms  upon  which 
the  purchase  is  to  be  made;  and  when 
such  terms  involve  the  execution  by 
the  purchaser  of  a  mortgage  to  the 
vendor  to  secure  the  purchase  price, 
the  later  mortgage,  although  sub- 
sequently recorded,  takes  priority: 
Montgomery  v.  Keppel,  75  Cal.  128; 
7  Am,  St  Rep.  125.] 


831  CONCERNING   NOTICE.  §  604 

is  often  a  most  essential  element  in  making  out  a  fraudu- 
lent intent,  where  a  mere  technical  notice  would  not  be 
sufficient. 

§  604,  Constructive  Notice.  —  Constructive  notice  as- 
sumes that  no  information  concerning  the  prior  fact, 
claim,  or  right  has  been  directly  and  personally  com- 
municated to  the  party;  at  least,  such  information  is  not 
shown  by  evidence,  but  is  only  inferred  by  operation  of 
legal  presumptions.  It  embraces  all  those  instances, 
widely  differing  in  their  external  features,  in  which, 
either  from  certain  extraneous  facts,  or  from  certain  acts 
or  omissions  of  the  party  himself,  disclosed  by  the  evi- 
dence, the  information  is  conclusively  presumed  to  have 
been  given  to  or  received  by  him,  or  is  inferred  by  a 
prima  facie  presumption  of  the  law  in  the  absence  of  con- 
trary proof/  There  is  a  marked  inconsistency  in  the 
treatment  of  constructive  notice  by  even  the  most  emi- 
nent judges  and  text-writers.  It  has  often  been  defined 
as  knowledge  or  information  inferred  from  certain  cir- 
cumstances, by  a  legal  presumption  of  so  high  and 
conclusive  a  nature  that  the  party  is  not  allowed  to 
overcome  the  inference  by  any  contrary  evidence  show- 
ing that  in  fact  he  had  no  knowledge  nor  information.' 

'  In  the  often-quoted  case  of  Espin  rebutted,    either    from    his    knowing 

V,   Pemberton,   3    De   Gfex    &   J.    547,  something  which  ought    to  have    put 

554,     Lord     Chancellor     Chelmsford  him  upon  further  inquiry,  or  from  his 

made    some    observations    concerning  willfully  al)staining    from    inquiry   to 

constructive   notice.      The    case    was  avoid     notice.       I     should     therefore 

one  of    notice    to  a  party's    attorney,  prefer  calling  the  knowledge  which  a 

The   lord    chancellor,   admitting    that  person     has,     either    by    himself     or 

it  was    treated    as  a   species    of    cou-  through  his  agent,  actual  knowledge; 

tstructive  notice,  thought  that  it  had  or  if   it  is   necessary  to   make  a  dis- 

better   be  classed  under   the  head  of  tinction  between  the  knowledge  which 

actual  notice.      *'  If  a  person  employs  a  person  possesses  himself    and   that 

a  solicitor,  who  either   knows  or  has  which  is  known  to  his  agent,  tlie  lat- 

imparted  to  him  in  the  course  of  his  ter   might   be  called   imputed   knowl- 

employment   some  fact  which   affects  edge."    The  entire  view  of  the  chan- 

the  transaction,  the  principal  is  bound  cellor  in    this   extract   is   lacking    ia 

by  the  fact,  whether  it  is  comrauni-  accuracy  of  thought,  from  his  confu- 

cated  to  or  concealed  from  him."     He  sion   of   information   with  knowledge, 

then  adds:  "Constructive  notice  prop-  Some  necessary  criticism  upon  his  de- 

erly  so  called   is  the   knowledge  [in-  scription  of  "constructive  notice"  will 

formation?]  which  the  courts  impute  be  found  in  the  text  and  in  the  next 

to  a  person  upon   a   presumption  so  following  note. 

strong  of  the  existence  of  the  knowl-  •'  Thus   the    English    editor   of    the 

edge  that  it  cannot  be  allowed  to  be  Leading  Cases  in  Equity  says:  "Con- 


§  605 


EQUITY   JURISPRUDENCE. 


832 


Notwithstanding  this  definition,  writers  and  judges  who 
adopt  it  have  admitted  into  the  class  of  constructive  no- 
tice, and  have  treated  as  instances  thereof,  all  those  cases 
in  which  it  is  settled  that  the  presumption  of  information 
being  received  is  merely  prima  facie,  and  that  the  infer, 
euce  may  be  overcome  by  contrary  evidence.  The  essen- 
tial element  of  constructive  as  distinguished  from  actual 
notice  certainly  is  the  legal  presumption  that  information 
has  been  communicated  to  or  acquired  by  the  party;  but 
it  is  equally  certain  that  this  legal  presumption  may  be 
conclusive  and  may  be  rebuttable.' 

§  605.  Opinion  of  Wigram,  V.  C,  in  Jones  v.  Smith. — 
It  would  be  very  difficult  to  formulate  any  statement 
which  should  embrace  within  its  general  terms  all  in- 
stances of  constructive  notice.  The  most  important 
species,  however,  have   been   sufficiently  settled   by  the 


■tractive  notice  is  defined  to  be  in  its 
nature  no  more  than  evidence  of  no- 
tice the  presumption  of  which  is  so 
violent  that  the  court  will  not  even 
allow  of  its  being  controverted";  citing 
Eyre,  C.  B.,  in  Plumb  v.  Fluitt,  2 
Anstr.  438;  Kennedy  v.  Green,  3 
Mylne  &  K.  699,  719;  2  Lead.  Cas.  Eq., 
4th  Am.  ed.,  121.  Judge  Story  gives 
exactly  the  same  definition:  1  Story's 
Eq.  Jur.,  sec.  399.  A  recent  editor  of 
Judge  Story's  treatise  adopts  the  same 
view,  in  nearly  the  same  language: 
"Constructive  notice  is  thus  a  con- 
clusive presumption  ":  1  Story's  Eq. 
Jur.,  sec.  410  a.  In  Hewitt  v.  Loose- 
more,  9  Hare,  449,  455,  Turner,  V.  C, 
said:  "Constructive  notice  is  knowl- 
edge which  the  court  imputes  to  a 
party  upon  a  presumption,  so  strong 
that  it  cannot  be  allowed  to  be  re- 
butted, that  the  knowledge  must  have 
been  communicated."  The  American 
editor  of  the  Leading  Cases  in  Equity 
says:  "Constructive  notice  is  a  legal 
inference  from  established  facts,  and, 
like  other  legal  presumptions,  does  not 
admit  of  dispute":  2  Lead.  Cas.  Eq., 
4th  Am.  ed.,  157.  With  respect  to 
this  last  citation,  it  certainly  cannot 
be  said  of  all  legal  presumptions  that 
they  "do  not  admit  of  dispute." 
"  Legal  presumptions  "  are  sometimes 
conclusive,  and  sometimes  rebuttable. 


'  This  view  renders  the  classifieatioa 
simple,  comprehensive,  and  certain. 
"  Actual "  and  "constructive  "  notice, 
as  defined  in  the  text,  are  separated 
by  a  broad,  clear,  and  natural  line  of 
distinction.  Additional  subdivisions 
into  "constructive,"  "implied,"  "im- 
puted "  notice,  and  the  like,  are,  as  it 
seems  to  me,  equally  unnecessary  and 
confusing.  The  explanation  given  by 
Lord  Brougham  in  Kennedy  v.  Green, 
3  Mylne  &  K.  699,  719,  is,  in  my 
opinion,  very  forcible  and  accurate, 
since  while  admitting  a  legal  pre- 
sumption as  the  basis,  it  does  not 
assert  that  the  presumption  is  always 
conclusive.  He  says:  "  The  doctrine 
of  constructive  notice  depends  upon 
two  considerations:  first,  that  certain 
things  existing  in  the  relation  or  con- 
duct of  parties,  or  in  the  case  between 
them,  beget  a  presumption  so  strong 
of  actual  knowledge,  that  the  law 
holds  the  knowledge  to  exist,  because 
it  is  highly  improbable  it  should  not; 
and  next,  that  policy,  and  the  safety 
of  the  public,  forbid  a  person  to  deny 
knowledge  while  he  is  so  dealing  as  to 
keep  himself  ignorant,  or  so  ar  that 
he  may  keep  himself  ignorant,  and  yet 
all  the  while  let  his  agent  know,  and 
himself,  perhaps,  profit  hj  that 
knowledge," 


833  CONCEENINQ    NOTICE.  §  605 

decisions,  and  will  be  described  in  the  subsequent  para- 
graphs. The  most  comprehensive  and  accurate  general- 
ization ever  attempted  by  any  judge  or  text- writer  was 
made  by  Vice-Chancellor  Wigram,  in  the  following  pas- 
sage, which  is  well  worthy  of  being  quoted  in  full:  "It 
is  indeed  scarcely  possible  to  declare  o  prioi'i  what  shall 
be  deemed  constructive  notice,  because,  unquestionably, 
what  would  not  affect  one  man  may  be  abundantly  suffi- 
cient to  affect  another.  But  I  believe  I  may,  with  suffi- 
cient accuracy,  and  without  danger,  assert  that  the  cases 
in  which  constructive  notice  has  been  established  re- 
solve themselves  into  two  classes:  1.  Cases  in  which  the 
party  charged  has  had  actual  notice  that  the  property  in 
dispute  was  in  fact  charged,  encumbered,  or  in  some 
way  affected,  and  the  court  has  thereupon  bound  him 
with  constructive  notice  of  facts  and  instruments,  to  a 
knowledge  of  which  he  would  have  been  led  by  an  in- 
quiry after  [i.  e.,  concerning]  the  charge,  encumbrance, 
or  other  circumstance  affecting  the  property  of  which 
he  had  iactual  notice;  and  2.  Cases  in  which  the  court 
has  been  satisfied  from  the  evidence  before  it  that  the 
party  charged  had  designedly  abstained  from  inquiry  for 
the  very  purpose  of  avoiding  notice.  How  reluctantly 
the  court  has  applied,  and  within  what  strict  limits  it  has 
confined,  the  latter  class  of  cases,  I  shall  presently  con- 
sider. The  proposition  of  law  upon  which  the  former 
class  of  cases  proceeds  is,  not  that  the  party  charged  had 
notice  of  a  fact  or  instrument  which  in  truth  related  to 
the  subject  in  dispute  without  his  knowing  that  such  was 
the  case,  but  that  he  had  actual  notice  that  it  did  so  re- 
late. The  proposition  of  law  upon  which  the  second  class 
of  cases  proceeds  is,  not  that  the  party  charged  had  in- 
cautiously neglected  to  make  inquiries,  but  that  he  had 
designedly  abstained  from  making  such  inquiries  for 
the  purpose  of  avoiding  knowledge,  —  a  purpose  which,  if 
proved,  would  clearly  show  that  he  had  a  suspicion  of  the 
truth,  and  a  fraudulent  determination  not  to  learn  it.    If, 

2  Eq.  Jcb.  — 53 


§  606  EQUITY    JURISPRUDENCE.  834 

in  short,  there  is  not  actual  notice  that  the  property  is  in 
some  way  affected,  and  no  fraudulent  turning  away  from 
a  knowledge  of  facts  which  the  res  gestx  would  suggest  to  a 
prudent  mind,  —  if  mere  want  of  caution  as  distinguished 
from  fraudulent  and  willful  blindness  is  all  that  can  be 
imputed  to  a  purchaser,  —  then  the  doctrine  of  cou' 
structive  notice  will  not  apply;  then  the  purchaser  will  in 
equity  be  considered,  as  in  fact  he  is,  a  bona  fide  purchaser 
without  notice."  *  I  would  remark  in  passing  that  the 
constructive  notice  to  subsequent  purchasers  and  encum- 
brancers resulting  from  the  registration  of  a  prior  deed, 
mortgage,  or  other  instrument,  under  the  recording  stat- 
utes of  this  country,  does  not  seem  to  fall  within  either  of 
Vice-Chancellor  Wigram's  two  classes,  since  it  does  not 
depend  upon  information  or  knowledge  concerning  any 
fact  affecting  the  property  sufficient  to  put  the  party  upon 
an  inquiry,  which  is  the  criterion  of  the  first  class,  nor 
upon  the  party's  willfully  abstaining  from  seeking  infor- 
mation, which  is  the  test  of  the  second  class.  In  short, 
this  species  of  constructive  notice  is  wholly  of  statutory 
origin,  and  is  not  the  result  or  application  of  any  general 
doctrine. 

§  606.  When  the  Presumption  is  Rebuttable.  —  Since 
constructive  notice,  as  heretofore  defined,  includes  all  the 
instances  in  which  information  concerning  a  prior  fact, 
claim,  or  right  is  inferred  either  by  a  conclusive  or  by  a 
rebuttable  presumption  of  law,  it  would  be  a  most  impor- 
tant aid  in  the  further  discussion  if  we  could  discover  a 
general  criterion  for  distinguishing  these  two  classes,  and 

>  Jones  V.  Smith,  1  Hare,  43,  55,  56.  Mer.  282;  Daniels  v.  Davison,  17  Ves. 
The  vice-chancellor  quoted  as  exam-  433;  Taylor  v.  Stibbert,  2  Ves.  437. 
pies  of  his  two  classes  the  following  2.  Of  the  second  class:  Illustrations  of 
cases:  1.  0/ tJte  Jirst  class:  YerTa,ra  v.  and  limitations  on  the  doctrine:  Whit- 
Cherry,  2  Vern.  383;  Jackson  v.  Rowe,  bread  v.  Jordan,  1  Younge  &  C.  303; 
2  Sim.  &  St.  472;  Kennedy  v.  Green,  Birch  v.  EUames,  2  Anstr.  427;  Hiern 
:^  Mylne  &  K.  699;  Taylor  v.  Baker,  5  v.  Mill,  13  Ves.  114;  Miles  v.  Langley, 
Price,  306;  Coppin  v.  Fernyhough,  2  1  Russ.  &  M.  39;  Hanbury  v.  Litch- 
Brown  Ch.  291;  Davies  v.  Thomas,  2  field,  2  Mylne  &  K.  629;  Hine  v.  Dodd, 
Younge  &  C.  234;  Eyre  v.  Dolphin,  2  2  Atk.  275;  Plumb  v.  Fluitt,  2  Anstr. 
Ball  &  B.  290;  Malpas  v.  Ackland,  3  432;  Evans  v.  Bicknell,  6  Ves.  174; 
Russ.  273;  Bisco  v.  Earl  of  Banbury,  Cothay  v.  Sydenham,  2  Brown  Ch. 
1  Cas.  Ch.  257;  Allen  v.  Anthony,  1  391. 


835 


CONCERNING    NOTICE. 


§  606 


determining  in  what  cases  the  presumption  is  conclusive, 
and  in  what  it  is  only  prima  facie  and  rebuttable.  It  may 
not  be  possible  to  lay  down  a  rule  which  is  absolutely 
universal  in  its  operation,  and  which  furnishes  a  certain 
test  for  every  case;  but  a  rule  may  be  formulated  which 
is  quite  general  in  its  application,  and  which  gives  a 
practical  test  sufficient  for  many  instances  differing  widely 
in  their  external  features.*     Wherever  a  party  has  infor- 


'  Williamson  v.  Brown,  15  N.  Y. 
354,  has  been  uuiformly  treated  as  an 
important  and  leading  case.  The 
controversy  was  concerning  the  prior- 
ity between  the  plaintiff,  who  held 
under  a  subsequent  conveyance  of  the 
land  which  was  duly  recorded,  and 
the  defendant,  who  held  a  prior  un- 
recorded mortgage.  The  defendant 
claimed  that  plaintiff  took  his  deed 
with  notice  of  the  prior  mortgage. 
On  this  issne  the  referee  found  that 
the  plaintiff,  when  he  took  his  deed, 
did  not  have  actual  notice  of  the  prior 
mortgage,  but  that  he  had  sufficient 
information  or  belief  of  the  existence 
of  said  mortgage  to  put  him  upon  in- 
quiry, and  that  he  pursued  such  in- 
quiry to  the  extent  of  his  information 
and  belief,  and  failed  to  discover  that 
any  such  mortgage  actually  existed. 
This  finding  the  court  interpreted  to 
mean  that  the  plaintiff  made  all  the 
inquiry  which  it  became  his  duty  to 
make  upon  the  information  he  had  re- 
ceived; upon  this  interpretation  the 
court  made  its  decision,  and  laid  down 
certain  general  rules.  It  was  held 
that  upon  the  finding  of  fact  no  con- 
structive notice  had  been  given;  the 
p7-ima  facie  presumption  was  over- 
come. It  will  be  observed  that  the 
finding  does  not  specify  the  particu- 
lars nor  nature  of  the  Information, 
which  was  enough  to  put  the  plaintiff 
upon  an  inquiry,  nor  does  it  state  the 
particulars  of  the  inquiry  which  he 
made.  The  conclusions  reached  by  the 
court,  and  rules  laid  down  by  them, 
are  therefore  general,  and  apply  to 
all  cases  which  could  be  properly  de- 
scribed by  this  finding  of  facts.  S.  L. 
Selden,  J.,  holds,  first,  that  construct- 
ive notice,  as  well  as  actual  notice, 
will  defeat  the  priority  obtained  un- 
der the  recording  statute  by  a  pre- 
vious record.    Tassing  to  the  question 


now  under  consideration,  he  quotes  the 
definition  of  actual  and  of  construct- 
ive notice,  given  in  Story's  trea- 
tise (Story's  Eq.  Jur.,  sec.  309);  he 
gives  a  recorded  deed  and  notice  to 
an  agent  as  examples  of  constructive 
notice;  because  in  each  case  the  pre- 
sumption is  conclusive,  and  the  party 
would  not  be  allowed  to  show  that  he 
actually  received  no  information.  He 
adds  some  remarks  concerning  the 
various  and  inaccurate  modes  in  which 
the  terms  "actual  "and  "construct- 
ive "  have  sometimes  been  used.  The 
learned  judge  then  proceeds  (p.  360): 
"The  phraseology  uniformly  used,  aa 
descriptive  of  the  kind  of  notice  in 
questioa,  '  sufficient  to  put  the  party 
upon  inquiry,'  would  seem  to  imply 
that  if  the  party  is  faithful  in  making 
inquiries,  but  fails  to  discover  the 
conveyance,  he  will  be  protected. 
The  import  of  the  terms  is,  that  it  be- 
comes the  duty  of  the  party  to  in- 
quire. If,  then,  he  performs  that 
duty,  is  he  still  to  be  bound,  without 
any  actual  notice?  The  presumption 
of  notice  which  arises  from  proof  of 
that  degree  of  knowledge  which  will 
put  a  party  upon  inquiry  is,  I  appre- 
hend, not  a  presumption  of  law,  but 
of  fact,  aud  may  therefore  be  contro- 
verted by  evidence."  I  must  remark 
at  this  point  that  the  mistake  in  the 
last  sentence  is  inexplicable.  Judge 
Selden  has,  in  other  opinions,  de- 
scribed in  the  most  clear  and  accurate 
manner,  excelled  in  fact  by  no  other 
judge,  the  true  nature  of  legal  pre- 
sumptions, the  distinctions  between 
those  which  are  conclusive  and  those 
which  are  pi-i7na/acie,  and  that  argu- 
mentative conclusions  of  fact  are  not 
jrresum'ptions  at  all;  that  the  term 
"  presumption  of  fact "  is  a  misnomer; 
that  a  presumption  "may  be  contro- 
verted by  evidence,"  is  not  the  test  of 


§  GOG  EQUITY    JURISPRUDENCE.  836 

mation  or  knowledge  of  certain  extraneous  facts,  which  do- 
not  of  themselves  constitute  actual  notice  of  an  existing  inter- 
est, claim,  or  right  in  or  to  the  subject-matter,  but  which 
are  sufficient  to  put  him  upon  an  inquiry  concerning  the 
existence  of  a  conflicting  interest,  claim,  or  right,  then 
he  is  charged  with  constructive  notice,  because  a  pre- 
sumption of  law  arises.  This  proposition  is  settled  by 
an  overwhelming  weight  of  authority,  English  and  Amer- 
ican. A  large  number  of  particular  instances  or  species 
of  constructive  notice  are  referable  to  and  embraced 
within  the  general  terms  of  this  description.  It  should 
be  carefully  observed  that  the  facts  of  which  the  party 
receives  information  or  has  knowledge  do  not  directly  tend 
to  show  the  existence  of  any  conflicting  interest  or  claim, 
and  are  therefore  not  actual  notice;  but  they  are  suffi- 
cient, whatever  be  their  nature  and  form,  to  put  the 
party,  as  a  reasonable  man,  upon  further  inquiry.  As 
an  illustration,  if  a  party  is  negotiating  for  the  purchase 
of  certain  land,  and  sees  or  learns  that  the  land  is  not  in 
the  intended  grantor's  possession,  but  is  possessed  and 

a  presumption  being  one  of  fact,  and  of  any  fact  sufficient  to  put  hira  on 
not  of  law.  The  inference  which  is  inquiry  as  to  the  existence  of  some 
drawn  from  "information  or  knowl-  right  or  title  in  conflict  with  that  he 
edge  of  facts  sufficient  to  put  the  party  is  about  to  purchase,  he  is  presumed 
upon  an  inquiry  "  is,  under  every  cor-  either  to  have  made  the  inquiry  and 
rect  definition,  a  presumption  of  law,  ascertained  the  extent  of  such  prior 
and  not  a  mere  argumentative  deduc-  right,  or  to  have  been  guilty  of  a  de- 
tion  which  a  jury  may  or  may  not  gree  of  negligence  equally  fatal  to  his 
make;  the  only  question  is,  whether  claim  to  be  considered  as  a  bona  Jide 
it  is  a  conclusive  or  a  rebuttable  pre-  purchaser.  This  presumption,  how- 
sumption.  Judge  Selden,  in  support  ever,  [is  a  mere  inference  of  fact,  and] 
of  his  position  that  the  presumption  may  be  repelled  by  proof  that  the  pur- 
under  these  circumstances  may  be  chaser  failed  to  discover  the  prior 
rebutted  by  evidence,  then  cites  and  right,  notwithstanding  the  exercise  of 
quotes  from  the  opinions  in  Whitbread  proper  diligence  on  his  part."  The 
V.  Boulnois,  1  Younge  &  C.  303,  per  general  conclusion  thus  formulated, 
Alder.son,  B. ;  Jones  v.  Smith,  1  Hare,  both  as  to  the  extent  of  the  presump- 
43;  Hanbury  V.  Litchfield,  2  Mylne  &  tion, — what  is  presumed, — and  its 
K.  629;  Flagg  v.  Mann,  2  Sum.  486,  prima  fade  or  rebuttable  nature,  is 
554,  per  Story,  J. ;  and  Rogers  v.  beyond  a  doubt  correct.  The  dictum 
Jones,  8  N.  H.  264,  per  Parker,  J.  In  by  which  it  is  asserted  to  be  "a  mere 
conclusion,  he  states  the  general  rule  inference  of  fact "  is  as  clearly  erro- 
as  follows  (p.  362):  "If  these  author-  neous.  Another  opinion  was  also  de- 
ities are  to  be  relied  upon,  and  I  see  livered  by  Mr.  Justice  Paige,  which 
no  reason  to  doubt  their  correctness,  arrived  at  the  same  result,  by  sub- 
the  true  doctrine  on  this  subject  is,  stantially  the  same  reasoning:  Reed  v, 
that  whers  a  purchaser  has  knowledge  Gannon,  50  N.  Y.  345,  349,  350 


837  CONCERNING   NOTICE.  §  606 

occupied  by  a  third  person,  a  stranger,  this  fact  of  pos- 
session  is  sufficient  to  put  the  expected  grantee  upon  an 
inquiry  concerning  the  nature  of  the  occupant's  interest. 
The  information  or  knowledge  of  such  extraneous  facts 
which  are  sufficient  to  put  the  party  upon  an  inquiry 
constitutes  a  constructive  notice  of  the  conflicting  claim 
or  interest  which  does  exist,  because  a  presumption  thence 
arises.  Another  instance  is  much  more  common  in  Eng- 
land than  in  this  country.  If  a  person  loans  money  upon 
the  security  of  a  mortgage  or  other  equitable  lien  given 
upon  land  belonging  to  the  borrower,  and  learns  that  the 
title  deeds  are  not  in  the  possession  of  the  borrower,  but 
are  in  the  possession  of  some  third  person,  this  is  a  con- 
structive notice  of  ai^y  claim  or  interest  in  the  land  held 
by  such  third  person,  because  the  lender  is  put  upon  an 
inquiry,  and  a  legal  presumption  arises  from  the  facts. 
This  presumption,  in  all  cases  of  this  class,  is  really  a 
double  one.  The  party  is  either  presumed  to  have  made 
the  inquiry,  and  to  have  carried  it  out  until  he  obtained 
full  knowledge  of  the  outstanding  conflicting  interest, 
claim,  or  right,  or  else  to  have  intentionally  and  delib- 
erately refrained  from  making  the  inquiry  or  following 
it  up  in  a  reasonable  and  proper  manner  for  the  very 
purpose  of  avoiding  the  knowledge  which  he  might  have 
acquired.  The  presumption  is  clearly  one  of  law,  and 
not  a  mere  inference  of  fact;  because  upon  the  bare  proof 
that  the  party  had  the  information  of  facts  sufficient  to 
put  him  upon  an  inquiry,  the  inference  is  at  once  made, 
without  any  further  evidence  in  its  support,  and  in  the 
absence  of  all  contrary  evidence  it  is  absolute  and  con- 
clusive.* 

'  Ratcliffe  v.  Barnard,  L.  R.  6  Ch.  De  Gex  &  J.  1,  5,  o;  Atterbury  v.  Wal- 

652,   654;    Maxfield  v.  Burton,   L.   R.  lis,  8  De  Gex,  M.  &  G.  454;  Ware  v. 

17  Eq.  15,  18;  RoUand  v.  Hart,  L.  R.  Lord  Egmont,  4  De  Gex,  M.  &  G.  460, 

6  Ch.  678,  681,  682;  Broadbent  v.  Bar-  473,  474;  Penny  v.  Watts,  1   Macn.  & 

low,  3  De  Gex,  F.  &  J.  570,  581 ;  Hunt  G.  150,  107;  Jackson  v.  Rowe,  2  Sim.  & 

V.  Elmes,  2  De  Gex,  F.  &  J.  578,  587,  St.  472;  Hewitt  v.  Loosemore,  9  Hare, 

588;  Perry  V.  Hell,  2  De  Gex,  F.  &  J.  449,    456,    458.     In   several   of    these 

38;  Espin  v,  Pemherton,  3  De  Gex  &  later  English  cases  a  very  strong  dis- 

J.  547,  654,  555;  Roberts  v.  Croft,  2  position  has  been  shown  to  limit  and 


607 


EQUITY   JURISPRUDENCE. 


838 


§  607.     Same  — Rebutted  by  Due  Inquiry.  —  It  may  be 
stated  as  a  general  proposition  that  in  all  instances  of 


restrict  the  efiFect  of  the  constructive 
notice  which  arises  from  the  existence 
of  facts  and  circumstances  sufBcient 
to  put  the  party  on  an  inquiry.  This 
limitation  is  applied  both  where  the 
party  made  some  inquiry  and  relied 
upon  what  he  had  learned  thereby, 
and  where  he  made  no  inquiry  at  all. 
The  criterion  to  which  I  refer  was 
fully  stated  in  Ware  v.  Lord  Egmont, 
4  De  Gex,  M.  &  G.  460,  473,  by  Lord 
Cranworth,  as  follows;  "I  must  not 
part  with  this  case  without  express- 
ing my  entire  concurrence  in  what  has 
on  many  occasions  of  late  years  fallen 
from  judges  of  great  eminence  on  the 
subject  of  constructive  notice,  namely, 
that  it  is  highly  inexpedient  for  courts 
of  equity  to  extend  the  doctrine, — to 
attempt  to  apply  it  to  cases  to  which 
it  has  not  hitherto  been  held  applica- 
ble. Where  a  person  has  not  actual 
notice,  he  ought  not  to  be  treated  as 
if  he  had  notice,  unless  the  circum- 
stances are  such  as  enable  the  court 
to  say,  not  only  that  he  might  have 
acquired,  but  also  that  he  ought  to 
have  acquired,  the  notice  with  which 
it  is  sought  to  affect  him;  that  he 
would  have  acquired  it  but  for  his 
gross  negligence  in  the  conduct  of  the 
business  in  question.  The  question, 
when  it  is  sought  to  affect  a  pur- 
chaiser  with  constructive  notice,  is,  not 
whether  he  had  the  means  of  obtain- 
ing, and  might  by  prudent  caution 
have  obtained,  the  knowledge  in  ques- 
tion, but  whether  the  not  obtaining  it 
was  an  act  of  gross  or  culpable  negli- 
gence. It  is  obvious  that  no  definite 
rule  as  to  what  will  amount  to  gross 
or  culpable  negligence,  so  as  to  meet 
every  case,  can  possibly  be  laid  down." 
The  first  and  leading  case  in  which 
this  restricted  view  was  laid  down, 
and  which  other  decisions  have  fol- 
lowed and  approved,  was  Hewitt  v. 
Loosemore,  9  Hare,  449,  decided  by 
Turner,  V.  C. ;  and  see  Woodworth  v, 
Paige,  5  Ohio  St.  70,  76.  On  the 
other  hand,  in  Broadbent  v.  Barlow, 
3  De  Gex,  F.  &  J.  570,  Lord  Chan- 
cellor  Cami)bell  said:  "By  'the  means 
of  knowledge '  by  which  any  one  is 
to  be  affect©<l,  must  be  understood 
means  of  knowledge  which  are  prac- 
tically withm  reacii,  and  of  which  a 


prudent  man  might  have  been  ex- 
pected to  avail  himself."  It  is  plain 
that  the  criterion,  as  established  by 
these  most  recent  English  cases,  is  no 
longer  the  mere  want  of  that  reason- 
able care  and  diligence  in  making  an 
inquiry  which  would  be  used  by  a  pru- 
dent man;  the  failure  to  prosecute  or 
to  make  the  inquiry  must,  under  the 
circumstances,  amount  to  gross  or  cul- 
pable negligence.  It  should  be  ob- 
served, however,  that  this  rule  is  con- 
fined, and  is  intended  to  be  confined, 
to  that  class  of  constructive  notices  in 
which  the  legal  presumption  is  rebut- 
table. 

The  American  courts  do  not  appear 
to  have  adopted  this  most  recent  Eng- 
lish rule;  they  eeem  to  have  adhered 
with  great  unanimity  to  the  doctrine 
contained  in  the  dictum  above  quoted 
from  Lord  Campbell.  Wherever  the 
facts  and  circumstances  do  not  tend  to 
show  actual  notice,  —  in  other  words, 
where  the  facts  and  circumstances  are 
not  simply  the  circumstantial  evidence 
of  an  actual  notice,  —  the  test  of  con- 
structive notice  generally  applied  by 
the  American  courts  has  been,  whether 
such  facts  are  sufficient  to  put  a  pru- 
dent man  upon  an  inquiry,  and  whether 
an  inquiry  has  been  prosecuted  with 
reasonable  care  and  diligence:  Rogers 
V.  Jones,  8  N.  H.  264;  Griffith  v.  Grif- 
fith, 1  Hoff.  Ch.  153;  Hull  v.  Noble, 
40  Me.  459,  480;  Warren  v.  Swett,  31 
N.  H.  332,  341,  342;  Briggs  v.  Taylor, 
28  Vt.  180;  Littleton  v.  Giddings.  47 
Tex.  109;  Allen  v.  Poole,  64  Miss. 
323;  Wood  v.  Krebbs,  30  Gratt.  708; 
Cordova  v.  Hood,  17  Wall.  1,  per 
Strong,  J.;  Brush  v.  Ware,  15  Pet. 
93,  112;  Helms  v.  Chadbourne,  45 
Wis.  60,  70,  71,  73;  Chicago  etc.  R.  R. 
Co.  V.  Kennedy,  70  111.  350,  361,  362; 
Blanchard  v.  Wave,  43  Iowa,  530;  37 
Iowa,  305;  Loughridge  v.  Bowland,  52 
Miss.  546,  553-555;  Deason  v.  Taylor, 
53  Miss.  697,  701;  Brown  v.  Volken- 
ing,  64  N.  Y.  76,  82;  Cambridge  Val- 
ley Bank  v.  Delano,  48  N.  Y.  326,  336, 
339;  Bennett  v.  Buchan,  61  N.  Y. 
222,  225:  Kellogg  v.  Smith,  26  N.  Y. 
18;  Baker  v.  Bliss,  39  N.  Y.  70,  74, 
78;  Reed  v.  Gannon,  50  N.  Y.  345; 
Pendleton  v.  Fay,  2  Paige,  202,  205; 
Edwards  v.  Thompson,  71  N.  C.  177, 


839  CONCERNING    NOTICE.  §  607 

constructive  notice  belonging  to  this  class,  where  it 
arises  from  information  of  some  extraneous  facts,  not  of 
themselves  tending  to  sliow  an  actual  notice  of  the  con- 
flicting right,  but  sufficient  to  put  a  prudent  man  upon 
an  inquiry,  the  constructive  notice  is  not  absolute;  the 
legal  presumption  arising  under  the  circumstances  is 
only  'prima  facie;  it  may  be  overcome  by  evidence,  and 
the  resulting  notice  may  thereby  be  destroyed.  When- 
ever, therefore,  a  party  has  merely  received  information,  or 
has  knowledge  of  such  facts  sufficient  to  put  him  on  an 
inquiry,  and  this  constitutes  the  sole  foundation  for  in- 
ferring a  constructive  notice,  he  is  allowed  to  rebut  the 
prima  facie  presumption  thence  arising  by  evidence;  and 
if  he  shows  by  convincing  evidence  that  he  did  make  the 
inquiry,  and  did  prosecute  it  with  all  the  care  and  dili- 
gence required  of  a  reasonably  prudent  man,  and  that  he 
failed  to  discover  the  existence  of,  or  to  obtain  knowledge 
of,  any  conflicting  claim,  interest,  or  right,  then  the  pre- 
sumption of  knowledge  which  had  arisen  against  him 
will  be  completely  overcome;  the  information  of  facts 
and  circumstances  which  he  had  received  will  not  amount 
to  a  constructive  notice.  What  will  amount  to  a  due 
inquiry  must  largely  depend  upon  the  circumstances  of 
each  case.*     If,  on  the  other  hand,  he  fail  to  make  any 

179;  Major  v.  Bukley,  51  Mo.  227,  232;  Bright  v.  Buckman,  39  Fed.  Rep. 
231;  Russell  v.  Sweezey,  22  Mich.  243;]  and  many  otlier  cases  cited  ia 
235,  239;  O'Rourke  v.  O'Connor,  39  the  preceding  and  the  subsequent 
Cal.  442,  446;  Dutton  v.  Warschauer,  notes.  It  is  sometimes  difficult  to 
21  Cal.  609;  82  Am.  Dec.  765;  Pell  v.  distinguish  a  case  of  constructive  no- 
McElroy,  36  Cal.  268;  Witter  v.  Dud-  tice  arising  from  extraneous  facts  suffi- 
ley,  42  Ala.  616,  621,  625:  [see  also  cient  to  put  the  party  upon  an  inquiry 
the  following  recent  cases:  Tillman  v.  from  a  case  of  mere  actual  notice  de- 
Thomas,  87  Ala.  321;  13  Am.  St.  Rep.  pending  upon  circumstantial  evidence; 
42;  Lamar  v.  Hale,  79  Va.  147;  Jan-  and  the  two  have  occasionally  been 
vriuv.  Janvrin,  60  N.  H.  169;  Anthony  confounded  by  the  decisions  tliem- 
V.  Wheeler,  130  111.  128;  17  Am.  St.  selves.  The  criterion  as  given  in 
Rep.  281;  Washburn  v.  Huntington,  the  text  will,  I  think,  render  the  dia- 
78  Cal.  573;  Fresno  C.  &  I.  Co.  v.  tinction  sufficiently  plain  and  prac- 
Rowell.  SOCal.  114;  13  Am.  St.  Rep.  tical. 

112;    Mansfield  v.  Excelsior  Kefiuiug  '  The  dififerent  species  of  construct- 

Co.,   135  U.    S.  326;    Montgomery  v.  ive  notice  in  which  tha  legal  presump- 

Keppel,  75  Cal.   128;  7  Am.  St.  Rep.  tion  may  thus  be  overcome  seem  to 

125;  McLennan  v.  McDonnell,  78  Cal.  be    the    following:    I.    That    derived 

273;  Gale  v.  Morris,  30  N.  J.  Eq.  289;  wholly   from    mere    extraneous   facts 

Vredeuburgh  v.  Burnet,  31  N.  J.  Eq.  and  circuinstauced  which  ara  said  to 


607 


EQUITY   JURISPRUDENCE. 


840 


inquiry,  or  to  prosecute  one  with  due   diligence  to  the 
end,  the  presumption  remains  operative,  and  the  conclu- 


pnt  a  party  on  an  inquiry,  which  are 
matters  iit  pais,  and  which  generally 
consist  of  fraud,  concealments,  ne- 
glects, mistakes,  and  the  like,  by  third 
persons;  2.  That  derived  from  the 
possession  or  tenancy  of  the  property 
by  some  third  person;  and  3.  To  a 
partial  extent,  that  derived  from  the 
pendency  of  an  action  affectmg  the 
property.  In  the  following  species  the 
constructive  notice  seems  to  be  abso- 
lute and  the  presumption  conclusive: 
1.  That  derived  from  a  statutory  re- 
cording or  registration  in  the  United 
States;  2.  That  derived  from  the 
statutory  lis  pendens;  3.  That  derived 
from  a  defiuite  recital  or  reference  in 
an  instrument  forming  an  essential 
part  of  a  party's  chain  of  title;  and  4. 
That  affecting  a  principal,  where  an 
actual  or  a  constructive  notice  has 
been  duly  given  to  his  proper  agent. 
That  the  presumption  may  be  over- 
come in  the  classes  of  cases  tirst  above 
mentioned  is  either  directly  or  in- 
ferentially  held  by  the  following  de- 
cisions, among  otiiers:  Williamson  v. 
Brown,  15  N.  Y.  354,  360;  Flagg  v. 
Mann,  2  Sum.  486,  554,  per  Story,  J.; 
Rogers  v.  Jones,  8  N.  H.  264,  per 
Parker,  J.;  Whitbread  v.  Boulnois,  1 
Younge  &  C.  303,  per  Alderson,  J.; 
Jones  V.  Smith,  1  Hare,  43,  per 
Wigram,  V.  0.;  Hanbury  v.  Litch- 
field, 2  Mylne  &  K.  629;  Hunt  v. 
Elmes,  2  De  Gex,  F.  &  J.  578;  Espin  v. 
Pemberton.  3  De  Gex  &  J.  547;  Rob- 
erts V.  Croft,  2  De  Gex  &  J.  1 ;  Ware 
V.  Lord  Egmont,  4  De  Gex,  M.  &  G. 
460;  Hewitt  v.  Loosemore,  9  Hare,  449; 
Griffith  V.  Griffith,  1  Hoff.  Oh.  153; 
[Anthony  v.  Wheeler,  130  111.  128;  17 
Am.  St.  Rep.  281.] 

Whenever  a  party  has,  by  means 
of  information  concerning  extraneous 
matters,  been  put  upon  inquiry,  how 
this  inquiry  should  be  made,  and  how 
far  it  should  be  prosecuted,  in  order 
that  the  legal  presumption  may  be 
overcome,  and  the  constructive  notice 
defeated,  although  the  party  may  still 
have  failed  to  ascertain  the  real  truth, 
must  largely  depend  upon  the  particu- 
lar circumstances  of  each  case;  no  uni- 
versal rule  is  possible.  Much  help, 
however,  may  be  derived  from  a  com- 
parison of  the  decisions,  which  I  have 


arranged  according   to   their   general 
subject-matter. 

1.  Examination  qfthe  Records.  — Ex- 
amination of  the  records  is  always 
necessary,  and  there  could  hardly  be 
a  "due  inquiry  "  without  it.  If  the 
information  given  points  to  the  exist- 
ence of  some  interest  or  claim  which, 
if  it  exists  at  all,  must  necessarily  ap- 
pear upon  the  record,  then  a  search  of 
the  proper  record,  and  a  discovery 
that  no  such  claim  appeared  therein, 
would  generally  be  sufficient;  the  "due 
inquiry  "  would  have  been  prosecuted: 
Barnard  v.  Campau,  29  Mich.  162; 
Jackson  v.  Van  Valkenburg,  8  Cow. 
200;  Bellas  v.  McCarthy,  10  Watts,  13, 
28;  Van  Keuren  v.  Cent.  R.  R.,  38 
N.  J.  L.  165,  167  (when  a  grantor  re- 
mains in  possession  after  conveyance, 
a  purchaser  from  his  grantee  held  not 
bound  to  inquire  further  than  the  rec- 
ord of  his  conveyance;  the  record  of 
his  deed  sufficient;  but  see,  per  contra, 
Illinois  Cent.  R.  R.  v.  McCullough,  59 
111.  166);  Reynolds  v.  Ruckman,  35 
Mich.  SO. 

In  general,  an  examination  of  the 
records  by  such  a  party  is  not  suffi- 
cient. If  the  information  which  puts 
him  on  an  inquiry  points  to  the  exist- 
ence of  some  matter  in  pais,  some 
interest  dehors  the  records,  or  which 
would  not  necessarily  be  shown  by  the 
records,  then  a  search  of  the  records 
alone  is  not  "due  inquiry," — if,  for 
example,  the  supposed  claim  was  an 
easement,  or  a  grantor's  lien  for  pur- 
chase price,  and  the  like:  Wilson  v. 
Hunter,  30  Ind.  466,  472;  Russell  v. 
Sweezey,  22  Mich.  235,  239;  Shotwell 
V.  Harrison,  30  Mich.  179;  Muuroe  v. 
Eastman,  31  Mich.  283;  Deason  v. 
Taylor,  53  Miss.  697,  701;  Littleton  v. 
Giddintrs,  47  Tex.  109;  Baker  v.  Bliss, 
39  N.  Y.  70;  Randall  v.  Silverthorn, 
4  Pa.  St.  173. 

2.  Inqiih-yfrom  the  Grantor  or  Vendor. 
—  A  purchaser  who  had  been  put  on  an 
inquiry  should  seek  information  from 
his  grantor  or  vendor,  and  a  failure  to 
do  so  would  generally  show  a  lack  of 
the  due  care  and  diligence  in  making 
the  inquiry.  There  are  cases  which 
go  to  the  length  of  holding  that  such 
a  purchaser,  who  neglects  to  question 
his  grantor  or  vendor,  will  be  charged 


84] 


CONCERNING   NOTICS. 


§  608 


sio^  of  a  notice  is  absolute.  The  criterion  thus  laid  down 
will  serve  to  determine  the  prima  facie  nature  of  the  pre- 
sumption in  a  very  large  number  of  the  instances  which 
are  properly  referable  to  the  class  of"  constructive  notice." 
§  608.  When  Conclusive.  —  It  should  be  added,  for  the 
purpose  of  concluding  this  general  description,  that  the 
doctrine  determining  what  constitutes  a  constructive  no- 
tice under  such  circumstances  may  be  formulated,  in  some- 
what different  terms,  as  follows:  Whenever  a  party  has 
information  or  knowledge  of  certain  extraneous  facts, 
which  of  themselves  do  not  amount  to,  nor  tend  to  show, 
an  actual  notice,  but  which  are  sufficient  to  put  a  reason- 
ably prudent  man  upon  an  inquiry  respecting  a  conflict- 
ing interest,  claim,  or  right,  and  the  circumstances  are 
such  that  the  inquiry,  if  made  and  followed  up  with  reason- 
able care  and  diligence,  would  lead  to  a  discovery  of  the  truth, 
to  a  knowledge  of  the  interest,  claim,  or  right  which  really 


with  notice  of  all  he  could  have  learned: 
Sergeant  v.  IngersoU,  7  Pa.  St  340; 
15  Pa.  St.  343,  348.  .349.  Under  some 
circnmstances  it  is  possible  that  the 
information  sought  and  obtained  from 
the  grantor  or  vendor  would  satisfy 
the  requirements  of  the  rule,  and  con- 
stitute the  due  inquiry:  See  Espin 
V.  Pemberton,  3  De  Gex  &  J.  547, 
656. 

3.  Inquiry  from  Third  Perscmn.  —  Un- 
der many  circumstances,  an  examina- 
of  the  records  and  a  questioning  of  the 
vendor  would  not  be  sufficient,  unless 
the  inquiry  were  further  prosecuted 
among  third  persons  from  whom  in- 
formation could  probably  be  obtained; 
a  neglect  to  make  such  inquiry  would 
not  overcome  the  presumption.  Thus 
an  omission  to  seek  information  from 
a  third  person  who  was  in  possession, 
or  from  a  third  person  who  was  said 
or  claimed  to  hold  some  lien  or  encum- 
brance thereon,  would  generally  be  a 
failure  to  prosecute  the  inquiry  with 
due  diligence.  The  cases  on  this  par- 
ticular subject  are  very  numerous,  de- 
pending upon  a  great  diversity  of  facts 
Littleton  v.  Giddings,  47  Tex.  109 
Russell  V.  Sweezey,  22  Mich.  235,  2:» 
Witter  V.  Dudley,  42  Ala.  616,  621, 
625.      The    following   recent   English 


cases  are  illustrations  of  a  failure  to 
make  "dueinquiry,"wherebythr,  party 
remained  charged  with  constructive 
notice:  Hop^ood  v.  Ernest,  3  De  Gex, 
J.  &  S.  116,  121;  Broadbent  v.  Bar- 
low, 3  De  Gex,  F.  &  J.  570,  581; 
Atterbury  v.  Wallis,  8  De  Gex,  M.  & 
G.  454;  Penny  v.  Watts,  1  Macn.  &  G. 
150,  165;  Hewitt  v.  Loosemore,  9  Hare, 
449,  456,  458;  Maxfield  v.  Burton, 
L.  R.  17  Eq.  15,  18;  Pitcher  v.  Raw- 
lins, L.  R.  11  Eq.  53;  Briggs  v.  Jones, 
L.  R.  10  Eq.  92.  In  the  following  re- 
cent English  cases  it  was  held  that  the 
inquiry  was  sufficient,  and  the  party 
was  not  affected  with  notice:  Green- 
field V.  Edwards,  2  De  Gex,  J.  &  S. 
582;  Cory  v.  Eyre,  1  De  (iex,  J.  &  S. 
149,  108,  169;  Hunt  v.  Elmes,  2  D6 
Gex,  F.  &  J.  578,  588;  Perry  v.  Holl, 
2  De  Gex,  F.  &  J.  38,  53,  54;  Espin  v. 
Pemberton,  3  De  Gex  &  J.  547,  556; 
Roberts  v.  Croft,  2  De  Gex  &  J.  1,  6, 
6;  Ware  v.  Lord  Egmont,  4  De  Gex, 
M.  &  G.  460,  473,  474;  Hewitt  v. 
Loosemore,  9  Hare,  449,  456,  458; 
Credland  v.  Potter,  L.  R.  10  Ch.  8; 
Ratcliffe  V.  Barnard,  L.  R.  6  Ch.  65-', 
654;  see  also  Epley  v.  Witherow,  7 
Watts,  163,  107;  McGehee  v.  Gindrat, 
20  Ala.  95;  Wilson  v.  McCuIlough,  23 
Pa.  St.  440;  62  Am.  Dec.  347. 


§  609  EQUITY    JURISPRUDENCE.  842 

exists,  then  the  party  is  absolutely  charged  with  a  con- 
structive notice  ,of  such  interest,  claim,  or  right.  Tho 
presumption  of  knowledge  is  then  conclusive.  There  is 
plainly  nothing  contradictory  between  this  statement  and 
the  criterion  laid  down  in  the  preceding  paragraph;  both 
are  phases  of  the  same  doctrine.  Since  the  facts  are  as- 
sumed to  be  such  that  an  inquiry  properly  conducted 
would  result  in  arriving  at  the  truth,  it  would  be  impos- 
sible for  the  party  to  show  by  any  evidence  that  he  had 
duly  prosecuted  the  inquiry,  and  had  nevertheless  failed 
to  acquire  the  knowledge.  If  the  facts  of  a  particular 
case  bring  it  within  this  description,  the  legal  presump- 
tion becomes  conclusive,  and  the  constructive  notice  is 
absolute  in  its  effects.' 

§  609.  Species  of  Constructive  Notice.  —  Having  thus 
explained  the  nature  of  constructive  notice,  and  discussed 
the  general  doctrines  concerning  it,  I  shall  now  describe 
its  various  kinds  or  species,  and  state  the  particular  rules 
applicable  to  each.  The  following  subdivision  is  accurate 
and  sufficient;  it  is  based  upon  natural  lines  of  separation, 
and  embraces  every  definite  species  recognized  by  the 
courts.  These  various  kinds  of  constructive  notice  are: 
1.  That  by  extraneous  facts,  or  matters  in  pais,  generally 
involving  acts  of  fraud  or  negligence;  2.  That  by  posses- 
sion or  tenancy;  3.  That  by  recital  or  reference  in  in- 
struments of  title;  4.  That  by  lis  pendens,  including  the 
statutory  notice  of  a  pending  action;  5.  That  by  judg- 
ments; 6.  That  by  registration  or  recording  of  instru- 
ments; 7.  That  between  a  principal  and  his  agent.  These 
seven  species  will  be  examined  in  the  order  thus  given. 

^  It  U  in  pursuance  of  this  general  port  of  the  general  rule  as  given  in 

proposition  that  the  constructive  no-  the    text,    see    the    following    cases, 

tice  from  recitals  contained  in  a  deed  among  others:  Helms  v.  Chadbourne, 

forming  a  necessary  link  in  a  party's  45  Wis.  60,  70,  71;  Chicago  etc.  R.  R, 

chain   of    title,    and    that   chargeable  Co.    v.    Kennedy,    70    III.    .350,    361; 

upon  a  principal   when   given   to   an  Loughridge  v.  Bowland,  52  Miss.  546, 

agent,    and   that   derived   from   a   lis  553;    Maul  v.  Rider,  59  Pa.  St.   167, 

pendens    and    from    registration,    are  171;  MuUison's  Estate,  68  Pa.  St.  212; 

absolute  in  their  effects,  the  legal  pre-  Kennedy    v.    Green,    3   Mylne   &   K. 

sumptions  being  conclusive.     In  sup-  699. 


843  CONUERNINQ    NOTICE.  §  610 

§  610.  1.  By  Extraneous  Facts,  Generally  Acts  of  Fraud, 
Negligence,  or  Mistake.  —  The  criterion  in  all  instances 
of  this  species  is,  that  the  party  had  knowledge  or  infor- 
mation of  certain  matters  in  pais,  which,  although  not 
directly  tending  to  show  the  existence  of  a  prior  conflict- 
ing right,  are  sufficient  to  put  him,  as  a  prudent  man, 
upon  an  inquiry;  and  he  is  charged  with  constructive 
notice  of  all  that  he  might  have  learned  by  an  inquiry 
prosecuted  with  reasonable  diligence;  a  legal  presumption 
arises  that  he  has  obtained  information  of  what  he  might 
thus  have  learned.  In  every  such  case  the  first  question 
is,  whether  the  facts  of  which  the  party  has  information 
are  sufficient  to  put  him  upon  an  inquiry,  so  as  to  raise 
the  prima  facie  presumption;  the  further  question  is  then 
presented,  whether  he  has  made  a  due  inquiry  without 
discovering  the  truth,  so  as  to  overcome  the  presumption 
and  defeat  the  notice,  or  whether  he  has  so  neglected  this 
duty  that  the  presumption  remains  unshaken  and  the 
notice  effective.  A  third  question  might  be  suggested, 
whether  he  had  made  an  inquiry  and  had  ascertained  the 
whole  truth  concerning  the  prior  conflicting  right,  so  that 
the  constructive  notice  would  in  reality  be  turned  into 
actual  knowledge  or  actual  notice.  I  would  remark  that 
in  many  of  the  decisions  involving  this  species  of  notice 
it  will  be  seen  upon  a  careful  examination  that  the  point 
actually  determined  by  the  court  was,  not  whether  the 
party  had  made  a  due  and  reasonable  inquiry,  but  whether 
the  facts  were  sufficient  to  put  him  upon  any  inquiry,  so 
that  his  failure  to  inquire  would  be  a  fatal  neglect.  It  is 
plain  from  the  discussions  of  the  preceding  paragraphs 
that  in  all  instances  belonging  to  this  species  the  legal 
presumption  upon  which  constructive  notice  always  rests 
is  only  prima  facie,  and  may  be  overcome  by  evidence 
clearly  showing  that  the  inquiry  was  duly  prosecuted 
without  success.  Before  describing  the  particular  cases 
falling  under  this  head,  it  is  proper  to  mention  the  diffi- 
culty, which  may  sometimes  exist,  of  distinguishing  this 


§  611  EQUITY   JURISPRUDENCE.  844 

kind  of  constructive  notice  from  those  instances  of  actual 
notice  which  are  established  merely  by  circumstantial 
evidence.  In  fact,  there  are  decisions  which  make  no 
attempt  to  distinguish  them;  the  terms  "  constructive 
notice"  and  "actual  notice"  have  been  applied  indis- 
criminately to  the  same  condition  of  circumstances.  The 
distinction,  however,  exists,  and  is  fundamental.  What- 
ever may  be  the  language  of  judicial  dicta,  it  is  settled 
beyond  a  doubt  that  in  one  case  the  actual  notice  is  argu- 
mentatively  inferred  as  a  conclusion  of  fact,  by  the  jury 
or  other  tribunal,  from  the  circumstances  which  put  the 
party  upon  an  inquiry;  and  in  the  other  case  the  con- 
structive notice  is  inferred  by  the  court  as  a  presumption 
or  conclusion  of  law  from  the  same  kind  of  circumstances, 
in  the  absence  of  contrary  evidence.^  I  shall  now  men- 
tion the  most  important  instances  which  properly  belong 
to  this  branch  of  constructive  notice. 

§  611.  Visible  Objects  and  Structures.  —  If  a  purchaser 
sees  or  has  knowledge  of,  or  by  the  ordinary  use  of  his 
senses  might  see  or  know  of,  visible  material  objects  or 
structures  upon  or  connected  with  the  land  or  other  sub- 
ject-matter concerning  which  he  is  dealing,  he  may,  and 
generally  will,  be  charged  with  a  constructive  notice  of 
any  easement  or  other  similar  right  the  existence  of  which 
would  be  reasonably  suggested  to  him  by  the  appearance 
of  such  material  object.  He  is  put  upon  an  inquiry,  and 
is  presumed  to  have  ascertained  whatever  he  might  have 
learned  by  prosecuting  the  inquiry  in  a  due  and  reason- 
able manner.* 

'  These  propositions  are  so  fully  ex-  for  titles  to  be  affected  in  a  vast  nam- 
amined  in  the  preceding  paragraphs  ber  of  modes  by  matters  in  pais,  by 
that  no  further  citation  of  authorities  matters  resting  in  the  knowledge  of 
in  their  support  is  necessary.  Cases  particular  individuals,  and  which  can 
belonging  to  this  first  species  of  con-  only  be  ascertained  by  a  special  in- 
structive notice  are  much  more  com-  quiry.  The  universal  system  of  record- 
mon  in  England  than  in  the  United  ing  in  this  country  largely  diminishes 
States;  indeed,  a  very  large  proportion  the  possibility  of  titles  being  thus 
of  the  English  decisions  concerning  affected  by  extraneous  matters, 
constructive  notice  must  be  referred  *  Hervey  v.  Smith,  22  Beav.  299; 
to  this  head.  The  reason  is  obvious.  Davies  v.  Sear,  L.  R.  7  Eq.  427,  432, 
In  England,  the  absence  of  any  general  433;  Morland  v.  Cook,  L.  R.  6  Eq. 
eystem  of  recording  readers  it  possible  252,  2(33,  2G5;  Raritaa  Water  P.  Co. 


845 


CONCERNING    NOTICE. 


§612 


§  612.  Absence  of  Title  Deeds.  —  The  case  belonging 
to  this  head  which  most  frequently  occurs  in  England  is 
that  arising  from  the  absence  of  the  title  deeds,  or  their 
non-production  by  the  owner  of  land  with  whom  an  in- 
tended purchaser  or  encumbrancer  is  dealing.  From  the 
peculiar  system  of  conveyancing  and  land  titles  prevailing 
in  England,  the  owner  of  a  legal  estate  in  fee  or  for  life  is 
entitled  and  is  presumed  to  have  the  title  deeds  and  other 
muniments  of  title  constituting  the  written  evidence  of 
his  estate  in  his  own  possession  or  under  his  personal  and 
immediate  control.  The  inability  to  produce  the  title 
deeds,  and  especially  their  possession  by  a  stranger,  would 
indicate  that  some  equitable  or  perhaps  legal  interest, 
mortgage,  or  lien  had  been  created  and  was  outstanding.* 


V.  Veghte,  21  N.  J.  Eq.  463,  478;  Hoy 
V.  Bramhall,  19  N.  J.  Eq.  563;  97  Am. 
Dec.  687;  Randall  v.  Silverthorn,  4 
Pa.  St.  173;  Paul  v.  Conuersville  etc. 
K  R.,  51  Ind.  527,  530.  In  Hervey 
V,  Smith,  22  Beav.  299,  there  were 
fourteen  chimney-pots  visible  on  the 
roof  of  a  house,  but  only  twelve  flues 
in  the  house;  and  the  purchaser  was 
held  charged  with  constructive  notice 
of  an  easement  for  the  passage  of 
smoke  in  favor  of  an  adjoining  dwell- 
ing. This  decision  has  been  criti- 
cised. In  Davies  v.  Sear,  L.  R.  7  Eq. 
427,  an  open  arcliway  in  a  house  visi- 
ble to  tiie  purchaser  was  held  con- 
structive notice  of  a  right  of  way 
through  the  premises  enjoyed  by  a 
neighboring  owner.  In  Morland  v. 
Cook,  L.  R.  6  Eq.  252,  lands  on  the 
coast  were  purchased  which  were  below 
the  level  of  the  sea,  and  which,  together 
with  a  larger  extent  of  adjacent  land, 
were  protected  by  a  sea-wall.  The 
purchaser  was  held  to  be  charged  with 
constructive  notice  of  a  covenant  pro- 
viding for  the  maintenance  of  the  sea- 
wall which  constituted  an  equitable 
charge  upon  the  land  so  bought.  la 
Raritan  etc.  Co.  v.  Veghte,  ill  N.  J. 
Eq.  463,  a  mill  race  and  dam  were  held 
constructive  notice  of  easements  for, 
the  use  of  water  rights  encumbering' 
the  property;  while  in  Paul  v.  Con-i 
nersville  etc.  R.  R.,  51  Ind.  527,  a' 
graded  railway  track  across  a  farm' 
was  held  notice  of  all  the  rights  of  the 


railroad.  See  also  Allen  v.  Seck- 
ham,  L.  R.  11  Ch.  Div.  790,  794;  Suf- 
field  v.  Brown,  9  Jur.,  N.  S.,  999;  33 
L.  J.  Ch.  249,  per  Lord  Romilly,  M. 
R.,  aud  10  Jur.,  N.  S.,  Ill;  33  L.  J. 
Ch.  256,  per  Lord  Westbury;  Pyer  v. 
Carter,  1  Hurl.  &  N.  916;  Ewart  v. 
Cochrane,  4  Macq.  117;  Dann  v.  Spur- 
rier, 7  Ves.  231;  Clements  v.  Welles, 
L.  R.  1  Eq.  200;  Wilson  v.  Hart,  L.  R. 
1  Ch.  463.  Exactly  the  same  question 
in  principle  sometimes  arises  in  suit* 
for  the  specific  performance  of  con- 
tracts, where  the  vendee,  being  familiar 
with  the  premises,  or  having  seen  them 
shortly  before  entering  into  the  con- 
tract, is  held  charged  with  construct- 
ive notice  of  easements,  and  other 
similar  rights  affecting  the  land,  wliich 
are  reasonably  suggested  by  the  visible 
appearance  of  material  structures  or 
of  modes  in  which  the  premises  are 
used  and  occupied.  See  Shackleton 
v.  Sutcliffe,  1  De  Gex  &  S.  609;  Grant 
v.  Munt,  Coop.  173;  Pope  v.  Garland, 

4  Younge  &  C.  394;  Bowles  v.  Round, 

5  Ves.  508;  Dyer  v.  Hargrave,  10  Ves, 
506. 

^  In  fact,  the  possession,  by  the  ap- 
parent owner  of  the  legal  estate,  of  all 
the  title  deeds  is  quite  analogous  to, 
though  not  of  course  exactly  identical 
with,  a  perfect  record  title  in  the 
United  States.  A  purchaser  dealing 
with  the  legal  owner  in  England,  and 
finding  him  in  possession  of  all  the 
title    deeds,   is  ia    a    positiou    quite 


§  612  EQUITY   JURISPRUDENCE.  846 

The  three  following  general  rules  may  be  considered  as 
definitely  settled  by  a  strong  preponderance  of  authority, 
and  especially  by  the  more  recent  and  carefully  con- 
sidered decisions  of  the  English  courts.  It  should  be 
observed  that  they  are  given  as  general  rules;  their  appli- 
cation must  largely  depend  upon  and  vary  with  the 
changing  circumstances  of  particular  cases.  If  a  pur- 
chaser or  encumbrancer  dealing  with  the  apparent  owner 
of  an  estate  learns  or  is  informed  that  the  title  deeds  are 
in  the  possession  of  a  third  person,  this  will,  in  general,  be 
a  constructive  notice  of  any  interest  in  or  claim  upon  the 
estate  held  by  such  person;  and  will  certainly  be  a  notice, 
if  the  party  thus  receiving  the  information  intentionally 
omits  to  make  any  inquiry  into  the  nature  and  objects  of 
the  stranger's  possession.'  On  the  other  hand,  it  is  now 
thoroughly  settled  that  the  mere  absence  or  non-produc- 
tion of  the  title  deeds  is  not  of  itself  a  constructive  notice 
to  a  purchaser  or  encumbrancer,  if  he  in  good  faith  in- 
quires for  them,  and  a  reasonable  excuse  for  their  non- 
appearance is  given.  His  omission  to  make  further  inquiry 
is  not  the  "culpable  neglect"  which  the  English  courts 
now  require,  under  such  circumstances,  in  order  to  charge 
the  party  with  notice.  Exactly  the  same  rule  has  been 
applied  by  several  of  the  cases  to  a  somewhat  different 
state  of  facts.  If  deeds  are  produced  and  delivered  to  the 
purchaser  or  encumbrancer,  which  are  represented  to  be 
all  of  the  muniments  of  title,  while  in  fact  they  are  not 
all,  but  some  of  the  deeds  affecting  the  title  are  in  posses- 
similar  to  that  of  a  purchaser  in  this  Burton,  L.  R.  17  Eq.  15,  18  (the  pur- 
country  who  has  made  a  search  and  chaser  was  informed  that  the  deeds 
finds  the  owner's  title  on  the  records  were  in  the  possession  of  a  third  per- 
clear  and  unencumbered.  W^hile  in  son,  and  simply  neglected  to  make  any 
neither  case  is  such  purchaser  abao-  inquiry;  it  did  not  appear  that  his 
lutely  secure  against  unknown  out-  neglect  was  intentional  or  willful), 
standing  claims,  in  both  he  stands  in  Upon  substantially  the  same  grounds 
a  like  position  of  advantage  and  pro-  it  was  held,  in  Kellogg  v.  Smith,  26 
tection.  N.  Y.  18,  23,  that  the  purchaser  of  a 

'  Dryden  v.  Frost,  3  Mylne  &  C.  670,  bond  and  mortgage  who  fails  to  require 
673,  per  Lord  Cottenham;  Hiern  v.  the  production  of  the  bond,  it  being  in 
Mill,  13  Ves.  114;  Birch  v.  Ellames,  fact  not  produced,  is  charged  with 
2  Anstr.  427;  Bradley  v.  Riches,  L.  R.  notice  of  any  defects  in  his  assignor's 
9  Ch.  Div.  189,  195,  196;  Maxfield  ▼.     title. 


847  CONCERNING   NOTICE.  §  613 

sion  of  a  third  person,  bis  omission  to  examine  the  deeds 
thus  delivered  to  him  and  to  discover  the  defect  is  not 
the  culpable  neglect  which  renders  him  chargeable  with 
notice/  Finally,  if  a  purchaser  or  encumbrancer  fails  to 
make  any  inquiries  concerning  the  title  deeds  of  the 
property  for  which  he  is  dealing,  this  is,  under  the  Eng- 
lish system,  a  "  culpable  negligence,"  and  he  is  thereby 
charged  with  constructive  notice  of  all  the  facts  which  he 
might  have  learned  by  means  of  a  due  inquiry.' 

§  613.  Other  Matters  in  Pais.  —  As  might  be  supposed 
from  our  wholly  different  system  of  conveyancing  and 
titles,  instances  of  constructive  notice  by  the  absence  or 
non-production  of  title  deeds  seldom,  if  ever,  arise  in  this 
country.  The  same  general  rule,  however,  is  applied  by 
our  courts  in  all  analogous  cases.  If  a  purchaser  or  en- 
cumbrancer, dealing  concerning  property  of  which  the 
record  title  appears  to  be  complete  and  perfect,  has  infor- 
mation of  extraneous  facts  or  matters  in  pais,  sufficient 
to  put  him  on  inquiry  respecting  some  unrecorded  con- 
veyance,, mortgage,  or  encumbrance,  or  respecting  some 
outstanding  interest,  claim,  or  right  which"  is  not  the  sub- 
ject of  record,  and  he  omits  to  make  a  proper  inquiry,  he 
will  be  charged  with  constructive  notice  of  all  the  facts 

'  Dixon  V.  Muckleston,  L.  R.  8  Ch.         '  Such  conduct  is  the  willful  shut- 

155,   158,    161;   RatclifiFe   v.   Barnard,  ting  one's  eyes  to  the  truth,  and  omit- 

L.  R.  6  Ch.  652,  65i;  Hunt  v.  Elmes,  ting  to  inquire  for  the  very  purpose  of 

2  De  Gei,  F.  &  J.  578,  588;  28  Beav.  avoiding   information,    spoken   of   by 

631;  Perry  v.  HoU,  2  De  Gex,  F.  &  J.  Vice- Chancellor  Wigram   in  the  pas- 

38,  53,  54;  Espin  v.  Pemberton,  3  De  sage  quoted  in  a  preceding  paragraph: 

Gex    &    J,    547,    556;    4   Drew.    333;  Hewitt   v.    Loosemore,   9   Hare,  449, 

Roberts  v.  Croft,  2  De  Gex  &  J.  1,  5,  458;  Hopgood  v.  Ernest,  3  De  Gex,  J. 

6;  24  Beav,  223;' Hewitt  v.  Loosemore,  &  S.  116,  121;  Atterbury  v.  Wallis,  8 

9  Hare,  449,  456,  458;  Colyer  v.  Finch,  De  Gex,  M.  &  G.  454,  466;  Maxfield  v. 

5  H.  L.  Cas.  905;  Finch  v.  Shaw,  19  Burton,  L.  R.  17  Eq.  15,  18;  Bradley 
Beav.  500;  Dowlev.  Saunders,  2  Hem.  v.  Riches,  L.  R.  9  Ch.  Div.   189,  195, 

6  M.  242;  Hipkins  v.  Amery,  2  Giff.  196;  Finch  v.  Shaw,  19  Beav.  500, 
292;  Farrow  v.  Rees,  4  Beav.  18;  511;  Jones  v.  Williams,  24  Beav.  47; 
Evans  v.  Bicknell,  6  Ves.  174;  Plumb  Peto  v.  Hammond,  .30  Beav.  495; 
V.  Fluitt,  2  Anstr.  432;  and  see  W^are  Allen  v.  Knight,  5  Hare,  272;  Jones 
v.LordEgmont,4DeGex,  M.&G.460,  v.  Smith,  1  Hare,  43;  1  Phill.  Ch. 
473,  474;  Greenfield  v.  Edwards,  2  De  244;  Worthington  v.  Morgan,  16  Sim. 
Gex,  J.  4;  S.  582;  Cory  v.  Eyre,  1  De  547;  Jackson  v.  Rowe,  2  Sim.  &  St. 
Gex,  J.  &  S.  149,  168.  169;  Perry  Her-  472. 

rick  V.  Attwood,  2  De  Gex  &  J.  21,  37. 


§  014 


EQUITY    JURISPRUDENCE. 


848 


which   he  might  have  learned   hy  means  of  a  due  and 
reasonable  inquiry.* 

§  614.  2.  By  Possession  or  Tenancy.  —  The  general  rule 
is  well-settled  in  England  that  a  purchaser  or  encum- 
brancer of  an  estate  who  knows  or  is  properly  informed 
that  it  is  in  the  possession  of  a  person  other  than  the 
vendor  or  mortgagor  with  whom  he  is  dealing  is  thereby 
charged  with  a  constructive  notice  of  all  the  interests^ 
rights,  and  equities  which  such  possessor  may  have  in 
the  land.  He  is  put  upon  an  inquiry  concerning  the 
grounds  and  reasons  of  the  stranger's  occupation,  and  is 
presumed  to  have  knowledge  of  all  that  he  might  have 
learned  by  means  of  an  inquiry  duly  and  reasonably 
prosecuted.  If  he  neglects  to  make  any  iuquiry,  or  to 
make  it  with  due  diligence,  the  presumption  and  notice, 
of  course,  remain  absolute.*     The  same  general  rule,  based 


'  This  inquiry,  as  has  been  shown, 
sometimes  should  be  made  of  the 
grantor  or  vendor,  and  sometimes  of 
third  persons,  according  to  the  circum- 
stances of  each  case:  Epley  v.  W^ith- 
erow,  7  Watts,  163,  167;  Jaquea  v. 
Vi^eeks,  7  VV^atts,  261.  274;  Buttrick 
V.  Holden,  13  Met.  355,  357;  Sergeant 
V.  Ingersoll,  7  Pa.  St.  340;  15  Pa.  St. 
343,  348,  349;  Warren  v.  Swett.  31 
N.  H.  332,  341;  Littleton  v.  Giddings, 
47  Tex.  109;  Helms  v.  Chadbourne, 
45  Wis.  60,  70;  Shepardson  v.  Ste- 
vens,  71  111.  646;  Erickson  v.  Rafferty, 
79  111.  209,  212;  Buck  v.  Payne,  50 
Miss.  648,  655;  Maul  v.  Rider,  59  Pa. 
St.  167,  171;  Stearns  v.  Gage,  79 
N.  Y.  102,  107;  Baker  v.  Bliss,  39 
N.  Y.  70.  [Mere  notice  of  an  existing 
debt  due  from  the  vendor  is  not  con- 
structive notice  to  a  subsequent  pur- 
chaser of  an  unrecorded  chattel  mort- 
gage by  which  it  is  secured:  PoUak  v. 
Davidson,  87  Cal.  551.  It  is  a  general 
rule  that  persons  dealing  with  a  cor- 
poration are  charged  with  notice  of 
the  provisions  of  its  charter,  constitu- 
tion, and  by-laws:  Bocock  v.  Alle- 
ghany Coal  and  Iron  Co.,  82  Va.  913;  3 
Am.  St.  Rep.  128.] 

"Taylor  v.  Stibbert,  2  Ves.  437, 
440,  per  Lord  Rosslyn;  Holmes  v. 
Powell.  8  De  Gex,  M.  &  G.  572,  580, 
581;  Penny  v.  Watts,   1  Macn.  &  G. 


150,  165.  The  general  rule  was  so 
clearly  and  accurately  stated  by  Knight 
Bruce,  L.  J.,  in  the  recent  case  of 
Holmes  v.  Powell,  8  De  Gex,  M.  &  G. 
572,  that  I  shall  quote  a  passage 
of  his  opinion  (p.  680):  "I  appre- 
hend that  by  the  law  of  England 
when  a  man  is  of  right  and  de  facto  in 
possession  of  a  corporeal  hereditament, 
he  is  entitled  to  impute  knowledge  of 
that  possession  to  all  who  deal  for  any 
interest  in  the  property,  conflicting  or 
inconsistent  with  the  title  or  alleged 
title  under  which  he  is  in  possession, 
or  which  he  has  a  right  to  connect 
with  his  possession  of  the  property. 
It  is  equally  a  part  of  the  law  of  the 
country,  as  I  understand  it,  that  a 
man  who  Tcnoios,  or  who  cannot  be  heard 
to  deny  that  he  knows,  another  to  be  in 
possession  of  certain  property  cannot 
for  any  civil  purpose,  as  against  him 
at  least,  be  heard  to  deny  having 
thereby  notice  of  the  title  or  alleged 
title  under  which  or  in  respect  of 
which  the  former  ia  and  claims  to  be 
in  that  possession.  Lord  Eldon's  lan- 
guage in  Allen  v.  Anthony,  1  Mer. 
282,  284,  recognizes,  as  I  understand 
it,  both  rules.  But  possession  of  a 
corporeal  hereditament,  to  be  efifectual, 
need  not  be  continually  visible  or 
without  cessation  actively  asserted. 
If  a  man   has  once  received  rightful 


849 


CONCERNING    NOTICB. 


§614 


upon  the  same  motives  and  reasons,  has  been  established 
in  the  United  States  by  a  very  great  number  of  decisions 
and  judicial  dicta}  In  by  far  the  larger  portion  of  Eng- 
lish cases,  the  possession  has  been  that  of  a  tenant  or 
lessee,  while  in  this  country  the  instances  of  notice  by 
mere  tenancy  are  comparatively  few.  I  shall  therefore 
treat  the  effect  of  tenancy  as  a  particular  application  of 
the  more  general  doctrine  concerning  notice  by  posses- 
sion. In  discussing  the  entire  subject,  I  shall  endeavor, 
—  1.  To  define  with  accuracy  and  precision  the  general 
rules  which  have  been  settled  in  the  United  States,  with 
their  limitations  and  exceptions;  2.  To  determine  the  ex- 
tent of  the  notice,  of  what  rights  belonging  to  the  occu- 
pant his  possession  is  notice,  and  the  effects  thereof  on 
the  rights  of  the  one  receiving  the  notice;  3.  To  ascer- 
tain what   kind,  amount,  and   length    of    possession    is 


and  actnal  possession  of  land,  he  may 
go  to  any  distance  from  it  without 
authorizing  any  servant,  or  agent,  or 
other  person  to  enter  upon  it  or  look 
after  it;  he  may  leave  it  for  years  un- 
cultivated and  unused;  he  may  set  no 
mark  of  ownership  upon  it,  —  and  his 
possession  may  nevertheless  still  con- 
tinue, at  least  until  his  conduct  afford 
evidence  of  intentional  abandonment, 
which  such  conduct  as  I  have  men- 
tioned would  not  necessarily  do. 
Suppose,  for  example,  a  purchase  of  a 
tract  of  woodland,  and  the  purchaser, 
after  possession  given  him,  to  leave  it 
wholly  neglected,  uninhabited,  un- 
touched, unvisited,  unseen,  for  years, 

the  possession  is  not  thus  lost 

It  is  unnecessary  for  me  to  repeat  that 
I  have  uniformly  been  using  the  word 
'possession'  as  meaning  'occupation,' 
and  not  as  including  that  kind  of  pos- 
session of  a  corporeal  hereditament 
which  a  man  has  by  receiving  com- 
pensation or  remuneration  for  the 
occupation  of  it  by  another."  The 
judge,  in  support  of  these  conclusions, 
referred  to  the  following  decisions: 
Hardy  v.  Reeves,  5  Ves.  426;  Taylor 
V.  Stibbert.  2  Ves.  437;  Daniels  v. 
Davison,  16  Ves.  249;  17  Ves.  433; 
Norway  v.  Howe,  19  Ves.  144;  Gordon 
v.  Gordon,  3  Swanst.  400;  Miles  v. 
Langley,  1  Russ.  &  M.  39;  White  v. 
2  Eq.  Jub.  — 54 


Wakefield,    7    Sim.    401;    Oxwith  v. 
Plummer,  2  Vern.  G36. 

1  Rogers  V.  Jones,  8  N.  H.  264;  Hull 
V.  Noble,  40  Me.  459,  480;  Johnson 
V.  Clarke,  18  Kan.  157,  164;  School 
Dist.  V.  Taylor,  19  Kan.  t287;  Tankard 
V.  Tankard,  79  N.  C.  54,  56;  Edward 
V.  Thompson,  71  N.  C.  177;  Noyes  v. 
Hall,  97  U.  S.  34,  38;  Cabeen  v.  Breck- 
enridge,  48  111.  91;  Truesdale  v.  Ford, 
37  111.  210;  Dunlap  v.  Wilson,  32  HU 
517;  Strickland  v.  Kirk,  51  Miss. 
795,  797:  Loughridge  v.  Rowland,  52 
Miss.  546,  553;  Moss  v.  Atkinson,  44 
Cal.  3,  17;  Killey  v.  Wilson,  33  Cal. 
690;  Russell  v.  Sweezey,  22  Mich. 
235,  239;  Sears  v.  Muuson,  23  Iowa, 
380;  Phillips  v.  Costley,  40  Ala.  486; 
McKinzie  v.  Perrill,  15  Ohio  St.  1(;2; 
Perkins  v.  Swank,  43  Miss.  349; 
Glidewell  v.  Spaugh,  26  Ind.  319; 
Warren  v.  Richmond,  53  III.  52; 
Reeves  v.  Ayers,  38  111.  418;  Keys  v. 
Test,  33  111.  316;  Bank  of  Orleans  v. 
Flagg,  3  Barb.  Ch.  316;  Dield  v.  Page, 
3  N.  J.  Eq.  143;  Baldwin  v.  Johnson, 
1  N.  J.  Eq.  441;  Wo^ds  v.  Farmere,  7 
Watts,  382;  32  Am.  Dec.  772;  Sailor  v. 
Hertzog,  4  Whart.  259;  Rinsjold  v. 
Biyan,  3  Md.  Ch.  4S8;  Bavnard  v. 
Norris,  5  Gill,  408;  46  Am.  Dec.  647; 
Webberv. Taylor,  "2  Jones  Ef|.  9;  [Smith 
V.  Brittenliam,  109  111.  540;  Chicago, 
B.,  &  Q.  R.  R.  v.  Boyd,  118  IlL  73.1 


§  615  EQUITY   JURISPRUDENCE.  850 

necessary  or  sufficient  in  various  classes  of  cases;  4.  To 
inquire  whether  the  presumption  arising  from  the  pos- 
session is  conclusive  or  rebuttable;  and  5.  To  consider 
the  case  of  possession  by  a  tenant  or  lessee,  and  the  par- 
ticular rules  connected  therewith. 

§615.  General  Rules.  —  Two  leading  and  entirely  dis- 
tinct rules  have  been  settled  in  the  United  States  as  well 
as  in  England,  and  the  failure  to  recognize  this  fact  has, 
as  it  seems  to  me,  sometimes  produced  confusion  and  un- 
certainty in  dealing  with  the  general  subject.  In  the  first 
place,  it  is  clearly  established  by  many  decisions  of  the 
highest  authority  that  an  actual,  open,  visible,  and  ex- 
clusive possession  of  a  definite  tract  of  land  by  one  right- 
fully in  possession  or  holding  under  a  valid  title  is  a 
constructive  notice  to  subsequent  purchasers  and  encum- 
brancers of  whatever  estate  or  interest  in  the  land  is  held 
by  the  occupant,  equivalent  in  its  extent  and  effects  to  the 
notice  given  by  the  recording  or  registration  of  his  title. 
The  constructive  notice  thus  described,  like  that  arising 
from  a  record  or  registration,  does  not  seem  to  require  nor 
to  depend  upon  any  actual  knowledge  or  information  of 
the  possession  communicated  to  or  had  by  the  subsequent 
purchaser,  since  he  is  held  to  be  charged  with  notice,  even 
though  he  is  a  resident  of  another  state.'     This  rule  is 

*  This  rule  seems  to  have  its  special  C.  177,    it    was    said   that  the  pur- 

and  most  usual  applicatiou    between  chaser  was  thus  charged  with  notice, 

prior  grantees   of  land   whose   deeds  although   he  lived  in  another  state); 

have  not  been  put  on  record,  and  sub-  School   District  v.  Taj'lor,    19   Kan. 

sequent   grantees    or    encumbrancers  287;  Emmons  v.  Murray,  16  N.  H.  385; 

who»e  deeds  or  mortgages  \have  been  Farmers'   L.    &   T.  Co.  v.  Maltby,  8 

recorded.       The     rvjJdful    possession  Paige,  361;  Doyle  v.  Stevens,  4  Mich, 

under  such   circumstances  is  held  to  87.     [See,  to  the  same  eflfect,  Tillotson 

produce  the  same  effect  as  that  pro-  v.  Mitchell,    111    111.  518;  Higgins  v. 

duced  by  a  record:    Noyes  v.  Hall,  97  White,  118  111.  619;  Woodson  v.  Col- 

U.  S.  34,  38;  Cabeen  v.  Breckenridge,  lins,  56  Tex.  168;  Sheorn  v.  Robinson, 

48  111.  91;  Truesdale  v.  Ford,  37  111.  22  S.  C.  32;  Sweatman  v.  Edmunds, 

210;  Brown  v.  Gaffney,    28   111.    157;  28  S.  C.  62;  Bienmann   v.  White,  23 

Dunlap  V.  Wilson,  32  111.  517;  Brad-  S.  C.  492;  Ranney  v.   Hardy,  43  Ohio 

ley  v.  Snyder,  14  111.  263;  58  Am.  Dec.  St.   157;   Galley  v.  Ward,  60  N.  H. 

564;  Tankard  v.  Tankard,  79  N.  C.  54,  331;  Sawyers  v.  Baker,   72   Ala.   49; 

56;  Edwards  v.  Thompson,  71  N.  C.  Carter  v.  Challen,  83  Ala.  135;  Hodge 

177.  179;  Webber  v.  Taylor,  2  Jones  v.  Amerman,  40  N.  J.  Eq.  99;  Weis- 

Eq.   9;  Taylor  v.    Kelly,  3  Jones  Eq.  berger  v.  Wisner,  55  Mich,  246;  Hyde 

240  (in  Edwards  v.  Thompson,  71  N.  Mangan,  88  Cal.  319.] 


851  CONCERNING    NOTICE.  §  615 

plainly  the  same  as  the  first  one  laid  down  by  Lord  Jus- 
tice Knight  Bruce,  in  the  opinion  quoted  under  the  last 
preceding  paragraph.^  The  rationale  seems  to  be,  that  as 
the  occupant's  title  is  a  good  one,  and  as  his  possession 
is  notorious  and  exclusive,  a  purchaser  would  certainly 
arrive  at  the  truth  upon  making  any  due  inquiry.  The 
purchaser  cannot  say,  and  cannot  be  allowed  to  say,  that 
he  made  a  proper  inquiry,  and  failed  to  ascertain  the 
truth.  The  notice,  therefore,  upon  the  same  motives  of 
expediency,  is  made  as  absolute  as  in  the  case  of  a  regis- 
tration. The  second  of  the  two  rules  is  undoubtedly  the 
one  which  is  sustained  by  the  greatest  number  of  decis- 
ions. It  must  not  be  supposed,  however,  that  there  is  any 
conflict  between  them,  nor  that  the  same  court  might  not, 
under  proper  circumstances,  adopt  both.  Whenever  a 
party,  dealing  as  purchaser  or  encumbrancer  with  respect 
to  a  parcel  of  land,  is  informed  or  knows,  or  is  in  a  con- 
dition which  prevents  him  from  denying  that  he  knows, 
that  the  premises  are  in  the  possession  of  a  third  person, 
other  than  the  one  with  whom  he  is  dealing  as  owner,  he 
is  thereby  put  upon  an  inquiry,  and  is  charged  with  con- 
structive notice  of  all  the  facts  concerning  the  occu- 
pant's right,  title,  and  interest  which  he  might  have 
ascertained  by  means  of  a  due  inquiry.  A  legal  presump- 
tion arises  that  he  possesses  all  the  knowledge  which  he 
could  have  acquired  by  such  an  inquiry.''    It  follows,  as  a 

'  Holmes  v.  Powell,  8  De  Gex,  M.  Richmond,  53  111.  52;  Russell  v.  Swee- 

&  G.  572,  580.  zey,    22   Mich.  235,    239;  Perkins   v. 

» Rogers    v.    Jones,   8   N.    H.    264;  Swank,  43  Miss.  349,   361;  O'Rourke 

Hull  V.  Noble,  40  Me.  459,  480;  John-  v.  O'Connor,  39  Cal.  442,  446;  Pell  v. 

son  V.  Clark,  18  Kan.  157,  164;  Mul-  McElroy,  36  Cal.  268;  Duttonv.  War- 

lins  V.  Wimberly,  50   Tex.  457,  464;  schauer,    21    Cal.   609;    82  Am.   Dec. 

Watkins   v.    Edwards,    23   Tex.    443;  765;   Smith  v.  Gibson,    15   Minn.  89, 

Strickland  V.  Kirk,  51  Miss.  795,  797;  99;    Bogue  v.    Williams,  48    IlL  371; 

Loughridge  v.  Bowland,  52  Miss.  546,  and  see  cases  aiite,  under  §  614.     [See 

553,  554;  Brown  v.  Volkeuing,  64  N.  also  Jamison  v.  Dimock,  95  Pa.  St.  52; 

Y.  76,  82,  83;  Van  Kueren  v.  Cent.  R.  Manufacturing  Co.  v.  Hendricks,   106 

R.,  38  N.  J.  L.  165,  167;  Moss  v.  At-  N.  C.  485;   Staton  v.    Davenport.   95 

kinson,  44  Cal.  3,  17;  Killey  v.  Wilson,  N.  C.  11;  Mayo  v.  Leggett,  96   N.  C. 

33  Cal.    690;  Rogers   v.    Hussey,    36  242;  Daniel  v.    Hester,  29  S.  C.  147 

Iowa,  664;  Illinois  Cent.  R.  R.  v.  Mc-  Day  v.  Railroad  Co.,  41  Ohio  St.  392 

Cnllongh,     59    111.     16(!;    Tunison    v.  Hottenstein  v.  Yerch,  104  Pa.  St.  454 

Chamblin,  88  111.  378;  390;  Warren  v.  Hohnea  v.  Caden,  57  Vt.    Ill;  Rowo 


§  616  EQUITY    JURISPRUDENCE.  852 

necessary  consequence  of  these  rules,  that  when  a  grantee 
or  a  vendee  whose  deed  or  contract  is  not  recorded  is  in 
actual  possession  of  the  land  conveyed  or  agreed  to  be  con- 
veyed to  him,  his  possession  is  constructive  notice  to  a 
subsequent  grantee  of  the  same  premises  whose  deed  is 
put  upon  record,  and  his  title  takes  precedence  of  such 
subsequent  but  recorded  deed.' 

§  616.  Extent  and  Effect  of  the  Notice.  —  There  ap- 
pears to  be  some  disagreement  among  the  American 
decisions  concerning  the  question  of  what  rights  and 
interests  held  by  the  occupant  his  possession  is  a  con- 
structive notice.  It  is  firmly  settled  in  England  that  the 
possession  of  a  tenant  or  lessee  is  not  only  notice  of  all 
rights  and  interests  connected  with  or  growing  out  of  the 
tenancy  itself  or  the  lease,  but  is  also  notice  of  all  inter- 
ests acquired  by  collateral  and  even  subsequent  agree- 
ments. If,  for  example,  a  tenant  should  enter  under  his 
lease  alone,  and  should  afterwards  make  an  agreement  for 
the  purchase  of  the  land,  his  possession  would  be  notice 
to  a  subsequent  purchaser  of  his  rights  as  vendee,  as 

V.  Ream,  105  Pa.  St.  543;  Border  State  Dixon  v.  Lacoate,  1  Smedeg  &  M.  107; 

Savings  Institution  v.  Wilcox,  63  Md,  Bank  of  Orleans  v.  Flagg,  3  Barb.  Ch, 

525;  Siskv.  Almon,  34  Ark.  391;  Fer-  316;    Braman  v.  Wilkinson,  3  Barb, 

ron  V.  Errol,  59  N.  H.  234;  Lindleyv.  151    (possession   by  a  vendee).     [See 

Martindale,    78   Iowa,    379;    Coe    v.  also  Barnett  v.  Vincent,  69  Tex.  685; 

Manseau,  62  Wis.  81;  Howzik  v.  De-  5  Am.  St.  Rep.  98  (a  case  of  possession 

laglise,  65  Wis.  499;  56  Am.  Rep.  642;  by  a  vendee  under  a  parol  contract  of 

Seymour  v.  McKinstry,  106  N.  Y.  38;  saIe);Lipp  v.  Land  Syndicate,  24  Neb. 

Schierer  v.  Cuddy,  85  Cal.  271;  Bank  692;  Lipp  v.  Hunt,  25  Neb.  91;  Allen 

of  Mendocino  v.  Baker,  82  CaL  114;  v.  Cadwell,  55  Mich.  8;  Finch  v.  Beal, 

Dreyfus  v.  Hirt,  82  Cal.  621.]  68  Ga.  594;  White  v.  White,  105  111. 

»  Strickland  v.  Kirk,  51  Miss.  795,  313;  Lamoreux  v.  Huntley,  68  Wis.  24; 

797;  Mossv.  Atkinson,  44  Cal.  3,   17  Peasley  v.  McFadden,  68Cal.  611;  Em- 

(the  vendee  may  enforce  his  contract  eric  v,  Alvarado,  90  Cal.  444.    This  rule 

against    such     subsequent     grantee);  is  not  changed  by  reason  of  the  great 

Killey  v.  Wilson,  33  Cal.  690;  Tuni-  inconvenience   to  which   a   purchaser 

son   v.  Chamblin,  88  111.   378,  390  (if  would  be  put  in  making  inquiries  of 

the  second   grantee   takes   possession  all  persons  in  a  large  tenement-house: 

equity  will  cancel  his  deed  as  a  cloud  Phelan  v.  Brady,  119  N.  Y.  587.]     It 

upon  the  first  grantee's  title,  and  will  will  be  seen  that  there  is  an  exception 

restore  possession  to  the  first  grantee);  to  this  particular  rule  in  some  states, 

Russell   V.    Sweezey,    22    Mich.    235,  where  actual  notice  of  a  prior  unre- 

239;  Warren  v.  Richmond,  53  111.  52;  corded  instrument   is  necessary,  and 

Doolittle  v.  Cook,  75  111.  354;  Cabeen  mere  possession  is  held  not  to  be  such 

V.  Breckenridge,  48  111.  91,  93;  Per-  actual  notice:    See  ijost,  §  646,  aubdi* 

kins  V.    Swank,    43   Miss.    349,    361;  vision  on  recording. 


853 


CONCERNING   NOTICE. 


§616 


well  as  of  tliose  belonging  to  him  as  lessee.*  It  would 
seein  that  the  principle  of  these  decisions  extended  to  all 
persons  in  possession,  whether  as  lessees,  vendees,  mort- 
gagees, or  otherwise.  It  has  accordingly  been  adopted 
and  followed  by  some  of  the  American  cases,  which  hold 
that  a  possession  originally  acquired  by  one  right  or  in 
one  manner  is  notice  of  all  other  rights  subsequently 
and  differently  obtained  and  held  by  the  occupant,  unless 
there  is  something  in  the  circumstances  of  the  case  which 
has  actually  misled  the  purchaser  who  is  to  be  affected  by 
the  notice.^  Exactly  the  opposite  conclusion  has,  how- 
ever, been  reached  by  cases  which  hold  that  a  possession 
begun  under  one  kind  of  right  is  not  notice  of  any  other 
or  different  interest  subsequently  obtained  by  the  occu- 
pant, unless  there  was  something  special  in  the  circum- 
stances which  might  draw  the  purchaser's  attention  to 
the  change  of  title,  and  thus  operate  rather  as  an  actual 


'  Daniels  v.  Davison,  16  Ves,  249; 
17  Ves.  433;  Taylor  v.  Stibbert,  2  Ves. 
437;  Allen  v.  Anthony,  1  Mer.  282; 
Meux  y.  Maltby,  2  Swanst  281;  Crof- 
tnn  V.  Ormsby,  2  Schoales  &  L.  583; 
Powell  V.  Dillon,  2  Ball  &  B.  416;  Lewis 
V.  Bond,  18  Beav.  85;  Wilbraham  v. 
Livesey,  18  Beav.  206;  Moreland  v, 
Richardson,  24  Beav.  33;  Bailey  v. 
Richardson,  9  Hare,  734;  Barnhart  v. 
Greenshields,  9  Moore  P.  C.  C.  33,  34; 
and  for  limitations  on  the  rule,  see 
Hanbury  v.  Litchfield,  2  Mylne  &  K. 
629,  633,  per  Lord  Cotteuham;  Jones 
v.  Smith,  1  Hare,  43,  62. 

'■^  In  my  opinion,  these  decisions  are 
much  more  in  harmony  with  the  gen- 
eral doctrine  than  those  others  which 
have  speculated  and  drawn  refined 
distinctions  upon  the  amount  of  notice 
derived  from  the  occupant's  original 
right  to  the  possession.  The  reasons 
upon  which  the  whole  doctrine  rests 
seem  to  be  conclusive.  The  posses- 
sion of  a  third  person  is  said  to  put  a 
purchaser  upon  an  inquiry;  and  he  is 
charged  with  notice  of  all  that  he 
might  have  learned  by  a  due  and  rea- 
sonable inquiry.  Clearly  a  purchaser 
who  is  thus  put  upon  inquiry  is  bound 
to  inquire  of  the  occupant  with  respect 
to  eveiT/  ground,  source,  and  right  of 


his  possession;  anything  short  of  this 
would  clearly  fail  to  be  the  "due  and 
reasonable  inquiry":  See  Kerr  v.  Day, 
14  Pa.  St.  112;  53  Am.  Dec.  626; 
Woods  V.  Farmere,  7  Watts,  382;  32 
Am.  Dec.  772;  Matthews  v.  Demerritt, 

22  Me.   312;  McKecknie  v.  Hoskins, 

23  Me.  230;  Rogers  v.  Jones,  8  N.  H. 
264;  Daubenspeck  v.  Piatt,  22  Cal. 
330;  [Balen  v.  Mercier,  75  Mich.  42. 
Thus  it  has  been  held  that  the  contin- 
uous possession  of  a  tenant  in  common 
after  he  has  purchased  out  his  co-ten- 
ants' share  is  notice  of  his  rights 
under  the  purchase,  as  against  a  judg- 
ment creditor  of  the  co-tenant:  Far- 
mers' Nat.  Bank  v.  Sperling,  113  111. 
273;  Haworth  v.  Taylor,  108  111.  275; 
but  see,  contra,  Duttonv.  McReynolds, 
31  Minn.  66,  and  Plumer  v.  Robert- 
son, 6  Serg.  &  R.  179,  where  it  is  held 
that  occupancy  by  one  of  three  former 
tenants  in  common  alone  is  not  notice 
of  a  transfer  to  him  of  the  interests  of 
the  other  two,  as  his  sole  occupancy 
could  be  referred  to  his  former  title. 
See  also  Wilcox  v.  Leominster  Nat. 
Bank,  43  Minn.  541,  19  Am.  St  Rep. 
259,  where  possession  by  a  tenant  in 
common  is  said  not  to  be  notice  of  his 
co-tenant's  title.] 


§  617  EQUITY    JURISPRUDENCE.  854 

than  a  constructive  notice.*  The  decisions  may  be  re- 
garded as  agreeing  upon  the  conclusion,  which  also  seems 
to  be  in  perfect  harmony  with  sound  principle,  that  where 
a  title  under  which  the  occupant  holds  has  been  put  on 
record,  and  his  possession  is  consistent  with  what  thus 
appears  of  record,  it  shall  not  be  a  constructive  notice  of 
any  additional  or  different  title  or  interest  to  a  purchaser 
who  has  relied  upon  the  record,  and  has  had  no  actual 
notice  beyond  what  is  thereby  disclosed.* 

§  617.  Grantor  Eemaining  in  Possession.  —  The  last- 
mentioned  rule  has  frequently  been  invoked  where  a 
grantor,  having  executed  a  deed  absolute  on  its  face, 
which  is  put  upon  record,  remains  in  possession  of  the 
land  by  virtue  of  some  arrangement  or  relation  between 
himself  and  his  grantee  dehors  the  deed  and  the  record, 
which  entitles  him  to  the  possession,  such  as  a  collateral 
agreement  which  really  turns  the  deed  into  a  mortgage, 
a  lien  for  the  unpaid  purchase  price,  an  unrecorded 
mortgage,  and  the  like.  In  England,  if  a  grantor  has 
signed  the  usual  receipt  for  the  whole  purchase-money 
indorsed  upon  his  conveyance,  his  continued  possession 
is  not  a  constructive  notice  of  any  lien  he  may  have  for 
the  unpaid  price.  The  receipt  in  such  a  case  is  analo- 
gous to  the  record  of  the  deed  in  the  United  States,  and 
a  subsequent  purchaser  from  the  grantee  has  a  right  to 

»  McMechan  v.  Griffing,  3  Pick.  154;  Bright  v.  Buckman,  39  Fed.  Rep.  243.] 

15   Am.   Dec.    189;   Kendall   v.  Law-  Where  A  gives  a  mortgage  by  absolute 

rence,  22  Pick.  542;  Bush  v.  Golden,  deed  with  defeasance  to  B,  and    the 

17  Conn.  594,  602;  Williams  v.  Sprigg,  deed  is  recorded,  but  the  defeasance  is 

6  Ohio  St.  585;  Matthews  v.  Demer-  not,  and  A  remains  in  possession,  his 

ritt,  22  Me.  312,  313;  Dawson  v.  Dan-  possession,    if    known   by   them,    has 

bury  Bank,  15  Mich.  489.  been  held  a  sufficient  notice  to  gran- 

*  Plumer  v.  Robertson,  6  Serg.  &  R.  tees  from  B:    Daubenspeck  v.   Piatt, 

184,  per  Tilghman,  C.  J.;  Woods  v.  22  Cal.  330;  hut  per  cotitra,  Crassen  v. 

Farmere,  7  Watts,  382,  388;  32  Am.  Swoveland,  22  Ind.  427;  Newhall  v. 

Dec.  772;  Great  Falls  Co.  v.  Worster,  Pierce,  5  Pick.  450;  and  see  Corpman 

15  N.  H.  412;  Smith  v.  Yule,  31  Cal.  v.  Baccastow,  84  Pa.  St.  363.     [Thus 

180;   and  see  White  v.   Wakefield,  7  the  possession  and  use  of   land   by  a 

Sim.   401;  Rice  v.   Rice,   2   Drew.   1;  firm  has  been  held  not  notice  that  the 

Mnir  v.  Jolly,  26  Beav.  143;  Staples  property  is  partnership  assets,  where 

V.  Fenton,  5  Hun,  172;  and  see  Bell  v.  the  record  shows  that  it  is  held  by  the 

Twilight,  18  N.  H.  159;  45  Am.  Dec.  partners  as  tenants  in  common:  Uam-. 

367;   [McNeil  v.   Polk,   57   Cal.  323;  mond  v.  Paxton,  58  Mich.  393.] 


855 


CONCERNING    NOTICE, 


§617 


rely  upon  it/  There  has  heen  a  direct  conflict  of  opinion 
among  the  American  courts  in  applying  the  rule  to  the 
condition  of  facts  above  described.  In  one  group  of  de- 
cisions the  possession  of  the  grantor  is  held  not  to  be  a 
constructive  notice  of  any  right  or  interest  he  may  have 
antagonistic  to  his  deed  which  has  been  put  upon  record; 
a  subsequent  purchaser,  it  is  said,  has  a  right  to  rely 
upon  the  information  derived,  or  which  would  be  derived, 
from  the  record,  and  to  assume  that  the  grantor's  con- 
tinued possession  is  merely  by  sufference.''  Another 
group  reaches  a  conclusion  directly  the  contrary  to  this, 
and  holds  that  a  purchaser  is  put  upon  an  inquiry  and  is 
affected  by  a  constructive  notice  in  the  same  manner  as 
in  any  other  case  of  possession  by  a  third  person.' 


1  White  V.  Wakefield,  7  Sim.  401; 
Rice  V,  Rice,  2  Drew.  1;  Muir  v.  Jolly, 
26  Beav.  143. 

*  Van  Keuren  v.  Cent.  R.  R.,  38 
N.  J.  L.  165,  167.  This  case,  while 
admitting  that,  in  general,  possession 
is  constructive  notice,  holds  in  the 
most  emphatic  manner  that  this  does 
not  apply  to  a  grantor  remaining  in 
possession  after  hia  conveyance.  A 
purchaser  from  his  grantee  is  not 
thereby  bound  to  inquire  whether  he 
retained  any  interest;  his  deed  abso- 
lute in  form  is  conclusive,  and  the  pur- 
chaser can  safely  rely  on  it:  Bloomer 
V.  Henderson,  8  Mfch.  395,  404,  405; 
77  Am.  Dec.  453;  Scott  v.  Gallagher, 
14  Serg.  &  R.  333,  334;  16  Am.  Dec. 
508;  Newhall  v.  Pierce,  5  Pick.  450; 
and  see  also,  for  dicta  or  reasoning 
pointing  to  the  same  conclusion.  New 
York  Life  Ins.  Co.  v.  Cutler,  3  Sand. 
Ch.  176,  179;  Woods  v.  Farmere,  7 
Watts,  382;  32  Am.  Dec.  772;  and  the 
opinions  in  Jaques  v.  Weeks,  7  Watts, 
261,  272,  287.  [See,  to  the  same  effect, 
Lamoreux  v.  Huntley,  68  Wis.  24;  Ma- 
teskey  V.  Feldman,  75  Wis.  103;  Ran- 
kin V.  Coar,  46  N.  J.  Eq.  566;  Sprague 
v.  White,  73  Iowa,  670;  May  v.  Stur- 
divant,  75  Iowa,  118;  9  Am.  St.  Rep. 
463;  Hafter  v.  Strange,  65  Miss.  323; 
7  Am.  St.  Rep.  659;  Ilowe  v.  Ream, 
105  Pau  St.  543;  Staton  v.  Davenport, 
95  N.  C.  11;  Mayo  v.  Leggett,  96 
N.  C  f242;  Eylar  v.  Eylar,  60  Tex, 
315;  Smith  v.  Miller,  63  Tex.  75;  Love 


V.  Breedlove,  75  Tex.  652.  In  Mates- 
key  V.  Feldman,  75  Wis.  103,  this  rule 
was  applied  to  a  case  where  a  convey- 
ance ot  land  -was  induced  by  fraud, 
and  the  grantor,  witliout  knowledge 
of  the  fraud,  continued  in  possession 
under  an  agreeuieut  with  the  grantee, 
and  it  was  held  that  such  possession 
was  not  constructive  notice  of  hia 
equities  arisiug  out  of  the  fraud  to 
one  claiming  under  a  mortgage  from 
the  grantee.  In  Rankin  v.  Coar,  46 
N.  J.  Eq.  566  (a  case  where  a  mother, 
after  conveying  a  house  to  her  son, 
continued  in  the  occupancy  of  a  part 
of  it,  the  son  appearing  by  the  records 
as  the  sole  owner),  it  was  held  that  the 
mother's  occupancy  was  not  sufficient 
to  give  notice  to  a  mortgagee  of  the 
son  of  any  equities  she  may  have  had.] 
As  to  possession  of  a  mortgagor  after 
foreclosure  sale,  see  Dawson  v.  Dan- 
bury  Bank,  15  Mich.  489;  Cook  v. 
Travis,  20  N.  Y.  400;  Reed  v.  Gan- 
non, 50  N.  Y.  345,  350. 

»  Illinois  Cent.  R.  R.  v.  McCuUough, 
59  111.  166.  This  case  lays  down  the 
rule  generally  that  when  a  grantor 
continues  in  possession,  this  is  con- 
structive notice  to  a  subsequent  pur- 
chaser from  his  grantee  of  all  hi» 
rights  and  equities  in  the  land.  It 
was  applied  to  a  grantor  whose  deed, 
having  been  delivered  as  an  escrow 
until  the  price  had  been  paid  by  the 
grantee,  was  put  upon  record  in  viola- 
tion of  this  arrcingement:   MetropoU- 


§§   618,  619  EQUITY    JURISPRUDENCE.  856 

§  618.  Tenant's  Possession,  how  Far  ITotice  of  Les- 
sor's Title.  —  Whether  possession  by  a  tenant  is  con- 
structive notice  of  his  landlord's  title,  is  also  a  question 
upon  which  the  decisions  are  in  direct  conflict.  In 
England  it  seems  to  be  settled  that  the  possession  by  a 
tenant,  or  notice  of  a  tenancy,  will  not  affect  a  purchaser 
with  constructive  notice  of  the  landlord's  title.*  The 
same  view  has  been  adopted  by  several  American  decis- 
ions.^ In  the  greater  number  of  American  cases,  how- 
ever, it  is  held  that  a  purchaser  is  bound  to  make  inquiry 
from  the  tenant  in  possession  with  respect  to  all  the 
rights  and  interests  which  he  claims  to  have,  and  under 
which  he  occupies,  and  is  presumed  to  know  all  the  facts 
which  he  might  have  learned  by  such  an  inquiry;  he 
must  pursue  his  inquiry  to  the  final  source  of  the  ten- 
ant's right,  and  is  thus  affected  with  a  constructive  notice 
of  the  landlord's  title  and  estate.' 

§  619.  Nature  and  Time  of  the  Possession.  —  Under 
this  head,  the  kind,  extent,  and  time  of  the  possession 
necessary  or  sufficient  to  constitute  a  constructive  notice 
will  be  examined.  The  determination  of  this  question 
must  largely  depend  upon  the  circumstances  or  condi- 
tions of  fact  under  which  it  arises,  and  upon  the  imme- 
diate purpose  or  object  for  which  the  protection  by  a 
notice  is  invoked.     Thus  the  question  may  arise  between 

tan  Bank  v.  Godfrey,  23  111.  579,  607,  his  possession  is  not  a  notice  to  a  pur- 

and  cases  cited;  Pell  v.  McElroy,  36  chaser  of  the  covenants  contained  in 

CaL   268,   278;    Wright   v.   Bates,    13  the  original  lease:  Hanbury  v.  Litch- 

Vt.  341,  350;  Grimstone  v.  Carter,  3  field,  2  2>Iylne  &  K.  629,  633. 

Paige,   421,   439;   24  Am.    Dec.   230;  »  Flagg  v.  Mann,  2  Sum.  486,  557; 

Hopkins  v.  Garrard,  7  B.  Mon.  312;  Beattie  v.  Butler,  21  Mo.  313;  64  Am. 

Webster  v.  Maddox,  6  Me.  256;  Mc-  Dec.  234;  and   see  Veazie  v.  Parker, 

Kecknie    v.    Hoskins,    23    Me.    230;  23  Mo.  170;  Jaqnes  v.  Weeks,  7  Watts, 

Jaques  v.  Weeks,  7  Watts,  261.     [See  261,  272,  per  Sergeant  J. 

also  Ford  V.  Marcall,  107  III  135.]  *  Edwards  v.  Thompson,  71  N.  C. 

'  The  rule  is  so  stated  by  the  Eng-  177,    179    (possession   by  a  tenant   is 

I'ish  editor  of  Leading  Cases  in  Equity:  the   same,  with  respect   to  notice,  as 

2  Lead.  Cas.  Eq.,  4th  Am.  ed.,  133;  possession  by  his  landlord);  CRourke 

Jones  V.  Smith,  1   Hare,  43,  63,  per  v.  O'Connor,  39  CaL  442,  446;   Cun- 

Wigram,   V.  C;   Barnhart  v.  Green-  ningham  v.  Pattee,  99  Mjiss.  24i3,  252; 

Bhields,  9  Moore  P.  C.  C.  36.     And  it  Kerr  v.  Day,  14  Pa.  St.   112;  53  Am. 

is  held  that  where  the  tenant  in  pos-  Dec.  526;  and  ece  post,  §  625. 
session  holds  under  a  derivative  lease, 


857  CONCERNING   NOTICE.  §  620 

the  rightful  holder  of  a  prior  unrecorded  title,  and  a  sub- 
sequent purchaser  whose  conveyance  is  recorded;  and  it 
may  therefore  come  within  the  first  rule  as  stated  in  a 
former  paragraph/  where  the  possession  of  a  person 
rightfully  entitled  is  equivalent,  in  its  effects  as  notice, 
to  a  registration;  or  it  may  arise  in  other  circumstances, 
which  are  not  directly  affected  by  the  recording  acts,  and 
which  are  governed  by  the  second  general  rule  concern- 
ing the  effect  of  possession  as  notice.  A  failure  to  recog- 
nize the  difference  existing  between  these  two  kinds  of 
cases  will  undoubtedly  account  for  whatever  of  confusion 
and  conflict  of  opinion  may  be  found  in  the  decisions 
upon  this  subject. 

§  620.  Actual,  Open,  Exclusive  Occupancy.  —  It  is  there- 
fore abundantly  settled  by  the  decisions,  that  where  the 
first  general  rule  as  stated  in  a  foregoing  paragraph  is 
invoked,  and  the  party  rightfully  in  possession  under  an 
unrecorded  conveyance  relies  upon  the  fact  of  such  pos- 
session as  a  constructive  notice,  equivalent  in  its  effects  to 
a  registration,  to  a  subsequent  grantee  or  encumbrancer 
whose  deed  or  mortgage  has  been  recorded,  his  possession 
must  be  an  actual,  open,  distinct,  notorious,  and  exclusive 
occupancy  of  the  land  in  question.  No  mere  occupation 
of  the  premises  in  common  or  in  connection  with  a  third 
person,  and  no  mere  exercise  of  acts  of  ownership  equiv- 
ocal in  their  nature  over  the  land,  will  then  suffice.^ 

*  Ante,  %  615.  weight  of  judicial   authority  and  by 

*  It  cannot  be  pretended  that  all  of  principle,  is  that  laid  down  in  the  text; 
the  decisions  expressly  and  distinctly  it  reconciles  all  apparent  conflict  of 
refer  the  necessity  of  such  open,  no-  judicial  dicta,  and  produces  a  syste- 
torious,  and  exclusive  occupancy  to  matic  and  harmonious  result:  See 
the  cases  in  which  the  first  general  Holmes  v.  Powell,  8  De  Gex,  M.  & 
rule  as  formulated  above  is  relied  upon.  G.  672,  580;  Noyes  v.  Hall,  97  U.  S. 
In  some  of  the  decisions  cited  below,  34,  38;  Cabeen  v.  Breckenridge,  48 
the  requirement  of  such  a  kind  of  oc-  111.  91;  Truesdale  v.  Ford,  37  111.  210; 
cupancy  seems  to  be  stated  in  the  most  Dunlap  v.  Wilson,  32  111.  517;  Brad- 
general  manner,  without  any  limita-  ley  v.  Snyder,  14  El.  263;  68  Am. 
tion  or  restriction,  as  though  it  applied  Dec.  564;  Tankard  v.  Tankard,  79 
to  every  instance  of  possession  oper-  N.  C.  64,  56;  Edward."?  v.  Thoinpsou,  71 
ating  as  a  constructive  notice.  Not-  N.  C.  177,  179;  Webber  v.  Taylor,  2 
withstanding  this  apparent  confusion  Jones  Eq.  9;  Taylor  v,  Kelly,  3  Jones 
in  some  of  the  decisions,  I  think  the  Eq.  240;  factual  residence  on  the 
true  rule,    established    alike   by   the  land,     however,     ia    not    necessary: 


I 


§621 


EQUITY   JURISPEUDENCE. 


858 


§  621.     Vacant  Premises  —  Constructive  Possession.  -^ 
If  the  possession  is  vacant  at  the  time  when  the  contract, 


Hodge  V.  Amerman,  40  N.  J.  Eq.  99;] 
Butler  V.  Steveua,  26  Me.  484  (posses- 
sion as  against  a  subsequent  grantee 
whose  deed  is  first  recorded,  under  a 
statute  requiring  actual  notice,  must 
be  an  actual,  open,  and  exclusive  oc» 
cupancy.  Grantor  conveyed  in  fee, 
and  the  grantee  recorded  his  deed, 
and  entered  upon  the  premises.  The 
grantor  continued  to  occupy  with  the 
grantee.  Held,  not  a  sufficient  posses- 
sion to  be  notice  of  any  interest  held 
by  the  grantor);  Bell  v.  Twilight,  22 
N.  H.  500,  519  (to  be  notice  of  a  prior 
unrecorded  deed,  as  against  a  subse- 
quent recorded  deed  or  mortgage,  the 
possession  must  be  exclusive  and  un- 
equivocal; a  mixed  possessson  is  not 
sufficient);  [see  also  Pope  v.  Allen,  90 
N.  Y.  298;]  Wright  v.  Wood,  23  Pa. 
St.  120,  130,  131  (the  general  rule  is 
admitted,  but  held  not  to  apply  to 
the  case  of  a  mere  intruder;  the  pos- 
session must  be  of  one  claiming  a  riyht); 
Coleman  v.  Barklew,  27  N.  J.  L.  357, 
359  (possession  of  a  first  grantee  whose 
deed  is  not  recorded  may  be  notice  to 
a  second  grantee  whose  deed  is  re- 
corded; but  it  must  be  actual,  distinct, 
and  manifested  by  such  acts  of  owner- 
ship as  would  naturally  be  observed 
and  known  by  others;  e.  g.,  land  with 
no  building  was  used  by  the  first 
grantee  and  others  for  pasturing  cat- 
tle, and  this  was  held  not  such  a 
visible,  open,  exclusive  possession  as 
would  constitute  a  notice  to  the 
second  grantee);  to  the  same  effect  are 
Williams  v.  Spriggs,  6  Ohio  St.  685, 
594;  Ely  v.  Wilcox,  20  Wis.  523,  531; 
91  Am.  Dec.  436;  Wickes  r.  Lake,  25 
Wis.  71;  Troy  City  Bank  v.  Wilcox, 
24  Wis.  671;  Bogue  v.  Williams,  48 
111.  371;  Patten  v.  Moore,  32  N.  H. 
382;  Martin  v.  Jackson,  27  Pa.  St. 
504,  506;  67  Am.  Dec.  489;  Mehan  v. 
Williams,  48  Pa.  St.  258;  McMechaa 
V.  Griffing,  3  Pick.  149;  15  Am.  Dec. 
198;  Holmes  V.  Stout,  4  N.  J.  Eq.  492; 
10  N.  J.  Eq.  419;  (mere  cutting  tim- 
ber on  the  premises  from  time  to  time 
is  not  a  sufficient  possession);  Brown 
V.  Volkening,  64  N.  Y.  76,  82,  83.  [As 
further  illustrations  of  the  rule  that 
the  possession  must  be  actual,  open, 
and  exclusive,  see  the  following  recent 
cases:  Rankia  v.  Coar,  46  N.  J.  Eq. 


566;  Troy  v.  Walter,  87  Ala.  233; 
McCarthy  v.  Nicrosi,  72  Ala.  332;  47 
Am.  Rep.  418;  Tillotson  v.  Mitchell, 
1 1 1  III.  518;  Galley  v.  Ward,  60  N.  H. 
331;  Lindley  v.  Martindale,  78  Iowa, 
379;  Townsend  v.  Little,  109  U.  S. 
510;  Pope  v.  Allen,  90  N.  Y.  298; 
Hellman  v.  Levy,  55  Cal.  117.]  On 
the  other  hand,  in  Krider  v.  Lafferty, 
1  Whart.  303,  a  grantee  whose  deed 
was  not  registered  took  possession  of 
the  ground,  planted  it  with  willows 
so  as  to  obtain  materials  in  his  trade 
of  basket-making,  and  continued  to 
use  the  land  in  this  manner,  growing 
the  willows  and  cutting  them  every 
year  for  his  business.  This  was  held 
to  be  a  change  in  the  condition  of  the 
premises  and  a  visible  occupation  of 
them  sufficient  to  affect  a  subsequent 
purchaser  with  notice.  In  Hatch  v. 
Bigelow,  39  111.  136,  paving  the  side- 
walk in  front  of  a  lot,  putting  up  a 
placard  on  the  lot  offering  it  for  sale, 
and  receiving  applicants  and  referring 
them  to  the  party's  agent,  were  held 
a  sufficient  possession  of  the  lot  to 
constitute  notice  [In  Townsend  v. 
Little,  109  U.  S.  510,  the  fact  that  an 
apparent  wife  lived  with  her  apparent 
husiband,  in  whose  name  the  title  stood, 
was  held  not  to  be  constructive  notice 
of  a  secret  equity  in  the  wife;  and  the 
same  conclusion  is  reached  in  the  case 
of  a  joint  occupancy  by  a  lawful  hus- 
band and  wife:  Lindley  V.  Martindale, 
78  Iowa,  379;  or  a  joint  occupancy  by 
a  son  and  mother:  Rankin  v.  Coar,  4^6 
N.  J.  Eq.  586.  In  Day  v.  Railroad 
Co.  41  Ohio  St.  392,  the  actual 
use  and  occupation  of  its  track  by  a 
railroad  company  was  held  to  be  con- 
structive notice  of  a  contract  for  a 
right  of  way  for  a  strip  on  either  side 
of  its  track  reasonably  necessary  for 
its  use.  In  Wright  v.  Lassiter,  71 
Tex.  640,  it  was  held  that  where  pos- 
session of  land  is  taken  under  a  title 
bond  not  recorded,  and  the  part  of  the 
land  actually  occupied  is  not  the  sub- 
ject of  dispute,  such  possession  is  not 
notice  as  to  that  part  of  the  land 
which  is  in  dispute.  In  Harris  v.  Mc- 
Intyre,  118  111.  275,  the  equitable 
owner  was  the  sister  of  the  holder  of 
the  recorded  legal  title.  He  lived  on 
the  land,  managed  it,  and  appeared  to 


859  CONCERNING    NOTICE,  §  621 

conveyance,  or  mortgage  is  executed — that  is,  if  the  prem- 
ises are  entirely  unoccupied  —  the  purchaser  cannot  be  af- 
fected by  any  notice  arising  from  possession.  He  is  not 
thereby  put  upon  an  inquiry  concerning  the  title  or  in- 
terest of  the  last  occupant  who  has  given  up  the  posses- 
sion, and  is  not  charged  with  a  constructive  notice  of 
facts  which  he  might  have  learned  by  means  of  such  in- 
quiry.' While  this  rule  is  equally  clear  and  just  in  its 
theory,  great  doubt  and  difficulty  might  arise  in  its  ap- 
plication, especially  under  the  conditions  of  land  owner- 
ship which  ordinarily  exist  in  this  country.  Does  the 
vacancy  of  possession  within  the  true  meaning  of  the 
rule  include  every  case  where  the  premises  are  not  in 
the  visible,  actual,  continuous  occupation  of  some  person 
claiming  a  right  as  owner,  tenant,  or  otherwise?  or  is  it 
confined  to  those  cases  where  no  person  is  known  to  ex- 
ercise any  acts  of  dominion  or  ownership  over  the  land? 
The  answer  to  this  question  given  by  the  English  courts 
is  very  definite  and  certain.  It  is  well  settled  in  England 
that  the  possession  which  may  amount  to  a  constructive 
notice  need  not  be  that  of  the  actual  occupant,  the  terre- 
tenant.  Where  the  purchaser  of  land  has  knowledge  or 
information  that  its  rents  and  profits  are  received  by  a 
person  other  than  his  grantor  or  vendor,  who  claims  to 
be  the  owner,  this  fact  is  constructive  notice  to  the  pur- 
chaser of  the  title  and  interest  of  the  one  thus  receiving 
the  rents  and  profits,  and  of  the  rights  of  all  parties  hold- 
ing under  such  title.^     It  is  also  settled  by  the  English 

the  world  as  the  owner  for  ten  years,  thereof:   Rice  v.  Haddock,  70  Iowa, 

She    merely   attended    to    household  318.] 

duties.  Her  possession  was  held  not  ■'  Knight  v.  Bowyer,  2  De  Gex  &  J. 
such  as  to  put  a  purchaser  from  the  421;  23  Beav.  609.  Of  course,  the  mere 
brother  on  inquiry.]  /act  that  a  third  person  is  receiving 
*  Miles  V.  Langley,  1  Russ.  &  M.  the  rents  and  profits  is  not  of  itself 
39;  2  Russ.  &  M.  626;  Jones  v.  any  notice  to  a  purchaser;  the  pur- 
Smith,  1  Hare,  43,  62;  Meehan  v.  chaser  must  receive  information  or 
Williams,  48  Pa.  St.  238;  Boggs  v.  acquire  knowledge  of  such  fact,  in  or- 
Varner,  6  Watts  &  S.  474;  Hewes  v.  der  that  he  may  be  affected  with 
Wiswell,  8  Me.  94.  [The  holder  of  a  notice.  It  is  plain,  also,  that  this  par- 
tax  deed  to  unoccupied  land  is  pre-  ticular  case  falls  under  the  second 
sumed  to  have  constructive  possession  general  rule  as  stated  utUc,  in  §  615. 


§  621  EQUITY   JURISPRUDENCE.  860 

decisions  that  a  rightful  possession,  in  order  to  put  a 
subsequent  purchaser  upon  inquiry,  and  to  affect  him 
with  constructive  notice,  need  not  be  an  actual  occupa- 
tion, continually  visible  or  actively  asserted  without  ces- 
sation. "If  a  man  has  once  received  rightful  and  actual 
possession  of  land,  he  may  go  to  any  distance  from  it 
without  authorizing  any  servant,  or  agent,  or  other  person 
to  enter  upon  it  or  look  after  it;  may  leave  it  for  years 
uncultivated  and  unused;  may  set  no  mark  of  ownership 
upon  it, —  and  his  possession  may  nevertheless  still  con- 
tinue, at  least  unless  his  conduct  afford  evidence  of  in- 
tentional abandonment,  which  such  conduct  as  I  have 
mentioned  would  not  necessarily  do."  *  In  order  that 
such  a  constructive  possession  by  a  person  claiming  right- 
fully should  charge  the  purchaser  with  notice  of  the 
party's  interests,  the  purchaser  must  receive  information 
or  have  knowledge  of  the  actual  possession  originally 
taken,  the  actual  occupation  of  the  premises  originally 
maintained,  by  the  adverse  claimant.  Unless  this  prior 
fact  should  be  brought  to  the  knowledge  of  the  purchaser, 
there  would  certainly  be  nothing  in  the  circumstances 
described  sufficient  to  put  him  upon  an  inquiry.  The 
effect  thus  given  to  a  mere  constructive  possession  by  the 
English  courts  cannot  be  reconciled,  in  my  opinion, 
with  rules  concerning  the  notice  resulting  from  posses- 
sion which  have  been  established  in  this  country  by  the 
overwhelming  weight  of  authority,  especially  when  taken 
in  connection  with  our  statutory  system  of  recording,  and 
the  judicial  interpretation  which  has  been  given  to  that 
legislation.  It  seems  to  be  a  necessary  conclusion  from 
the  unvarying  line  of  decisions,  some  of  which  are  cited 
in  the  foregoing  paragraphs,  that  as  against  a  subsequent 
grantee  or  encumbrancer  whose  deed  or  mortgage  has 

^  Holmes  v.  Powell,  8  De  Gex,  M.  551 ;  Clements  v.  Welles,  L.  R.  1  Eq. 

&G,  572,  581,  per  Turner,  L.  J.;  see  200;  35  Beav.  513;  Feilden  v.  Slater, 

ante,  §  614,  note,  where  the  passage  L.  R,  7  Eq.  523;  Parker  v.  Whyte,  1 

is   quoted  in   full.     See  also,  to   the  Hem.  &  M.  167;  and  compare  the  Amer- 

same  general  efiFect,  Wilson  v.  Hart,  ican  cases  Hatch  v.  Bigelow.  39  111.  136; 

L.  R.  1  Ch.  463,  467;   2  Hem.  &  M.  Krider  v.  Lafferty,  1  VVhart.  303. 


861  CONCERNING   NOTICE,  §§  622,  623 

been  duly  recorded,  no  mere  constructive  possession  of  a 
prior  and  even  rightful  claimant,  consisting  only  of  an 
original  act  of  taking  actual  possession,  followed  by  a 
leaving  of  the  premises  entirely  vacant  and  unoccupied, 
can  amount  to  the  constructive  notice  from  possession  as 
recognized  by  the  American  law.  This  result  seems 
necessarily  to  follow  from  the  provisions  of  the  recording 
acts,  and  the  judicial  interpretation  given  to  them  in 
many  of  the  states.^ 

§  622.  Time  of  the  Possession.  —  In  order  that  any 
kind  of  possession,  whether  actual  and  visible,  or  simply 
constructive,  or  consisting  in  the  rightful  receipt  of  rents 
and  profits,  may  put  a  purchaser  upon  an  inquiry,  and 
operate  as  a  constructive  notice,  it  must  exist  at  the  time 
of  the  transaction  by  which  his  rights  and  interests  are 
created.  A  possession  which  had  ended  before,  or  which 
did  not  commence  until  after,  the  sale  to  him  was  made, 
or  the  conveyance  or  encumbrance  was  executed,  could 
not  affect  him  with  any  constructive  notice.'' 

§  623.  The  Presumption  is  Rebuttable.  —  We  have 
seen  that  the  rationale  of  the  doctrine  consists  in  the  legal 
presumption  that  the  party  dealing  with  respect  to  the 
estate,  seeing,  hearing,  or  learning  that  it  was  possessed 
by  a  stranger,  thereupon  made  an  inquiry  into  the  grounds 
of  such  possession,  and  became  informed  of  all  the  facts 
which  could  be  ascertained  through  a  diligent  inquiry, 
and  this  presumed  information  is  the  constructive  notice. 
The  question  is  therefore  a  vital  one,  whether  this  legal 
presumption  is  absolute  and  conclusive,  so  that  the  party 
is  necessarily  charged  with  the  notice,  or  whether  it  is 
only  prima  facie  and  rebuttable.     In  a  very  large  number 

'  See  Brown  v,  Volkening,  64  N.  Y.  agricultural  lands,  over  a  quarter  of  a 

76,  82,  S3,  in  which   the   efifect  of   a  mile  away  from  a  tract  of  uninclosed 

mere  constrnc.tivt  possession  as  operat-  and  uncultivated  timber-land,  was  not 

ing  to  charge  a  subsequent  purchaser  constructive  notice  to  a  bona  fide  pur- 

with  notice  under  the  recording  stat-  chaser  of  the  timber-land.] 
utes  is  discussed,  and  the  positions  of         '  Meehan  v.  Williams,  48  Pa.  St.  238; 

the    text    are    fully   sustained.       [In  Boggs  v.  Varner,  6  Watts  &  S.  474; 

United  States  v.  Minor,  29  Fed.  Rep.  Hewes  v.  Wiswell,  8  Me.  94;  Wright 

134,    it  was   held  that   possession  of  v.  Wood,  23  Pa.  St.  120,  130,  131. 


§  623  EQUITY    JURISPRUDENCE.  862 

of  the  decided  cases,  the  language  used  by  the  court,  while 
dealing  with  constructive  notice  arising  from  possession, 
does  undoubtedly  speak  of  this  presumption,  without  any 
limitations,  as  though  it  were  absolute  and  conclusive,  and 
as  though  the  constructive  notice  were  necessary  and  cer- 
tain.^ If  we  should  rely  solely  upon  the  general  language 
of  these  judicial  dicta,  and  upon  the  great  preponderance 
in  numbers  of  the  cases  in  which  such  expressions  of 
opinion  are  to  be  found,  we  should  certainly  be  compelled 
to  regard  the  question  as  definitely  answered, — the  pre- 
sumption as  absolute  and  conclusive.  When,  however, 
we  examine  these  judicial  utterances,  when  we  apply  to 
them  the  settled  rules  of  interpretation,  when  we  go  below 
their  surface  and  discover  the  real  points  decided,  we  shall 
find  that  the  courts  have  not,  in  the  vast  majority  of  in- 
stances, consciously  and  intentionally  defined  the  nature 
of  the  presumption,  and  have  not  in  an  authoritative 
manner  passed  upon  the  question.  Such  a  scrutiny  will 
show  very  clearly  that  in  by  far  the  greater  number  of 
these  decisions  the  real  nature  of  the  presumption  was  not 
consciously  and  intentionally  before  the  courts  for  ex- 
amination. The  cases  referred  to,  with  a  few  possible 
exceptions,  belong  to  one  or  another  of  the  three  follow- 
ing groups:  1.  In  some  of  them  the  court  is  simply 
announcing,  in  its  most  general  form,  the  doctrine  con- 
cerning constructive  notice  arising  from  possession  by  a 
stranger.  The  general  rule  is  stated  in  its  broadest  man- 
ner; all  special  facts  and  circumstances  which  might 
modify  it  are  passed  over  in  silence;  all  restrictions  and 
limitations  which  might  apply  to  it  are  tacitly  ignored, 
or  postponed  for  future  consideration  whenever  occasion 
rnay  require  it.^  The  sweeping  language  used  by  judges 
in  cases  of  this  kind  is  clearly  not  decisive  upon  the  na- 
ture of  the  presumption.  2.  A  second  group  includes 
those  cases  in  which,  upon  the  special  facts  and  circum- 
stances before  it,  the  court  really  decides  that  a  purchaser 

'  See  ante,  cases  under  §§  614,  615.        *  See  ajiie,  cases  under  §§  614,  615. 


863  CONCERNING    NOTICE.  §  623 

or  encumbrancer,  knowing  the  fact  of  possession  by  a 
stranger,  and  being  put  upon  inquiry  thereby,  has  either 
wholly  neglected  to  make  any  inquiry,  or  has  failed  to 
prosecute  it  with  due  diligence,  and  is  therefore  conclu- 
sively presumed  to  have  obtained  full  information,  and  is 
absolutely  charged  with  notice.  In  cases  of  this  kind,  the 
language  of  the  judges,  however  general  it  may  be,  must, 
upon  the  most  elementary  rules  of  interpretation,  be  con- 
fined to  the  very  facts  of  the  particular  controversy;  and 
the  court  only  intends  to  decide  that  a  party,  being  put 
upon  an  inquiry,  and  failing  to  prosecute  the  inquiry  in 
a  proper  manner,  is  conclusively  presumed  to  have  ob- 
tained all  the  information  possible,  and  is  affected  with 
an  absolute  notice.'  In  still  a  third  group  the  courts  have 
merely  held  that  where  a  prior  grantee  is  in  rightful 
possession  under  an  unrecorded  conveyance,  and  his  pos- 
session is  open,  notorious,  visible,  and  exclusive,  a  subse- 
quent purchaser  or  encumbrancer,  even  though  his  deed 
or  mortgage  is  put  upon  record,  becomes  charged  with  an 
absolute  notice.  This  is,  as  it  seems  to  me,  only  another 
mode  of  stating  the  well-settled  rule,  that  when  a  party  is 
put  upon  an  inquiry  and  the  circumstances  are  such  that 
the  inquiry,  if  duly  prosecuted,  must  necessarily  lead  to 
knowledge  of  the  prior  adverse  title,  the  presumption  that 
he  obtained  the  knowledge  is  conclusive.  In  short,  the 
facts  of  these  cases  are  so  strong  that  the  party  put  upon 
the  inquiry  cannot  by  any  evidence  rebut  and  overcome 
the  prima  facie  presumption. 


2 


1  Many  of  the  cases  which  seem  to  mers,  10  Gill  &  J.  316;  32  Am.  Dec. 

treat  the  presumption  as  conclusive  167;   Macon  v.  Sheppard,  2   Humph, 

properly  belong  to  this  group:    Gou-  335;  Morton  v.  Robards,  4  Dana,  258; 

verueur  v.  Lynch,  2  Paige,  300;  Grim-  Brush  v.  Halloway,  2  J.  J.  Marsh.  180; 

stone  V.  Carter,  3  Paige,  421;  24  Am.  Burt  v,  Cassety,   12  Ala.  739;  Scrog- 

Dec.  230;  Brice  v.  Brice,  5  Barb.  533;  gins  v.  Dougal,  8  Ala.  382;   and  see 

Tuttle  V.  Jackson.  6  Wend.  213;   21  notes  under  §§  614,  615. 
Am.  Dec.  306;  Hanly  V.  Morse,  .32  Me.         "School   Dist.    v.  Taylor,  19   Kan. 

287;  McLaughlin  v.  Shepherd,  32  Me.  287;  Noyes  v.  Hall,  97  U.  S.  34,  38; 

143;52Am.  Dec.  646;  Webster  V.  Mad-  Cabeen   v.  Breckenridge,  48   111.    91; 

do3c,  6  Greenl.  256;  Kent  v.  Plummer,  Truesdale  v.  Ford,  37  HI.  210;  Dunlap 

7   Greenl.    464;   Jaques   v.  Weeks,   7  v.    Wilson,    32   111.   577;   Emmons  v. 

Watts,  272;  Kerr  v.  Day,  14  Pa.  St.  Murray,   16  N.  H     385;  Farmers'  L. 

112;  53  Am.  Dec.  526;  Hardy  v.  Sum-  &   T.    Co.  v.   Maltby,  8  Paige,   361; 


§  624  EQUITY   JURISPRUDENCE.  864 

§  624.  Same  Continued. — There  is,  on  the  other  hand, 
an  able  and  well-considered  series  of  decisions  in  which 
the  nature  of  the  legal  presumption  arising  from  posses- 
sion has  been  directly  and  intentionally  examined.  In 
all  these  cases,  where  the  court  has  deliberately  met  the 
question,  has  intentionally  investigated  the  presumption 
arising  from  possession,  and  has  definitely  passed  upon 
its  nature,  it  has  been  held  that  the  presumption,  under 
ordinary  circumstances,  or  independently  of  special  and 
controlling  circumstances,  is  not  a  conclusive  one,  but  is 
only  'prima  facie,  and  may  be  rebutted  and  overcome  by 
proper  evidence  showing  that  the  party  has  made  a  dili- 
gent inquiry,  and  has  nevertheless  failed  to  discover  the 
real  truth  concerning  the  existence  of  an  adverse  right  or 
interest.  This  conclusion  may  be  considered  as  settled 
by  the  decided  weight  of  judicial  authority,  English  and 
American.*  It  is  also  in  complete  conformity  with  prin- 
ciple. Undoubtedly,  in  ordinary  cases,  where  a  third 
person  is  possessed  under  a  claim  of  right  or  title  which 
is  actually  valid,  an  inquiry  prosecuted  with  reasonable 
diligence  from  parties  naturally  conversant  with  the  facts 
will  generally  result  in  a  discovery  of  the  truth,  and  the 
presumption  thus  becomes  conclusive,  not  because  it  is 
essentially  so,  but  because  it  is  necessarily  confirmed  by 
the  existing  facts,  —  no  evidence  can  overturn  it.     A  dif- 

Strickland  v.  Kirk,  51  Miss.  795,  797;  St.  112;  53  Am.  Dec.  526;  [Hillman  r. 
Moss  V.  Atkinson,  44  Cal.  3,  17;  Levy,  55  Cal.  117;  Scheerer  v.  Cuddy, 
Killey  v.  Wilson,  33  Cal.  690;  Russell  85  Cal.  271.  In  the  last  case  it  is  held 
V.  Sweezey,  22  Mich.  235,  239;  Tuni-  that  the  presumption  can  only  be  over- 
son  V.  Chamblin,  88  111.  378,  390.  And  come  by  clear  and  convincing  proof, 
see  Tankard,  79  N.  C.  54,  56;  Edwards  by  the  subsequent  purchaser,  of  dili- 
V.  Thompson,  71  N.  C.  177,  179.  g^"*  ^^^  unavailing  effort];  and  see,  on 
'  Whitbread  v.  Jordan,  1  Younge  &  the  general  question  of  the  presump- 
C.  303,  per  Alderson,  B. ;  Jones  v.  tion  arising  from  facts  suflScient  to 
Smith,  1  Hare,  43,  60-70,  per  Wigram,  put  a  party  upon  inquiry  being  over- 
V.  C. ;  Hanbury  V.  Litchfield,  2  Mylne  come  by  evidence  of  an  inquiry  dili- 
&  K.  629,  6.33;  Williamson  v.  Brown,  gently  made,  but  unsuccessful.  Penny 
15  N.  Y.  354,  360,  362  (see  opinion  v.  Watts,  1  Macn.  &  G.  150;  Ware  v. 
quoted  ante,  in  note  under  §  606);  Lord  Egmont,  4  De  Gex,  M.  &  G.  460; 
Thompson  v.  Pioche,  44  Cal.  508,  516;  Roberts  v.  Croft,  2  De  Gex  &;  J.  1; 
Fair  v.  Stevenot,  29  Cal.  486;  Rogers  Espiu  v.  Pemberton,  3  De  Gex  &  J.  547; 
V.  Jones,  8  N.  H.  264;  Flagg  v.  Mann,  Hunt  v,  Elmes,  2  De  Gex,  F.  &  J.  578; 
2  Sum.  486,  554;  Kerr  v.  Day,  14  Pa.  Hewitt  v.  Loosemore,  9  Hare,  449. 


865  CONCERNING   NOTICE.  §  625 

ferent  condition  of  circumstances,  however,  might  easily 
exist,  and  often  does  exist.  The  purchaser  put  upon 
an  inquiry  might  exhaust  all  the  reasonable  modes  of 
acquiring  knowledge;  he  might  receive  incorrect  infor- 
mation from  the  parties  acquainted  with  the  real  facts, 
and  on  whom  he  had  a  right  to  rely;  he  might  even  be 
misled  by  the  person  in  possession;  he  might  act  in  the 
most  perfect  good  faith,  —  and  come  to  the  reasonable 
conclusion  that  the  possession  was  not  based  upon  any  ad- 
verse claim,  and  was  wholly  subordinate  to  his  own  right 
and  that  of  his  immediate  grantor  or  mortgagor.  To  say 
that  the  presumption  is,  under  such  circumstances,  con- 
clusive, and  the  constructive  notice  is  absolute,  would  be 
to  violate  all  the  equitable  reasons  upon  which  the  whole 
doctrine  of  constructive  notice  is  founded.^ 

§  625.  Possession  by  a  Lessee  or  Tenant.  —  It  is  the 
settled  rule  in  England  that  possession  by  a  lessee  is  con- 
structive notice  to  a  purchaser  not  only  of  the  tenant's 
rights  and  interests  directly  growing  out  of  or  connected 
with  the  lease  itself,  but  also  of  all  rights  and  interests 
which  he  may  have  acquired  by  other  and  collateral 
agreements,  as,  for  example,  from  a  contract  to  convey 
the  land,  or  to  renew  the  lease,  and  the  like.  This  rule 
has  also  been  adopted  by  American  courts.*    It  applies 

*  As  a  simple  illustration,  suppose  17  Ves.  433;  Douglas  v.  Witterwronge 
the  subsequent  purchaser^  who  is  put  (cited),  16  Ves.  253;  Knight  v.  Bow- 
upon  an  inquiry,  should  go  to  the  yer,  23  Beav.  609,  641;  Lewis  v.  Bond, 
party  in  possession,  and  should  cate-  18  Beav.  85;  Wilbraham  v.  Livesey, 
gorically  demand  from  him  an  explana-  18  Beav.  206;  Meux  v.  Maltby,  2. 
tion,  —  a  statement  of  the  right  under  Swanst.  277,  281;  Crofton  v,  Ormsby, 
which  he  claimed  to  hold  his  posses-  2  Schoales  &  L.  583;  Powell  v.  Dillon, 
sion,  — and  he  should  be  told  in  explicit  2  Ball  &  B.  416;  Bailey  v.  Richardson, 
terms  that  the  possession  was  based  9  Hare,  734;  Barnhart  v.  Greenshields, 
upon  no  right,  —  was  merely  by  suffer-  9  Moore  P.  C.  C.  18,  33, 34;  Kerr  v.  Day, 
ance  of  the  owner  and  grantor,  —  and  14  Pa.  St.  112;  53  Am.  Dec.  526;  Cun- 
that  it  could  not  in  any  way  interfere  ningham  v.  Pattee,  99  Mass.  248,  252. 
with  the  purchaser's  title;  would  the  [See  also  Morrison  v.  Herrick,  130  111. 
possessor  be  permitted  to  contest  the  631.  But  see,  contra.  Smith  v.  Miller, 
purchaser's  right,  to  allege  that  he  was  63  Tex,  72,  where  it  is  held  that  occu- 
charged  with  notice,  because  the  pre-  pancy  by  a  tenant  of  the  vendor  would 
sumption  arising  from  his  own  posses-  not  charge  the  vendee  with  notice  of 
■ion  was  conclusive  ?  See  Leach  v.  a  claim  to  the  land  asserted  by  the 
Ansbacher,  55  Pa.  St.  85.  tenant  under  an  unrecorded  titla  from 

*  Daniels  v.  Davison,   16  Ves.   249;  a  former  vendor.] 

2  Eq.  Jub.— 65 


§  626  EQUITY    JURISPRUDENCE.  866 

to  a  lessee,  a  sublessee,  and  a  tenant  from  year  to  year.* 
Upon  the  question  whether  the  lessee's  possession  is  also 
a  constructive  notice  of  the  lessor's  title,  there  seems  to 
be  a  conflict  among  the  English  and  American  decisions. 
It  is  settled  in  England  that  a  purchaser  or  encumbrancer 
is  not  by  such  possession  charged  with  a  constructive 
notice  of  the  nature  or  extent  of  the  landlord's  title  and 
interest.'  This  restrictive  rule  of  the  English  courts  has 
been  adopted  and  followed  by  some  of  the  American 
cases.'  Another  and  more  numerous  group  of  decisions 
by  the  courts  of  various  states  hold  that  a  purchaser,  by 
means  of  a  lessee's  possession,  is  put  upon  an  inquiry 
respecting  all  the  rights  and  interests  under  which  he 
holds  and  which  affect  the  property,  and  is  therefore 
charged  with  a  constructive  notice  of  the  lessor's  title 
and  estate.*  From  the  number  and  authority  of  the  de- 
cisions by  which  it  is  sustained,  this  conclusion  may 
justly  be  regarded  as  the  American  doctrine. 

§  626.  3.  By  Recital  or  Reference  in  Instruments  of 
Title  —  General  Rule.  —  "Wherever  a  purchaser  holds  un- 
der a  conveyance,  and  is  obliged  to  make  out  his  title 
through  that  deed,  or  through  a  series  of  prior  deeds,  the 

>  Feilden  v.  Slater,  L.  R.  7  Eq.  523;  544;  Nelson   v.  Wade,  21   Iowa,  49; 

Parker  v.  Whyte,  1  Hem.  &  M.  167;  Morrison    v.     March,    4    Minn.    422; 

Wilson  V.  Hart,  L.   R.  1  Ch.  463;  2  Bank  v.    Godfrey,    23  111.   579,   607; 

Hem.  &  M.  551;  Clements  v.  Welles,  Pittman  v.  Gaty,  5  Gilm.    186;   Bank 

L.  R.  1  Eq.  200;  35  Beav.  513.  v.   Flagg,   3  Barb.   Ch.   316;  Kerr  v. 

»  Jones  V.  Smith,  1  Hare,  43,  63,  per  Day,  14  Pa.  St.  112;  53  Am.  Dec.  526; 
Wigram,  V.  C;  Barnhart  v.  Green-  Sergeant  v.  Ingersoll,  15  Pa.  St.  343, 
shields,  9  Moore  P.  C.  C.  18,  36;  and  348;  Wright  v.  Wood,  23  Pa.  St.  120, 
when  the  person  in  actual  possession  130;  Hood  v.  Fahnestock,  1  Pa.  St. 
is  a  sublessee,  a  purchaser  is  not  470;  44  Am.  Dec.  147;  Sailor  v.  Hert- 
thereby  affected  with  notice  of  cove-  zog,  4  Whart.  259.  [The  following 
nants  contained  in  the  original  lease  recent  cases  are  to  the  same  efifect: 
from  which  his  right  is  derived:  Han-  Thomas  v.  Burnett,  128  111.  37;  Glen- 
bury  V.  Litchfield,  2  Mylne  &  K.  629,  denning  v.  Bell,  70  Tex.  632;  Wood- 
633;  Jones  v.  Smith,  1  Hare,  43,  62;  son  v.  Collins,  56  Tex.  168;  Hotten- 
and  see  ante,  §  618.  stein  v.  Lerch,  104  Pa.  St.  454;  Brat- 

3  Flagg  V.  Mann,  2  Sum.  486,  557;  ton  v.  Rogers,  62  Miss.  281;  Taylor  v. 

Jaques  v.  Weeks,  7  Watts,  261,  272;  Mosely,  57  Miss.  544;  Wolf  v.  Zabel, 

Beattie  v.  Butler,  21  Mo.  313;  64  Am.  44  Minn.   90;   Wilkins  v.  Bevier,  43 

Dec.  234.  Minn.    213;    19   Am.    St.    Rep.    238; 

*  O'Rourke    v.    O'Connor,    39    Cal.  Crawford  v.  Chicago  etc.  R.  R  Co.,  112 

442,  446;  Thompson  v.  Pioche,  44  Cal.  111.  314;  Haworth  v.  Taylor,  108  IlL 

508,  516;   Dickey  t.  Lyon,   19  Iowa,  275.] 


867  CONCERNING    NOTICE.  §  626 

general  rule  is  firmly  established  that  he  has  constructive 
notice  of  every  matter  connected  with  or  affecting  the 
estate  which  appears,  either  by  description  of  parties,  by 
recital,  by  reference,  or  otherwise,  on  the  face  of  any  deed 
which  forms  an  essential  link  in  the  chain  of  instruments 
through  which  he  must  derive  his  title.  The  reasons  for 
this  doctrine  are  obvious  and  most  convincing;  in  fact^ 
there  could  be  no  security  in  land  ownership  unless  it 
were  strictly  enforced.  The  right  of  such  a  purchaser  is, 
under  our  system  of  conveyancing,  confined  to  the  instru- 
ments which  constitute  his  chain  of  title,  which  are  his 
title  deeds,  and  everything  appearing  in  those  instru- 
ments and  forming  a  legitimate  part  thereof  is  a  neces- 
sary element  of  his  title.  The  rationale  of  the  rule  is 
equally  clear  and  certain.  Any  description,  recital  of 
fact,  reference  to  other  documents,  puts  the  purchaser 
upon  an  inquiry;  he  is  bound  to  follow  up  this  inquiry 
step  by  step,  from  one  discovery  to  another,  from  one  in- 
strument to  another,  until  the  whole  series  of  title  deeds 
is  exhausted,  and  a  complete  knowledge  of  all  the  matters 
referred  to  in  their  provisions  and  affecting  the  estate  is 
obtained.  Being  thus  put  upon  the  inquiry,  he  is  con- 
clusively presumed  to  have  prosecuted  it  until  its  final 
result,  and  with  ultimate  success.  The  purchaser's  igno- 
rance that  a  particular  instrument  forming  a  link  in  his 
chain  of  title  was  in  existence,  and  his  consequent  failure 
to  examine  it,  would  not  in  the  slightest  affect  the  opera- 
tion of  the  rule.  An  imperative  duty  is  laid  upon  him 
to  ascertain  all  the  instruments  which  constitute  essential 
parts  of  his  title,  and  to  inform  himself  of  all  that  they 
contain.* 

'  Frye  v.  Partridge,  82  111.  267,  270;  Miss,  323;  Deason  v.  Taylor,  53  Miss. 

Chicago  etc.  R.  R.  Co.  v.  Kennedy,  70  697,  701;  Wiseman  v.  Hutchinson,  20 

111.  350,  361,  362;  Rupert  v.  Mark,  15  Ind.  40;  Croskey  v.  Chapman,  26  Ind. 

111.  540;  Merrick  v.  Wallace,  19  111.  333;  Johnston  v.  Gwathmey,  4  Litt. 

4S6;  Morrison  v.  Kelly,  22  111.  610;  74  317;    14    Am.    Dec.    135;    Corbitt   v. 

Am.    Dec.    169;   Morris  v.  Hogle,  37  Clenny,  52  Ala.  480,  483;  Dudley  v. 

111.   150;  87  Am.  Dec.  243;   Doyle  v.  Witter,  46  Ala.  664,  694,  695;  Burch 

Teas,    4    Scam.    202;    McConnell-  v.  v.  Carter,  44  Ala.  115, 117;  Campbell  v. 

Reed,  4  Scam.  117;  Allen  v.  Poole,  54  Roach,  45  Ala.  667;  Witter  v.  Dudley, 


627 


EQUITY   JURISPRUDENCE. 


868 


§  627.  Nature  of  the  Notice.  — The  notice  which  thus 
results  from  recitals  and  other  matters  contained  in  title 
deeds,  within  the  operation  of  the  general  rule,  is  absolute 
in  its  nature.  The  party  having  been  put  upon  an  inquiry, 
the  presumption  that  he  obtained  a  knowledge  of  all  the 
facts  which  could  be  ascertained  by  means  of  a  diligent 

42  Ala.  616,  621,  625;  Newsome  v. 
Collins,  43  Ala.  656,  663;  Major  v. 
Buckley,  51  Mo.  227,  231;  Ridgeway 
V.  HoUiday,  59  Mo.  444;  Willis  v. 
Gay,  48  Tex.  463;  26  Am.  Rep.  328; 
Wood  V.  Krebbs,  30  Gratt.  70S;  Bur- 
well's  Ex'rs  V.  Fanber,  21  Gratt.  446; 
Long  V.  Weller'sEx'rs,  29  Gratt.  347; 
Brush  V.  Ware,  15  Pet.  93,  114; 
Mueller  v.  Engeln,  22  Bush,  441,  444; 
Stidham  v.  Matthews,  29  Ark.  650, 
659.  660;  Pringle  v.  Dunn,  37  Wis. 
449,  464;  19  Am.  Rep.  772;  Fitzhugh 
V.  Barnard,  12  Mich.  105;  Case  v. 
Erwin,  18  Mich.  434;  Baker  v.  Mather, 
25  Mich.  51,  53;  Frost  v.  Beekman,  1 
Johns.  Ch.  2S8,  298;  Howard  Ins.  Co.  v. 
Halsey,  8  N,  Y.  271;  59  Am.  Dec.  478; 
Gibert  v.  Peteler,  38  N.  Y.  165;  97  Am. 
Dec.  785;  Acer  v.  Westcott,  46  N.  Y. 
384;  7  Am.  Rep.  355;  Murrell  v.  Wat- 
son,  1  Tenn.  Ch.  342;  Rafferty  v.  Mai- 
lory,  3  Biss.  362,  368,  369;  Green  v. 
Earlv,39Md.  223,  229;  White  v.  Foster, 
102  Mass.  375,  380;  Acer  v.  Westcott, 
1  Lans.  193,  197;  Sigourney  v.  Munn, 
7  Conn.  324;  Christmas  v.  Mitchell,  3 
Ired.  Eq.  535;  Hagthrop  v.  Hook'a 
Adm'rs,  1  Gill  &  J.  270;  Kerr  v. 
Kitchen,  17  Pa.  St.  433;  Malpas  v. 
Ackland,  3  Russ.  273;  Davies  t. 
Thomas,  2  Younge  &  C.  234;  Green- 
field  V.  Edwards,  2  De  Gex,  J.  &  S. 
582;  Pilcher  v.  Rawlins,  L.  R.  11  Eq. 
53;  Robson  v.  Flight,  4  De  Gex,  J.  & 
S.  608;  Clements  v.  Welles,  L.  R.  1 
Eq.  200;  Wilson  v.  Hart,  L.  R.  1  Ch. 
463.  [The  following  recent  cases  are 
to  the  same  effect:  Central  Trust  Co. 
V.  W.  St.  L.  etc.  R'y  Co.,  29  Fed.  Rep. 
546;  Kerfoot  v.  Cronin,  105  111.  609; 
Buchanan  v.  Balkum.  60  N.  H.  406; 
Leiter  v.  Pike,  127  111.  287;  Robinson 
V.  Crenshaw,  84  Va.  348;  Thompson 
V.  Sheppard,  85  Ala.  611;  Gaines  v. 
Summers,  50  Ark.  322;  Tydings  t. 
Pitcher,  82  Mo.  379;  Montgomery  r. 
Noyes,  73  Tex.  203;  Crawford  v.  Chi- 
cagoetc.  R.  R.  Co.,  112  111.  314;  Was- 
tervelt  v.  Wyckoff,  32  N.  J.  Eq.  188; 
Smith  V.  Burgess,  133  Mass.  513;  Pat- 


man  V.  Harland,  17  Ch.  Div.  353; 
Spielman  v.  Kliest,  36  N.  J.  Eq.  206; 
Jennings  v.  Dixey,  36  N.  J.  Eq.  490; 
Halle  V.  Newbold,  69  Md.  265;  Stokea 
V.  Riley,  121  111.  166;  Lovejoy  v.  Ray. 
mond,  58  Vt.  509;  Stewart  v.  Matheny, 
66  Miss.  21;  14  Am.  St.  Rep.  538; 
Marbury  v.  Ehlen,  72  Md.  206;  20 
Am.  St.  Kep.  467;  Carpenter  v.  Mitch- 
ell, 54  III.  126;  Geile  v.  Reynolds,  35 
Minn.  336;  Morehead  v.  Horner,  30 
W.  Va.  548;  Cresswell  t.  Jones,  68 
Ala.  420;  Newbold  v.  Peabody  Heights 
Co.,  70  Md.  493;  Joy  v.  St.  Louis,  13» 
U.  S.  1;  29  Fed.  Rep.  546;  Aldrich  v. 
Billings,  14  R.  I.  233.]  The  facts  and 
decisions  in  a  few  of  the  earlier  Eng- 
lish cases  throw  much  light  upon  the 
general  rule,  its  operation  and  founda- 
tion. In  Moore  v.  Bennett,  2  Ch. 
Cas.  246,  and  Bacon  v.  Bacon,  Toth. 
13.3,  it  was  said  that  where  a  purchaser 
can  only  make  out  title  by  a  deed 
which  leads  him  to  another  fact,  he 
shall  not  be  deemed  a  purchaser  with- 
out notice  of  that  fact,  but  shall  be 
pi-esumed  cognizant  thereof;  for  it  is 
cransa  negligentia  that  he  sought  not 
after  it.  In  Bisco  v.  Earl  of  Banbury, 
1  Ch.  Cas.  287,  the  rule  was  stated 
very  clearly.  A  purchaser  had  actual 
notice  of  a  certain  mortgage.  This 
mortgage  deed  referred  to  other  en- 
cumbrances; and  he  was  held  to  be 
charged  with  constructive  notice  of 
these  encumbrances  thus  referred  to  in 
the  mortgage.  The  court  said:  "The 
purchaser  could  not  be  ignorant  of  the 
mortgage,  and  ought  to  have  seen  it, 
and  that  would  have  led  him  to  the 
other  deeds,  in  which,  pursued  from 
one  to  another,  the  whole  case  must 
have  been  discovered  to  him."  In 
Coppin  V.  Fernyhough,  2  Brown  Ch. 
291,  it  was  held  that  a  purchaser  wha 
has  actual  notice  of  one  instrument 
afifecting  the  estate  has  constructive 
notice  of  all  other  instruments  to  which 
an  examiuatioa  of  the  first  could  hav& 
led  him. 


869 


CONCERNING   NOTICE. 


628 


inquiry  prosecuted  through  the  entire  chain  of  title  deeds, 
and  through  all  the  instruments  referred  to,  is  conclusive; 
it  cannot  be  rebutted  by  any  evidence  of  a  failure  to  dis- 
cover the  truth,  nor  even  by  proof  of  ignorance  that  in- 
struments affecting  the  title  were  in  existence.  This 
presumption  extends  to  unrecorded  documents  as  well  as 
to  those  which  have  been  duly  recorded.* 

§  628.  Extent  of  the  Notice.  —  Where,  under  the  opera- 
tion of  the  foregoing  general  rule,  a  purchaser  has  notice 
of  a  title  deed,  he  is  presumed  to  know  all  its  contents, 
and  is  bound  thereby.  As  an  illustration,  notice  of  a 
lease  includes  in  its  effects  a  constructive  notice  of  all  its 
covenants.*  Furthermore,  the  necessity  of  prosecuting 
the  inquiry,  and  the  constructive  notice  arising  therefrom, 


»  Corbitt  V.  Clenny,  52  Ala.  480, 
4S3;  Stidham  v.  Matthews,  29  Ark. 
650,  659,  660;  Howard  Ins.  Co.  v. 
Halsey,  8  N.  Y.  271;  59  Am.  Dec.  478; 
4  Sand.  565;  Johnson  v.  Thweatt,  18 
Ala.  741;  Wailes  v.  Cooper,  24  Miss. 
208;  Honore's  Ex'rs  v.  Bakewell,  6 
B.  Mon.  67;  43  Am.  Dec.  147;  Nelson 
V.  Allen,  1  Yerg.  360;  and  see  many 
of  the  cases  cited  in  the  last  preceding 
note.  In  fact,  all  the  decisions,  either 
explicitly  or  implicitly,  treat  the  pre- 
sumption as  conclusive,  and  the  notice 
as  absolute.  [See,  in  addition,  Wester- 
velt  V.  Wychoff,  32  N.  J.  Eq.  188; 
Crawford  v.  Chicago  etc.  R.  R.  Co.,  112 
111.  314;  Central  T.  Co.  v.  Wabash  etc. 
R'y  Co.,  29  Fed.  Rep.  546;  Buchanan 
V.  Balkum,  60  N.  H.  406;  Stewart  v. 
Matheny,  66  Miss.  21;  14  Am.  St. 
Rep,  538.] 

••'Taylor  r.  Stibbert,  2  Ves.  437; 
Hall  V.  Smith,  14  Ves.  426;  Walter  v. 
Maunde,  1  Jacob  &  W.  181;  Tanner 
V.  Florence,  1  Ch.  Cas.  259;  Cosser  v. 
Collinge,  3  Mylne  &  K.  282;  Pope  v. 
Garland,  4  Younge  &  C.  394;  Martin 
V.  Cotter,  3  Jones  &  L.  496,  506; 
Lewis  V.  Bond,  18  Beav.  85;  VVilbra- 
ham  V.  Livesey,  18  Beav.  206;  Cox  v. 
Coventon,  31  Beav.  .378;  Drysdale  v. 
Mace,  2  Smale  &  G.  225;  Smith  v. 
Capron,  7  Hare,  1S5;  Clements  v. 
Welles,  L.  R.  1  Eq.  200;  35  Beav.  513. 
[See  also  Smith  v.  Burgess,  133  Mass. 
513.]  To  this  rule  there  is  an  impor- 
tant limitation.  In  suits  for  specific 
performance  of  a  contract  the  vendee 


will  not  always  be  charged  with  notice 
of  all  the  covenants  contained  in  a 
lease  of  the  premises,  of  which  lease 
he  has  a  general  notice.  This  is  espe- 
cially so  where  the  lease  contains  un- 
usual covenants  seriously  affecting  the 
value  of  the  property,  and  information 
concerning  them  has  not  been  given. 
Lord  Chancellor  Su2;den  said  of  such  a 
case:  "It  is  a  question  of  boivi  fides. 
Where  the  purchaser  has  completed 
his  purchase,  the  rule  [i.  e.,  the  rule 
stated  in  the  text]  is  right;  but  where 
the  purchaser  is  only  bidding  for  some- 
thing, and  has  not  been  informed  of 
the  obligations  to  which  he  will  be 
liable  in  becoming  the  purchaser,  it  is 
always  a  question  of  good  faith ": 
Martin  v.  Cotter,  3  Jones  &  L.  496, 
506.  In  Wilbraham  v.  Livesey,  18 
Beav.  206,  Sir  John  Romilly,  M.  R., 
held  that  while  a  person  who  contracts 
for  a  lease  from  another,  with  knowl- 
edge that  he  holds  under  a  leasehold 
title,  has  notice  of  the  ordinary  cove- 
nants in  the  original  lease,  he  will  not 
be  held  to  have  notice  of  peculiar  and 
unusual  covenants.  See  also  Van  v. 
Corpe,  3  Mylne  &  K.  269,  277;  Flight 
V.  Barton,  3  Mylne  &  K.  282;  Pope  v. 
Garlan<l,  4  Younge  &  C.  394,  401. 
The  reason  of  this  limitation  is,  that 
the  remedy  of  specific  performance  is 
Bomewliat  discretionary;  or  to  speak 
more  accurately,  it  will  not  be  granted 
unless  the  position  of  the  plaintiff  is 
perfectly  equitable,  fair,  and  just. 


§  628  EQUITY    JURISPRUDENCE.  870 

extend  to  every  instrument  forming  an  essential  link  in 
the  direct  chain  of  title  through  which  the  purchaser 
holds;  that  is,  to  the  ultimate  source  of  his  title,  and  to 
every  succeeding  deed  through  which  the  title  must  be 
directly  traced,  and  which  is  necessary  to  its  establish- 
ment. The  purchaser  is  thus  charged  with  notice  of 
every  provision  in  each  separate  instrument  constituting 
the  entire  series  by  which  his  own  interest  can  be  affected, 
or  from  which  others  have  derived  or  may  derive  any 
rights.*  Not  only  is  a  purchaser  thus  charged  with  a 
constructive  notice  of  everything  material  in  the  deeds 
which  form  the  direct  chain  through  which  his  title  is 
deduced,  but  if  any  of  these  conveyances  should  contain 
a  recital  of  or  reference  to  another. deed  otherwise  collat- 
eral, and  not  a  part  of  the  direct  series,  he  would  by  means 
of  such  recital  or  reference  have  notice  of  this  collateral 
instrument,  of  all  its  contents,  and  of  all  the  facts  indi- 
cated by  it  which  might  be  ascertained  through  an  in- 
quiry prosecuted  with  reasonable  diligence.^   Finally,  the 

•  See  the  cases  cited  ante,  under  §  Ch.  244.  Deason  v.  Taylor,  53  Miss. 
626;  also  Howard  Ins.  Co.  v.  Halsey,  697,  is  a  very  illustrtive  case.  It 
8N.  Y.  271;  59  Am.  Dec.  478;  4  Sand,  holds  that  a  purchaser  is  not  only 
565;  Guion  v.  Knapp,  6  Paige,  35;  29  bound  by  notice  of  all  recitals  in  the 
Am.  Dec.  741;  Harris  v.  Fly,  7  Paige,  deed  to  himself,  and  of  everything 
421;  Acer  v.  Westcott,  1  Lans.  193;  stated  in  the  several  conveyances 
Jnmel  V.  Jumel,  7  Paige,  591;  Briggs  which  make  up  his  direct  chain  of 
V.  Palmer,  20  Barb.  392;  20  N.  Y.  15;  title,  but  he  must  investigate  and  ex- 
21  N.  Y.  574;  Babcock  v.  Lisk,  57  plore  every  collateral  matter  to  which 
m.  327;  Dargin  v.  Beeker,  10  Iowa,  his  attention  is  thus  directed.  For 
571;  Hamilton  v.  Nutt,  34  Conn.  501;  example,  a  prior  deed  in  a  chain  of 
McAteer  v.  McMuUen,  2  Pa,  St.  32;  title  recited  that  the  sale  to  the  gran- 
Martin  v.  Nash,  31  Miss.  324;  George  tee  therein  was  on  credit.  Held,  that 
V.  Kent,  7  Allen,  16;  Pike  v.  Good-  a  subsequent  purchaser  was  charged 
now,  12  Allen,  472,  474;  Brown  v.  with  constructive  notice  of  the  prior 
Simons,  44  N.  H.  475;  Sanborn  v.  grantor's  lien  on  the  premises,  and  he 
Kobinson,  54  N.  H.  239;  [see  also  was  bound  to  ascertain  whether  that 
Robinson  v.  Crenshaw,  84  Va.  348;]  purchase  price  referred  to  had  been 
and  the  same  is  true  of  parties  deriv-  paid  or  was  still  unpaid;  and  the  fact 
ing  title  from  or  through  public  grants  that  the  time  of  payment  as  stated  in 
or  patents:  Brush  v.  Ware,  15  Pet.  93,  the  prior  deed  had  passed  did  not  ex- 
Ill;  Bonner  v.  Ware,  10  Ohio,  465.  cuse  or  in  any  way  affect  the  necessity 

'  Deason  v.  Taylor,  53   Miss.    697,  of   hia   making   inquiry.      The  court 

701;   George   v.    Kent,    7   Allen,    16;  cited,  as  sustaining  the  rule  thus  laid 

Judson  V.  Dada,  79  N.   Y.  373,   379;  down,    Wiseman   v.    Hutchinson,    20 

Green  v.   Slayter,  4  Johns.    Ch.    38;  Ind.  40;  Croskey  v.  Chapman,  26  Ind. 

Cambridge  Bank  v.  Delano,  48  N.  Y.  333;  Johnston  v.  Gwathmey,  4  Litt. 

326;  Hope  v.  Liddell,  21  Beav.    183;  317;  14  Am.  Dec.  135;  Honore  v.  Bake- 

Jones  v.  Smith,   1  Hare,  43;  1  Phill.  well,  6  B.  Mon,  67;  43  Am,  Dec.  147; 


871 


CONCERNING   NOTIfiE. 


629 


notice  extends  to  all  deeds  and  other  instruments  properly- 
falling  within  tne  two  preceding  rules,  whether  they  are 
recorded  or  unrecorded.  In  other  words,  a  purchaser  is 
charged  with  notice  of  any  deed  forming  a  part  of  his 
direct  chain  of  title,  and  of  every  collateral  instrument 
recited  or  referred  to,  as  well  when  it  is  unrecorded  as 
when  it  is  recorded.' 

§  629.  Limitation  —  Matters  Purely  Collateral.  —  To 
the  general  rule  defining  constructive  notice  from  title 
papers,  and  to  the  subordinate  rules  contained  in  the 
preceding  paragraph,  there  are  one  or  two  necessary  lim- 
itations. In  the  first  place,  a  purchaser  is  not  charged 
with  constructive  notice^  of  absolutely  every  matter  or 


Thornton  v.  Knox,  6  B.  Mon,  74.  [To 
the  same  effect  are  Thompson  v.  Shep- 
pard,  85  Ala.  611;  Witter  v.  Dudley, 
42  Ala.  61H;  Tydings  v.  Pitcher,  82 
Mo.  379.]  In  Avent  v.  McCorkle,  45 
Miss.  221,  it  was  held  that  under  the 
same  circumstances  a  subsequent  pur- 
chaser may  assume  the  prior  purchase 
price  to  have  been  paid,  when  a  suffi- 
cient time  has  elapsed  to  bar  any  claim 
for  such  price  under  the  statute  of 
limitations.  It  has  also  been  held  that 
where  one  executes  a  deed,  release,  or 
other  instrument  affecting  the  title  to 
real  estate,  which  contains  a  reference 
to  some  other  deed  for  a  more  complete 
description  of  the  premises,  or  for  some 
other  purpose,  he  thereby  becomes 
charged  with  notice  of  the  instrument 
thus  referred  to,  of  its  contents,  and 
of  the  facts  which  it  indicates:  See 
Howard  Ins.  Co.  v.  Halsey,  8  N.  Y. 
271;  59  Am.  Dec,  478;  4  Sand.  565; 
Guion  V.  Knapp,  6  Paige,  35;  29  Am. 
Dec.  741.  In  Howard  Ins.  Co.  v.  Hal- 
sey, supra,  the  rule  was  certainly  car- 
ried to  its  extreme  limits.  [And  Avhere 
the  recitals  in  a  recorded  deed  clearly 
indicate  a  resulting  trust  in  favor  of 
parties  not  named,  whose  relinquish- 
ment of  a  right  referred  to  in  the  deed 
constitutes  its  consideration,  a  pur- 
chaser is  thereby  put  on  inquiry,  and 
is  charged  with  notice  of  what  mi^ht 
have  been  learned  by  such  inquiry: 
Montgomery  v.  Noyes,  73  Tex.  '203. 
And  where  a  deed  recited  that  it  was 
made  subject  to  such  rights  as  a  city 
might   have   acquired    by  deed,    cou' 


demnation  proceeding,  judgment,  or 
otherwise,  the  recital  was  held  to  con- 
stitute notice  of  the  existence  and  con- 
tents of  a  previous  deed  in  escrow  to 
the  city  by  the  grantor:  Lester  v. 
Pike,  127  111.  287.] 

'  Stidham  v.  Matthews,  29  Ark. 
650,  659,  660;  Baker  v.  Mather,  25 
Mich.  51,  53;  White  v.  Foster,  102 
Mass.  375,  3S0;  Howard  v.  Chase, 
104  Mass.  249;  George  v.  Kent,  7  Al- 
len, 16;  Garrett -V.  Puckett,  15  Ind, 
485;  Ross  v.  Worthington,  11  Minn. 
438;  88  Am.  Dec.  95;  Price  v,  Mc- 
Donald, 1  Md.  403;  .54  Am.  Dec.  657; 
Hudson  v.  Warner,  2  Har.  &G.  415.  In 
Baker  v.  Mather,  25  Mich.  51,  a  second 
mortgagee  had  constructive  notice  of  a 
prior  unrecorded  mortgage  expressly 
mentioned  in  and  excepted  from  the 
deed  to  his  mortgagor,  although  this 
deed  itself  was  also  unrecorded.  In 
White  V.  Foster,  102  Mass.  375,  380, 
a  deed  referred  to  a  mortgage  of  the 
land  by  the  grantor,  which  was  on 
record,  and  which  reserved  "all  the 
trees  growing  on  the  land,  the  same 
having  been  sold  to  A."  Held,  that 
the  grantee  thereby  had  notice  of  A'a 
title  as  a  valid  title,  although  A's  deed 
of  the  trees  was  not  recorded.  [See 
also  §  627.] 

^  Of  course  he  may  have  adzuil  no- 
tice of  any  and  every  matter  so  stated, 
if  it  can  be  proved  that  he  actually 
saw  and  read  the  provision  containing 
the  statement.  Example  of  no  such 
notice.  See  Sleeper  v.  Cbapman.  121 
Mass.  404. 


§  630  EQUITY   JURISPRUDENCE.  872 

fact  stated  in  the  instruments  forming  his  direct  chain 
of  title,  or  in  a  collateral  instrument  connected  with  the 
direct  series  by  reference  or  recital.  The  rules  do  not 
extend  to,  and  he  is  not  constructively  bound  by,  a  recital 
in  any  deed  or  other  title  paper  of  matter  which  is  wholly 
foreign  to  the  nature  and  objects  of  the  instrument.  In 
other  words,  he  has  no  constructive  notice  of  any  matter 
contained  in  a  recital  which  does  not  affect  his  own  in- 
terest in  the  property  held  under  or  through  the  convey- 
ance, or  from  which  other  persons  do  not  derive  any 
rights  in  such  property;  he  is  not  charged  with  notice 
of  any  fact  wholly  collateral  and  foreign  to  the  objects 
and  effects  of  the  instrument  as  a  conveyance  of  an  estate 
or  interest  to  himself.'  In  the  second  place,  the  rules  do 
not  extend  to  any  recital  or  statement  contained  in  an  in- 
strument which  is  purely  collateral,  and  deals  with  another 
subject-matter,  and  which  is  not  connected  with  the  direct 
series  of  title  deeds  by  reference,  although  such  collateral 
instrument  may  have  been  executed  between  the  same 
parties.  The  purchaser  is  not  charged  with  constructive 
notice  of  such  a  recital  or  statement.^ 

§  630.  Particular  Instances.  —  The  constructive  notice 
arises  not  only  from  recitals,  references,  and  other  simi- 
lar statements  of  fact,  but  also  from  the  character  and 
description  of  the  parties  to  a  deed  or  other  instrument 
of  title.  A  purchaser  may  thus  be  charged  with  notice  of 
the  rights  held  by  third  persons,  from  the  fact  that  they 
are  joined  as  parties  to  a  conveyance,  or  from  the  char- 
acter or  description  of  them  appearing  in  the  instrument, 
as  married  women,  trustees,  administrators,  executors,  and 
the  like.'     The  immediate  parties — grantor  and  grantee, 

'  Mueller  v.  Engeln,  12  Bush,  441,  tempted  to  reserve  a  lien  thereon  in 

444;  Burch  v.  Carter,  44  Ala.  115,  117.  favor  of  the  grantor. 

Mueller  v.  Engeln,  12  Bush,  441,  ad-  ^  Boggs   v.    Varner,  6  Watts  &   S. 

mirably  illustrates  this  limitation.     A  469;   Burch   v.    Carter,    44   Ala.  115, 

purchaser  held  under  a  deed  of  land.  117;   Sleeper  v.  Chapman,  121  Mass. 

It  was  held  that  he  had  no  constructive  404  (clause  in  a  chattel  mortgage), 

notice  of  a  clause  in  such  deed  which  *  As  illustrations:   A  grantee  by  a 

purported  to  be  a  bill  of  sale  of  cer-  deed,  in  which  the  grantor  is  described 

tain  chattels  from  the  grantor,  and  at-  as  an  administrator  and  conveys  as 


873 


CONCERNING   NOTICS. 


§631 


mortgagor  and  mortgagee — by  whom  and  to  whom  the 
instrument  is  directly  executed  have,  of  course,  a  notice 
of  everything  which  it  contains.  The  notice  is  then 
really  an  actual  one,  rather  than  constructive;  for  the 
immediate  parties  are  assumed  to  have  read  their  own 
conveyance,  and  to  have  become  acquainted  with  all  of 
its  contents.^ 

§  631.  When  the  Notice  Arises. — The  doctrine  of 
constructive  notice  from  title  deeds  applies  only  to  in- 
struments actually  in  existence;  it  does  not  extend  to 
deeds  which  may  be  executed  in  the  future,  and  which 
may  possibly  affect  the  subject-matter.  A  purchaser  is 
therefore  not  charged  with  constructive  notice  of  the 
contents  of  a  deed  which  is  merely  in  contemplation  or 
which  may  by  possibility  be  executed,  even  though  it 
should  afterwards  become  operative.*     In  applying  the 


such,  has  constructive  notice  of  the 
trust  and  of  all  rights  under  it,  and 
obtains  no  title  as  against  the  heirs  to 
whom  the  land  had  descended:  Raf- 
ferty  v,  Mallory,  3  Biss.  362,  368,  369; 
a  married  woman  being  a  party  is  no- 
tice of  her  interest:  Steedman  v.  Poole, 
6  Hare,  193;  the  fact  that  persons 
uniting  as  parties  are  described  as 
devisees  may  be  notice  of  their  rights: 
Burgoyne  v.  Hatton,  Barn.  Ch.  237; 
and  see  Attorney-General  v.  Hall,  16 
Beav.  388.  A  purchaser  by  a  deed 
from  a  grantor  who  is  a  trustee,  whose 
only  title  is  that  of  a  trustee,  may 
have  notice  of  the  trust,  and  will  cer- 
tainly have  such  notice  if  the  grantor 
executes  the  deed  in  his  character  as 
trustee:  See  Sergeant  v.  Ingersoll,  7 
Pa.  St.  340;  15  Pa.  St.  343,  348;  Dud- 
ley  V.  Witter,  46  Ala.  664,  694;  John- 
son  V.  Thweatt,  18  Ala.  741;  Witter 
V.  Dudley,  42  Ala.  616,  621,  625;  Coy 
V.  Coy,  15  Minn.  119.  [See  also  Mar- 
bury  V.  Ehlen,  72  Md.  206;  20  Am. 
St.  Rep.  467;  Abell  v.  Brown,  55  Md. 
217;  Leake  v.  Watson,  58  Conn.  332; 
IS  Am.  St.  Rep,  270;  Simmons  v. 
Oliver,  74  Wis.  633;  Smith  v.  Ayer, 
101  U.  S.  320;  Gale  v.  Harby,  20  Fla. 
171.]  A  grantee  from  one  of  two 
joint  owners  has  constructive  notice 
of  the  interest  held  by  the  other  joint 
owner:   Campbell  v.   Roach,  45   Ala. 


667.  A  grantee  from  one  who  holds 
only  under  a  land  contract  has  notice 
of  his  own  grantor's  interest,  and  of 
the  rights  held  by  the  vendor  in  the 
contract:  Newsome  v.  Collins,  43  Ala. 
656,  663. 

'  For  example:  Where  a  deed  of 
land  described  it  as  encumbered  by 
a  mortgage,  the  grantee  would  have 
actual  notice  of  sxich  encuml)rance: 
Guion  V.  Knapp,  6  Paige,  35;  29  Am. 
Dec.  741;  Bellas  v.  Lloyd,  2  Watts, 
401;  Kerr  v.  Kitchen,  17  Pa.  St.  433; 
Knouflf  V.  Thompson,  16  Pa.  St.  357, 
364;  Hackwith  v.  Damrore,  1  Mon. 
235;  [Buchanan  v.  Bolkum,  60  N.  H. 
407.]  For  instances  in  which  a  gran- 
tee has  notice  of  his  grantor's  title  as 
trustee,  or  as  a  joint  owner,  or  as  a 
vendee,  under  the  deed  of  conveyance 
executed  between  them,  see  Sergeant 
v.  Ingersoll,  7  Pa.  St.  340;  15  Pa.  St. 
343,  348;  Dudley  v.  Witter,  46  Ala, 
664,  694;  Witter  v.  Dudley,  42  Ala. 
616,  621,  625;  Johnson  v.  Thweatt,  18 
Ala.  741;  Campbell  v.  Roach,  45  Ala, 
667;  Newsome  v.  Collins,  43  Ala,  656, 
663. 

'  Cothay  v.  Sydenham,  2  Brown  Ch, 
391.  A  purchaser  was  informed  that  a 
draught  of  a  deed  had  been  prepared, 
but  not  that  it  was  executed.  He 
was  held  not  to  be  charged  with  no- 
tice of   the  instrument  as  a  deed,  al- 


§631 


EQUITY   JURISPKUDENCB. 


874 


general  doctrine,  it  is  also  settled  by  the  English  courts 
that  where  a  person  receives  actual  notice  of  a  deed,  and 
this  notice  is  at  the  same  time  accompanied  by  an  errone- 
ous statement  as  to  its  contents,  under  such  circumstances 
that  he  may  reasonably  rely  upon  the  information,  he  is 
not  thereby  charged  with  a  constructive  notice  of  the  real 
contents/  A  recital,  reference,  or  other  statement  in  a 
title  deed,  in  order  to  operate  as  notice,  must  be  so  defi- 
nite and  distinct  that  it  conveys  some  information  to  the 
party,  or  else  arouses  his  attention  by  directing  him  to 
the  source  of  information.  A  statement  may  be  so  vague 
and  uncertain  in  its  terms  that  it  will  not  put  a  purchaser 
upon  an  inquiry,  and  will  not  therefore  affect  his  con- 
science with  notice.^  Finally,  the  notice  arising  from 
title  deeds,  like  every  other  instance  or  kind  of  construct- 
ive notice,  does  not  operate  between  the  immediate  par- 


though  it  had  in  fact  been  executed. 
Lord  Thurlow  stated  the  rule  in  such 
cases  as  follows:  "If  the  notice  had 
been  of  a  deed  actually  executed,  it 
certainly  would  do;  but  where  the 
notice  is  not  of  a  deed,  but  only  of 
an  intention  to  execiate  a  deed,  it  is 
otherwise;  there  is  no  case  nor  reason- 
ing which  goes  so  far  as  to  say  that  a 
purchaser  shall  be  affected  by  notice 
of  a  deed  in  contemplation." 

'  Jones  V.  Smith,  1  Hare,  43,  60-70, 
per  Wigram,  V.  C.  The  opinion  in 
this  case  is  very  instructive:  Allen  v. 
Knight,  5  Hare,  272;  Bird  v.  Fox,  11 
Hare,  40;  Harryman  v.  Collins,  18 
Beav.  11;  Ware  v.  Lord  Egmont,  4 
De  Gex,  M.  &  G.  460,  473;  and  see 
cases  cited  ante,  in  note  under  §  616. 
[In  the  recent  case  of  Patman  v.  Har- 
land,  L.  R.  17  Ch.  Div.  353,  it  was 
held  by  Jessel,  M.  R.,  that  a  purchaser 
or  lessee  haviug  notice  of  a  deed  form- 
ing part  of  the  chain  of  title  of  his 
vendor  or  lessor  has  constructive  no- 
tice of  the  contents  of  the  deed,  and 
is  not  protected  from  the  consequences 
of  not  looking  at  the  deed,  even  by  tlje 
most  express  representations  of  the 
vendor  or  lessor  that  it  contains  no 
restrictive  covenants  nor  anything 
affecting  the  title.  The  master  of  the 
rolls  distinguished  this  case  from  the 
case  of  Jones  v.  Smith,  1  Hare,  43,  and 


the  other  cases  cited,  by  reason  of  the 
fact  that  in  Jones  v.  Smith,  1  Hare,  43, 
the  purchaser  in  that  case  was  told  by 
the  vendor  that  the  prior  deed  did  not 
affect  his  title,  while  in  the  present 
case  the  lessee  had  notice  that  the 
deed  did  affect  his  vendor's  title.  It 
would  seem  to  follow  from  these  de- 
cisions that  a  subsequent  vendee  or 
lessee  may  rely  upon  representations 
of  his  vendor  or  lessor  that  a  prior 
deed  does  not  affect  his  title;  but  if  he 
has  notice  that  it  does  affect  the  title, 
he  is  bound  to  examine  the  deed  for 
himself,  and  cannot  rely  upon  the 
representations  of  his  lessor  or  ven- 
dor as  to  the  nature  of  its  coutents.] 
It  has  been  held  in  some  American 
decisions  that  the  grantee  by  a  quit- 
claim deed  is  charged  with  notice  of 
any  defects  in  the  title,  and  cannot  be 
a  purchaser  without  notice:  See  Ridge- 
way  V.  Holliday,  59  Mo.  444;  Smith  v. 
Dunton,  42  Iowa,  48;  Watson  v.  Phelps, 
40  Iowa,  462;  but  see  post.  §  753,  note. 
*  White  v.  Carpenter,  2  Paige,  217, 
per  Walworth,  C. :  "The  recital  must 
be  such  as  to  explain  itself  by  its  own 
terms,  or  refer  to  some  deed  or  circum- 
stance which  explains  it  or  leads  to  its 
explauation."  See  Bell  v.  Twilight, 
22  N.  H.  500;  Kaine  v.  Denniston,  22 
Pa.  St.  202;  French  v.  The  Loyal  Co., 
5  Leigh,  627. 


875  CONCERNINQ   NOTICE.  §  632 

ties  to  a  conveyance,  —  the  grantor  and  grantee,  mortgagor 
and  mortgagee,  —  but  only  between  a  purchaser,  grantee, 
or  mortgagee  and  some  prior  party  holding  or  claiming 
to  hold  an  adverse  right,  interest,  or  title.* 

§  632.  By  Lis  Pendens  —  Rationale  of  the  Doctrine. — 
It  has  been  stated  in  numerous  judicial  opinions,  and  the 
same  view  has  been  repeated  by  text-writers,  that  the  rule 
concerning  the  effect  of  lis  pendens  is  wholly  referable  to 
the  general  doctrine  of  constructive  notice.  It  has  been 
said  that  a  pending  suit  in  equity  operates  as  a  construct- 
ive notice  to  the  world,  and  that  a  purchaser  pendente 
lite  is  bound  by  the  final  result  of  the  litigation,  because 
he  is  charged  with  such  a  notice  of  the  proceeding,  en- 
tirely irrespective  of  any  information  which  he  may  or 
may  not  have  had.  Courts  of  the  highest  ability  and 
authority  have,  however,  adopted  a  somewhat  different 
theory.  According  to  this  view,  "  it  is  not  correct  to 
speak  of  lis  pendens  as  affecting  a  purchaser  through  the 
doctrine  of  notice,  though  undoubtedly  the  language  of 
the  courts  often  so  describes  its  operation.  It  affects  him, 
not  because  it  amounts  to  notice,  but  because  the  law  does 
not  allow  litigant  parties  to  give  to  others,  pending  the 
litigation,  rights  to  the  property  in  dispute,  so  as  to  preju- 
dice the  opposite  party.  Where  a  litigation  is  pending 
between  a  plaintiff  and  a  defendant  as  to  the  right  to  a 
particular  estate,  the  necessities  of  mankind  require  that 
the  decision  of  the  court  in  the  suit  shall  be  binding, 
not  only  on  the  litigant  parties,  but  also  on  those  who 
derive  title  under  them  by  alienations  made  pending  the 
suit,  whether  such  alienees  had  or  had  not  notice  of  the 
pending  proceedings.  If  this  were  not  so,  there  could  be 
no  certainty  that  the  litigation  would  ever  come  to  an 
end.  A  mortgage  or  sale  made  before  final  decree  to  a 
person  who  had  no  notice  of  the  pending  proceedings 
would  always  render  a  new  suit  necessary,  and  so  inter- 

*  Champlin  v.  Lay  tin,  6  Paige,  189,  203. 


633 


EQUITY   JURISPRUDENCE, 


876 


minable  litigation  might  be  the  consequence."  *  It  must 
not  be  supposed  that  this  mode  of  explanation  affects  in 
the  slightest  degree  the  settled  rules  concerning  lis  pen- 
dens,  or  alters  the  rights  and  liabilities  of  alienees  from  a 
party  to  a  suit  during  its  pendency;  it  may,  however, 
prevent  the  extension  of  the  doctrine,  and  restrict  its 
further  application  to  particular  persons  and  conditions 
of  fact. 

§  638.     The  General  Rule.  —  If  we  accept  this  rationale 
of  the  doctrine  as  correct,  the  general  rule  may  be  accu- 


*  Bellamy  v.  Sabine,  1  De  Gex  &  J. 
566,  678,  584.  In  this  most  carefully 
considered  case  the  theory  given  in 
the  text  was  fully  adopted  and  made 
the  basis  of  decision  by  the  court  of 
appeal  in  chancery.  Lord  Chancellor 
Cranworth,  after  using  the  language 
which  I  have  quoted  in  the  text,  pro- 
ceeded as  follows  (p.  579):  "  That  this 
is  the  true  doctrine  as  to  lis  pendens 
appears  to  me  to  be  not  only  founded 
on  principle,  but  also  consistent  with 
the  authorities."  He  cites  Culpepper 
V.  Aston,  2  Ch.  Cas.  115,  221;  Sorrell 
V.  Carpenter,  2  P.  Wms.  482,  and 
adds:  "In  both  these  cases  the  doc- 
trine really  was,  that,  pending  a  liti- 
gation, the  defendant  cannot  by  alien- 
ation aflfect  the  rights  of  the  plaintiff 
to  the  property  in  dispute;  and  the 
same  principle  is  applicable  against  a 
plaintiff,  so  as  to  prevent  him  from 
alienating  to  the  prejudice  of  the  de- 
fendant where,  from  the  nature  of  the 
suit,  he  may  have  in  the  result  a  right 
against  the  plaintiff;  as  on  a  bill  by  a 
devisee  to  establish  a  will  against  an 
heir,  if  in  the  result  the  devise  is  de- 
clared void,  the  heir  is  not  to  be  preju- 
diced by  an  alienation  of  the  devisee 
(plaintiff)  pendente  Hie:  See  Garth  v. 
Ward,  2  Atk.  174.  The  language  of 
the  court  in  these  cases,  as  well  as  in 
Worsley  v.  Earl  of  Scarborough,  3 
Atk.  392,  certainly  is  to  the  effect 
that  Us  "pendens  is  implied  notice  to  all 
the  world.  I  confess  I  think  that  is 
not  a  perfectly  correct  mode  of  stating 
the  doctrine.  What  ought  to  be  said 
is,  that,  pendente  lite,  neither  party  to 
the  litigation  can  alienate  the  property 
in  dispute  so  as  to  affect  his  opponent." 
The  Lord  Justice  Turner  gives   the 


same  rationale  of  the  doctrine.  He 
says  (p.  584):  "The  doctrine  of  lis 
pendens  is  not,  as  I  conceive,  founded 
upon  any  of  the  peculiar  tenets  of  a 
court  of  equity  as  to  implied  or  con- 
structive notice.  It  is,  as  I  think,  a 
doctrine  common  to  the  courts  both  of 
law  and  of  equity,  and  rests,  as  I  ap- 
prehend, upon  this  foundation,  that  it 
would  plainly  be  impossible  that  any 
action  or  suit  could  be  brought  to  a 
successful  termination,  if  alienations 
pendente  lite  were  permitted  to  prevail. 
The  plaintiff  would  be  liable  in  every 
case  to  be  defeated  by  the  defendants 
alienating  before  the  judgment  or  de- 
cree, and  would  be  driven  to  com- 
mence his  proceedings  de  novo,  subject 
again  to  be  defeated  by  the  same 
course  of  proceeding.  That  this  doc- 
trine belongs  to  a  court  of  law  no  less 
than  to  courts  of  equity  appears  from  a 
passage  in  the  Institutes,  vol.  2,  p.  375, 
by  Lord  Coke."  Knight  Bruce,  L.  J., 
concurred  in  these  opinions.  [In  Dov- 
ey's  Appeal,  97  Pa.  St.  153,  it  was 
held,  in  considering  the  rationale  of 
the  doctrine  of  Us  pendens,  that  a 
purchaser  was  not  affected  because  the 
lis  pendens  amounted  to  notice,  but 
because  the  law  does  not  allow  liti- 
gant parties  to  give  to  others,  pending 
the  litigation,  rights  to  the  property 
in  dispute  so  as  to  prejudice  the  oppo- 
site party,  and  defeat  the  execution  of 
the  decree  to  be  entered  in  the  cause. 
And  the  doctrine  was  consequently 
said  to  have  no  application  except  in 
those  cases  where  the  lis  in  question 
is  of  such  a  character  as  to  enable  a 
definite  decree  to  be  entered  therein 
deciding  therightof  property  between 
the  parties.] 


877 


CONCERNING   NOTICE. 


§633 


rately  formulated  as  follows:  During  the  pendency  of  an 
equitable  suit,  neither  party  to  the  litigation  can  alienate 
the  property  in  dispute,  so  as  to  affect  the  rights  of  his 
opponent.  This  brief  proposition  in  reality  contains  the 
entire  doctrine.  Adopting,  however,  the  ordinary  mode 
of  explanation,  which  regards  the  effect  of  lis  pendens  as 
merely  a  particular  instance  of  constructive  notice,  "  the 
general  and  established  rule  is,"  using  the  language  care- 
fully chosen  by  Chancellor  Kent  in  a  leading  case,  "that 
a  lis  pendens  —  a  pending  suit  in  equity  —  duly  prose- 
cuted, and  not  collusive,  is  notice  to  a  purchaser  of  the 
property  in  dispute  from  a  party  to  the  litigation,  so  as 
to  affect  and  bind  bis  interest  by  the  decree;  and  the 
Us  2->endens  begins  from  the  service  of  the  subpoena  after 
the  bill  is  filed." ^     Wherever,  therefore,  an  equitable  suit 

Ch.  38;  Sugden  on  Vendors,  344.  At 
the  time  Allen  bought  the  property 
from  Scott,  the  solicitor  and  agent  of 
Brooks  &  Co.,  Emily  Poole  had  filed 
her  bill,  and  had  obtained  service  of  a 
summons  upon  Scott.  There  was  afts 
pendens,  and  he  was  chargeable  with 
notice  of  the  character  and  extent  of 
Mrs.  Poole's  clai-m  on  the  land, —  of 
everything  which  the  pleadings  and 
exhibits  set  forth.  The  teclmical  no- 
tice arising  from  lis  pendens  has  its 
foundation  in  necessity;  '  for  it  would 
be  impossible  for  any  suit  to  be 
brought  to  a  successful  termination  if 
alienations  pending  the  suit  could  pre- 
vail.'" It  will  be  observed  that  in 
this  last  sentence  the  learned  judge 
quotes  the  very  language  of  Turner, 
L.  J.,  in  Bellamy  v.  Sabine,  1  De  Gex 
&  J.  566,  cited  under  the  pre- 
ceding paragraph,  and  thereby  adopts 
the  theory  sanctioned  by  that  case.  In 
Center  v.  Bank,  22  Ala.  743,  757,  it 
was  said:  "Z-ia  pevdens,  which  in  a 
chancery  suit  begins  with  the  filing  of 
the  bill  and  service  of  subpoena,  and 
continues  until  the  final  orders  are 
taken  in  the  caee,  is  notice  of  every 
fact  contained  in  the  pleadings  which 
is  pertinent  to  the  issue,  and  of  the 
contents  of  exhibits  to  the  bill  which 
are  produced  and  proved."  The  lead- 
ing American  cases  by  which  the  gen- 
eral rule,  originally  established  by  the 
English  court  of  chancery,  was  adopted 


'  The  following  risumS  of  the  doc- 
trine is  given  in  the  recent  case  of  Al- 
len v.  Poole,  54  jSIiss.  323,  333,  by 
Simrall,  C.  J.:  "Was  Allen  a  ]}UV' 
chciser  pendente  lite  t  and  if  so,  what  are 
the  consequences?  A  lis  pendens  be- 
gins from  the  service  of  the  subpoena, 
and  not  from  the  filing  the  bill  or  is- 
suance of  the  writ;  Allen  v.  Manda- 
ville,  26  Miss.  397,  399;  Murray  v. 
Ballon,  1  Johns.  Ch.  566,  576;  2  Sug- 
den on  Vendors,  7th  Am.  ed.,  544. 
If  a  person  purchases  an  estate  pend- 
ing a  suit  involving  a  question  of  title 
to  it,  he  will  be  considered  a  purchaser 
with  notice,  although  he  was  not  a 
party  to  the  suit:  Newland  on  Con- 
tracts, 506.  The  lis  pendens  continues 
until  the  final  disposition  of  the  suit: 
Sugden  on  Vendors,  281,  285.  A  bill 
to  foreclose  a  mortgage  on  the  prem- 
ises is  a  suit  involving  the  title  within 
the  rule:  Choudron  v.  Magee,  8  Ala. 
570.  Equally  so  must  be  a  suit  assert- 
ing the  vendor's  lien.  Lis  pendens  is, 
in  law,  notice  of  every  fact  averred  in 
the  pleadings  pertinent  to  the  matter 
in  issue  or  the  relief  sought,  and  of  the 
contents  of  exhibits  filed  and  proved: 
Center  v.  Bank,  22  Ala.  743,  757.  But 
in  order  that  the  notice  may  attach, 
the  property  involved  in  the  suit  must 
be  so  pointed  out  in  the  proceedings  as 
to  warn  the  public  that  they  intermed- 
dle at  their  peril;  Miller  v.  Sherry,  2 
Wall.  237;  Green  v.  Slayter,  4  Johns. 


§  633 


EQUITY   JURISPRUDENCE. 


878 


afifecting  tlie  title  to  a  particular  estate  as  its  subject-mat- 
ter has  been  begun  by  service  of  process,  and  is  prose- 
cuted in  good  faith,  whether  we  say  that  the  lis  pendens 
is  constructive  notice  to  all  the  world,  or  regard  the  doc- 
trine as  necessarily  resting  upon  a  basis  of  expediency, 


were  Murray  v.  Ballon,  1  Johns,  Ch. 
566;  Murray  v.  Lylburn,  2  Johns,  Ch. 
441;  Murray  v,  Finster,  2  Johns.  Ch. 
155, —  all  decided  by  Chancellor  Kent. 
See  also,  as  sustaining  the  doctrine 
stated  in  the  text,  Real  Estate  Sav. 
Inst,  V.  Collonious,  63  Mo.  290,  294; 
Turner  v,  Babb,  60  Mo.  342;  O'Reilly 
V,  Nicholson,  45  Mo.  160;  Blanchard 
V.  Ware.  43  Iowa,  530,  531;  37  Iowa, 
305,  307;  Holmaa  v.  Patterson's  Heirs, 
29  Ark.  357;  Brundage  v.  Biggs,  25 
Ohio  St.  652;  Seabrook  v.  Brady,  47 
Ga.  650;  Douglass  v.  McCrackin,  52 
Ga.  596;  Thaipe  v.  Dunlap,  4  Heisk. 
674,  686;  Salisbury  v.  Morss,  7  Lans. 
359,  365,  366;  Cook  v.  Mancius,  5 
Johns.  Ch.  89,  93;  Sedgwick  v.  Cleve- 
land,  7  Paige,  287;  Van  Hook  v. 
Throckmorton,  8  Paige,  33;  White  v. 
Carpenter,  2  Paige,  217,  252;  Hayden 
V.  Bucklin,  9  Paige,  512,  514;  Jackson 
V.  Losee,  4  Sand.  Ch.  381;  Jackson  v. 
Andrews,  7  Wend.  152,  156;  Parks  v. 
Jackson,  11  Wend.  442,  451,  457;  25 
Am.  Dec.  656;  Hopkins  v.  McLaren, 
4  Cow.  667;  Griffith  v.  Griffith,  1  HofF. 
Ch.  153;  Leitch  v.  Wells,  48  Barb. 
637;  48  N.  Y.  585;  Chapman  v.  West, 
17  N.  Y.  125;  Patterson  v.  Brown,  32 
N.  Y.  81;  Mitchell  v.  Smith,  53  N.  Y. 
413;  Ayrault  v.  Murphy,  54  N.  Y. 
203;  Harrington  v.  Slade,  22  Barb. 
161;  Pratt  v.  Hoag,  5  Duer,  631;  Nor- 
ton V.  Birge,  35  Conn.  250;  Borrow- 
Bcale  V.  Tuttle,  5  Allen,  377;  Haven  v. 
Adams,  8  Allen,  363,  367,  per  Chap- 
man,  J.;  Beeckman  v.  Montgomery, 
14  N.  J.  Eq.  106;  80  Am.  Dec.  229; 
McPherson  v.  Housel,  13  N.  J.  Eq. 
299;  Hersey  v.  Turbett,  27  Pa.  St. 
418;  Boulden  v.  Lanahan,  29  Md.  200; 
Inloes's  Lessee  v.  Harvey,  11  Md.  519; 
Tongue  v.  Morton,  6  Har.  &  J.  21; 
Edwards  v.  Banksmith,  35  Ga.  213; 
Brandon  v.  Cabiness,  10  Ala.  155; 
Choudron  v.  Magee,  8  Ala.  570;  Hoole 
V.  Attorney -General,  22  Ala.  190;  Ash- 
ley v.  Cunningham,  16  Ark.  168;  Whit- 
ing V.  Beebe,  12  Ark.  421,  564;  Gossom 
V.  Donaldson,  IS  B.  Mon.  230;  Owings 
V.    Myers,   3  Bibb,    278;   Roberts  v. 


Fleming,  53  111.  196,  198;  Jackson  v. 
Warren,  32  III.  331;  Gilman  v.  Hamil- 
ton,  16  111.  225;  Kern  v.  Hazlerigg,  11 
Ind.  443;  71  Am.  Dec.  360;  Truitt  v. 
Truitt,  38-lud.  16;  Green  v.  White,  7 
Blackf.  242;  McGregor  v.  McGregor, 
22  Iowa,  441;  Knowles  v.  Rablin,  20 
Iowa,  101;  Loomis  v.  Riley,  24  111.  307; 
Cooley  V.  Brayton,  16  111.  10;  Culpep- 
per V.  Aston,  2  Ch.  Cas.  115,  221; 
Preston  v.  Tubbin,  1  Vern.  286;  Sor- 
rell  V.  Carpenter,  2  P.  Wms.  482; 
Garth  V.  Ward,  2  Atk.  174;  Worsley 
v.Earl  of  Scarborough,  3  Atk.  392;  Hig- 
gins  V.  Shaw,  2  Dru.  &  War.  356; 
Tredway  v.  McDonald,  51  Iowa,  663. 
[See,  in  further  illustration  of  the  gen- 
eral rule,  the  following  recent  cases: 
Hale  V.  Warner,  36  Ark.  217;  Powell 
V.  Campbell,  20  Nov.  232;  19  Am.  St. 
Rep.  350;  Stone  v.  Tyree,  30  W.  Va. 
687;  Moore  v.  Moore,  67  Tex.  293; 
Paxton  V.  Meyer,  67  Tex.  96;  Union 
Trust  Co.  V.  S.  N.  Co.,  130  U.  S.  570; 
Warren  Co.  v.  Marcy,  97  U.  S.  96; 
Kimberling  v.  Hartly,  1  Fed.  Rep. 
571;  Allen  v.  Halliday,  28  Fed.  Rep. 
261;  Hovey  v.  Elliott,  118  N.  Y.  132; 
Haverly  v.  Alcott,  57  Iowa,  171;  Wil- 
liamson  v,  Williams,  11  Lea,  355;  Hal- 
lom  V.  Trum,  125  111.  247;  Smith  v. 
Cassidy,  73  Tex.  161;  Banks  v. 
Thompson,  75  Ala.  531 ;  Evans  v.  Wel- 
born,  74  Tex.  530;  15  Am.  St.  Rep. 
858;  Wortham  v.  Boyd,  66  Tex.  401; 
Reppetoe  v.  Dwyer,  65  Tex.  703;  Ran- 
dall V.  Snyder,  64  Tex.  350;  Hoffman 
V.  Blume,  64  Tex.  334;  Russell  v.  Kirk- 
bride,  62  Tex.  455;  Walker  v.  Gold- 
smith, 14  Or.  125;  Arnold's  Petition, 
15  R.  L  15;  Wilson  v.  Wright,  72  Ga. 
848;  Smith  v.  Coker,  66  Ga.  461; 
Smith  V,  Hodsdon,  78  Me.  180;  Pick- 
ett  V.  Ferguson,  45  Ark.  177;  55  Am. 
Rep.  545;  Lynch  v.  Andrews,  25  W. 
Va,  751;  Whitfield  v.  Riddle,  78  Ala. 
99;  March  banks  v.  Banks,  44  Ark,  48; 
Hammond  v,  Paxton,  58  Mich,  393; 
Hall  Lumber  Co.  v.  Gustin,  54  Mich. 
624;  Armstrong  v.  Broom,  5  Utah, 
176;  Gardner  v.  Peckham,  13  R.  L 
102.] 


879  CONCERNING    NOTICE.  §  634 

the  result  is  the  same;  an  alienee  of  the  subject-matter 
from  either  party  during  the  pendency  of  the  suit  takes 
it  subject  to  the  rights  of  the  other  party  involved  in  the 
controversy,  and  is  bound  by  the  decree  or  judgment 
finally  rendered.  In  the  great  majority  of  ordinary  liti- 
gations the  rule  has  naturally  been  applied  to  an  alienee 
of  the  defendant;  but  it  is  also  extended,  wherever  the 
nature  and  object  of  the  suit  require,  to  one  who  derives 
title  from  the  plaintiff.^  The  same  principle  embraces 
actions  at  law,  as  well  as  suits  in  equity;  but  from  the 
essential  nature  of  legal  titles,  it  need  not  ordinarily  be 
invoked  at  law.  In  all  actions  at  law  to  which  the  doctrine 
could  apply,  —  as,  for  example,  in  actions  of  ejectment, — 
if  the  plaintiff  recovers  a  judgment  against  the  defendant, 
he  has  also  a  perfect  title  against  any  alienee  of  the  de- 
fendant, since  he  must  necessarily  recover  upon  the 
strength  of  his  own  legal  title;  in  other  words,  the  de- 
fendant can  never  give  to  an  assignee  or  alienee  a  better 
title  against  the  plaintiff  than  that  which  he  himself 
holds.^  It  is  otherwise  in  many  equitable  suits.  Where 
the  plaintiff  in  equity  has  only  an  equitable  title  or  right 
to  the  property  in  dispute,  it  might  be  possible  for  the 
defendant  to  transfer  the  subject-matter  to  a  bona  fide 
purchaser,  and  thus  to  clothe  such  transferee  with  a  title 
overriding  the  equity  of  the  plaintiff.  The  doctrine  of 
constructive  notice  by  Us  pendens  is  therefore  an  essential 
incident  of  many  equitable  suits,  in  order  to  prevent  a 
failure  of  justice.  It  naturally  came  to  be  regarded  as  pe- 
culiar to  proceedings  in  courts  of  equity,  although  the 
same  principle  would  operate,  if  necessary,  at  law.  This 
analysis  and  description,  it  should  be  observed,  are  en- 
tirely independent  of  any  statutory  modifications  which 
have  been  made  in  some  of  the  states  and  in  England. 

§  634.    Requisites  of  the  Lis  Pendens.  —  Having  thus 
explained  the  general  rule  and  the  reasons  upon  which  it 

*  [A  suit  and  cross-suit  constitute     Lumber    Co.    T.    Onstin,    64    Mich, 
only  one  action,  and  notice  of  the  suit     624.] 
is  notice  of  the  cross-suit  also;  Uall        ^  Sheridau  v.  Andrews,  49  N,  X .  47ii> 


634 


EQUITY   JURISPEUDENCB. 


880 


rests,  I  shall  very  briefly  state  those  incidents  of  the 
pending  suit  which  must  exist  in  order  that  the  rule 
may  operate  and  its  effects  may  be  produced  upon  an 
alienee.  The  lis  pendens  and  the  consequent  notice,  to  use 
the  language  ordinarily  employed,  only  begin  from  the 
service  of  a  subpoena  or  other  process  after  the  filing  of  the 
bill,  so  that  the  court  may  have  acquired  jurisdiction  of 
the  defendant/  The  effect  of  the  suit  as  notice  continues 
through  the  entire  time  of  its  pendency,  and  ends  when 
the  suit  is  really  ended  by  a  final  judgment.'  In  order, 
however,  that  a  purchaser  pendente  lite  may  be  thus  af- 
fected, the  suit  must  be  prosecuted  in  good  faith,  with  all 
reasonable  diligence,  and  without  unnecessary  delay.  A 
neglect  to  comply  with  this  requisite  would  relieve  a  pur- 
chaser from  the  effect  of  the  lis  pendens  as  notice.'  The 
question  of  reasonable  diligence  in  prosecuting  the  suit 
must,  however,  depend  upon  the  circumstances  of  each 
case.     Thus  the  abatement  of  the  suit  by  the  death  of  a 


»  Allen  V.  Poole,  54  Miss.  323,  333; 
Allen  V.  Mandaville,  26  Miss,  397, 
399;  Center  v.  Bank,  22  Ala,  743; 
Farmers'  National  Bank  v.  Fletcher, 
44  Iowa,  252;  Murray  v.  Ballon,  1 
Johns.  Ch.  566,  576;  Hayden  v.  Buck- 
lin,  9  Paige,  512;  Leitch  v.  Wells,  43 
N.  Y.  5S5;  bnt  see  King  v.  Bell,  23 
Conn.  593;  Norton  v.  Burge,  35  Conn. 
250,  2S0;  Dresser  v.  Wood,  15  Kan. 
344;  Haughwont  v.  Mnrphy,  21  N.  J. 
Eq.  118;  Weeks  v.  Tomes,  16  Hun, 
349;  [Rooney  v.  Michael,  84  Ala.  585; 
Stone  V,  Tyree,  30  W.  Va.  687;  Mc- 
Claskey  v.  Barr,  48  Fed.  Rep.  130. 
See  also  Banks  v.  Thompson,  75  Ala. 
531;  Smith  v.  Cassidy,  73  Tex.  154; 
Hallon  V.  Trum,  125  111.  247;  William- 
eon  V.  Williams,  11  Lea,  355.  In  the 
latter  case  it  was  held  that  the  lis  pen- 
dens  did  not  operate  as  notice  until 
the  service  of  process  upon  the  de- 
fendant, even  though  a  copy  of  the 
bill  had  been  previously  read  to  such 
defendant  by  a  co-defendant  who  had 
been  served  with  process.  In  Haverly 
T.  Alcott,  57  Iowa,  171,  a  party  pur- 
chasing was  said  to  be  charged  with 
notice  from  the  time  the  petition  is 
filed.     Thia  result,  however,   follows 


from  the  provisions  of  the  Iowa  code, 
sec.  2628.] 

»  Ibid. ;  Turner  v.  Crebill,  1  Ohio, 
372;  and  see  Lee  Co.  v.  Rogers,  7 
Wall.  181;  Jackson  v.  Warren,  32  111. 
331;  Winborn  v.  Gorrell,  3  Ired.  Eq. 
117;  40  Am.  Dec.  456;  Page  v.  War- 
ing, 76  N.  Y.  463;  [Pickett  v.  Fergu- 
Bon,  45  Ark.  177;  Smith  v.  Hodsdon, 
78  Me.  180;  Evans  v.  Welborn,  74 
Tex.  530;  15  Am.  St.  Rep.  858;  Whit- 
field V.  Riddle.  78  Ala.  99;  Hammond 
V,  Paxton,  58  Mich.  393;  Hale  v. 
Warner,  36  Ark,  217.] 

'  Murray  v.  Ballou,  1  Johns.  Ch. 
566,  per  Kent,  C. ;  Herrington  v.  Mc- 
Collum,  73  111.  476;  Petree  v.  Bell,  2 
Bush,  58;  Clarkson  v.  Morgan,  6  B. 
Mon.  441,  448;  Watson  v.  Wilson,  2 
Dana,  406;  26  Am.  Dec.  459;  Price  v. 
McDonald,  1  Md.  403,  412;  54  Am. 
Dec.  657;  Gibler  v.  Trimble,  14  Ohio, 
323;  Trimble  v.  Boothby,  14  Ohio,  109; 
45  Am.  Dec.  526.  [To  the  same  efifect 
see  Hayes  v.  Nourse,  114  N.  Y,  607; 
Durand  v.  Lord,  115  111.  610;  Ham- 
mond  V.  Paxton,  53  Mich.  393;  Mann 
V.  Roberts,  11  Lea,  57,  In  the  latter 
case,  a  delay  of  three  and  a  half  years, 
without  excuse,  was  held  fatal.] 


881  CONCERNING   NOTICE.  §  634 

party  will  not  destroy  its  effect  as  lis  pendens,  provided  it 
is  revived  without  unnecessary  delay.*  Even  a  judgment 
in  favor  of  the  defendant  does  not  necessarily  at  once 
terminate  the  Us  pendens.  If  the  unsuccessful  party  is 
entitled  to  appeal,  the  constructive  notice  continues  dur- 
ing a  reasonable  time  for  an  appeal  to  be  taken.^  The 
effect  of  lis  pendens  upon  the  rights  of  an  alienee  depends 
not  only  upon  this  element  of  time,  but  also  upon  the 
averments  of  the  pleadings.  Proper  and  specific  alle- 
gations are  a  necessary  requisite.  Lis  pendens  is  notice 
of  everything  averred  in  the  pleadings  pertinent  to  the 
issue  or  to  the  relief  sought,  and  of  the  contents  of  ex- 
hibits filed  and  proved.^  In  order  that  the  notice  may 
thus  operate,  the  specific  property  to  which  the  suit  re- 
lates must  be  pointed  out  in  the  pleadings  in  such  a 
manner  as  to  call  the  attention  of  all  persons  to  the  very 
thing,  and  warn  them  not  to  intermeddle.  It  is  not 
necessary  that  the  land  should  be  described  by  metes  and 
bounds;  certainty  to  a  common  intent  —  reasonable  cer- 
tainty—  is  sufficient.  The  specific  subject-matter  should 
be  so  described  and  identified  that  no  one,  upon  reading 
the  allegations,  could  have  a  reasonable  doubt  as  to  what 
was  intended.  The  averments  of  the  bill  "  must  be  so 
definite  that  any  one  on  reading  it  can  learn  what  prop- 
erty was  intended  to  be  made  the  subject  of  litigation."* 

*  Ashley  v.  Cunningham,  16  Ark.  main  as  if  the  suit  had  never  been 
168;  Debell  v.  Foxworthy,  9  B.  Mon.  commenced:  Wortham  v.  Boyd,  60 
228;  Watson  V.  Wilson,  2  Dana,  406;  Tex.  401;  Valentine  v.  Austin,  124 
26  Am.  Dec.  459.  In  the  last-named  N.  Y.  400.  And  a  suit  is  deemed  to 
case  the  efifect  of  a  death,  and  the  have  been  abandoned,  within  the 
necessity  of  a  revivor  without  delay,  meaning  of  the  rule,  when  another 
are  fully  and  carefully  examined  by  suit  seeking  the  same  relief  is  insti- 
the  court.  And  see  also  Herrington  tuted  and  carried  to  decree  in  it- 
V.  McCoUum,  73  111.  476.  place.     The    lis  pendens  filed   in    tlie 

*  When  an  appeal  is  thus  taken  first  suit  will  not  be  given  eflfect  in 
without  delay,  the  &  pendens  is,  of  the  second:  Hammond  v.  Paxton,  58 
course,  prolonged  until    the  final  de-  Mich.  393.] 

cision;    Debell    v.    Foxworthy,    9    B.  »  Allen  v.  Poole,  54  Miss.  323,  333; 

Mon.  228;  Oilman  v.  Hamilton,  16  111.  Center  v.  Bank,  22  Ala.  743,  757. 

225;    [Moore  v.  Moore.  67  Tex.  293;  *  Allen  v.  Poole,  54  ]SIiss.   323,  333; 

Randall  v.  Snyder,  64  Tex.  350.     But  Miller  v.  Sherry,  2  Wall.  237;  Oreea 

if  the  suit  be  ended  by  an  abandon-  v.  Slayter,  4  John??.  Ch.  38;  Griffith  v. 

ment    or    dismissal    by    the    adverse  Griffith,  9  Paige.  315,  'Ml;  1  Hoff.  Ch. 

party,  the  rights  of  the  purchaser  re-  153;  Low  v.  Pratt,  53  111.  43S:  I  ewis 
2  Eq.  Job.  — 56 


§  635  EQUITY    JURISPRUDENCE.  882 

The  notice  arising  from  a  pending  suit  does  not  affect 
property  not  embraced  within  the  descriptions  of  the 
pleading;  nor  does  its  operation  extend  beyond  the  prayer 
for  relief.^  I  would  remark,  in  passing,  that  while  the 
general  doctrine  of  notice  by  lis  pendens  and  the  fore- 
going special  rules  have  ordinarily  been  applied  to  real 
property  described  by  the  plaintiff  in  his  bill  of  com- 
plaint, they  should,  upon  principle,  apply  with  equal  force 
to  the  "counterclaims"  and  "cross-complaints"  author- 
ized by  the  reformed  procedure,  by  which  the  defendant 
alleges  some  equitable  interest  or  right,  and  demands 
some  affirmative  equitable  relief.  In  such  pleadings  the 
defendant  becomes  the  actor,  and  is  to  all  intents  and 
purposes  a  plaintiff.^ 

§  635.  To  What  Kinds  of  Suits  the  Rule  Extends  — 
Suits  concerning  Land.  —  It  may  be  stated  as  a  general 
proposition  that  the  doctrine  of  notice  by  lis  pendens 
extends  to  all  equitable  suits  which  involve  the  title  to 
a  specific  tract  of  land,  or  which  are  brought  to  establish 
any  equitable  estate,  interest,  or  right  in  an  identified 
parcel  of  land,  or  to  enforce  any  lien,  charge,  or  encum- 
brance upon  land.  Among  the  most  familiar  instances 
in  which  the  rule  applies  are  suits  to  foreclose  mortgages, 
to  enforce  vendor's  liens,  to  establish  trusts,  and  the  like.' 

▼.  Madisons,  1  Munf.  303.    See  Browa  Blanchard    v.    Ware,    43   Iowa,    530, 

V,  Goodwin,  75   N.  Y.  409;   Joues  v.  631;   37   Iowa,  305,  307  (suit  to  spe- 

McNarrin,  68  Me.  334;  28  Am.  Rep.  cifically  perform  a  contract  for  sale  of 

66;   JaflFray  v.  Brown,   17    Hun,  575.  land    fraudulently  concealed   by   the 

[See   also    Russell    v.    Kirkbride,    (32  grantor);  Brundage  v.  Biggs,  25  Ohio 

Tex.  455;  Arnold's  Petition,  15  R.  I.  St.  652,  656  (equitable  interest  in  the 

15.]  land  set   up   by  the   defendant   in   a 

^  Ibid.  See  Chapman  v.  West,  17  "counterclaim,"  or  cross-complaint); 
N.  y.  125,  for  peculiar  circumstances  Seabrook  v.  Brady,  47  Ga.  650  ^suit  to 
in  which  the  notice  extends  to  a  por-  enforce  a  charge  on  land);  Tiiarpe  v. 
tion  of  the  premises  not  directly  em-  Dunlap,  4  Heisk.  674,  686  (suit  in- 
braced  within  the  objects  of  the  suit;  volving  the  title  to  land);  Salisbury 
Drake  v.  Crowell,  40  N.  J.  L.  58.  v.  Morss,  7  Lans.  359,  365  (suit  to  en- 

'  [See  Hall  Lumber  Co.  v.  Gustin,  force  a  charge  created  by  will  on  land 

54  Mich.  624.]  devised);  Edwards   v.  Banksmith,  35 

»  Allen  V.  Poole,  54  Miss.  323,  333;  Ga.  213;  Knowles  v.  Rablin,  20  Iowa, 

Cboudron  v.  Magee,  8  Ala.  .570;  Real  101;  Wickliffe  v.  Breckinridge,  1  Bush, 

Estate   Sav.    Inst.    v.    Collonious,    63  427;  Bayer  v.  Cockerill,  3  Kan.  28-J; 

Mo.    290,    294    (suit    to   set   aside   a  Horn  v.  Jones,  28  Cal.  194:  Cockrill 

partition  sale   on   account  of   fraud);  v.  Maney,  2  Tenn.  Ch.  49j  Watson  v. 


883 


CONCERNING   NOTICE. 


§  636 


§  636.  Suits  concerning  Personal  Property.  —  While 
the  doctrine,  in  general,  applies  to  all  equitable  suits  in 
which  the  subject-matter  is  land,  or  any  estate  or  interest 
therein,  the  proposition  is  equally  true  and  general  that 
it  does  not  extend  to  ordinary  suits  concerning  personal 
property,  goods  and  chattels,  securities  or  money.^  The 
reason  for  this  restriction  is  obvious;  there  is  no  neces- 
sity for  invoking  the  rule  in  such  litigations,  under  all 
ordinary  circumstances.  The  decisions  have,  however, 
admitted  an  exception  to  this  general  proposition  in  one 
class  of  suits.  Actions  brought  to  enforce  a  trust  extend- 
ing over  personal  property,  goods,  and  securities  not 
negotiable  in  their  nature  are  held  to  be  within  the 
operation  of  the  rule.  A  purchaser  of  such  trust  prop- 
erty from  the  trustee,  during  the  pendency  of  the  action, 
is  charged  with  constructive  notice,  and  his  purchase  is 
invalid  as  against  the  plaintiff  whose  rights  are  estab- 
lished by  the  final  decree.^     It  is  well  settled  that  the 


Wilcox,  39  Wis.  643;  20  Am.  Rep. 
63;  Truitt  v.  Truitt,  38  Ind.  16.  The 
actioa  of  ejectment  by  which  an  equi- 
table interest  was  enforced  under  the 
peculiar  practice  prevailing;  in  Penn- 
sylvania operated  as  notice  within 
the  principle  of  the  rules:  Bollin  v. 
Connelly,  73  Pa.  St.  336;  Hersey  v. 
Turbett,  27  Pa.  St.  418;  Hill  v.  Oli- 
phant,  41  Pa.  St.  364.  A  suit  to  for- 
close  an  unrecorded  mortgage  may 
thus  operate  as  a  notice  of  the  mort- 
gage to  subsequent  purchasers  in  place 
of  an  actual  recording:  Center  v. 
Bank,  22  Ala.  743;  Chapman  v.  West, 
17  N.  Y.  125;  [Armstrong  v.  Broom, 
5  Utah,  176;]  but  not,  perhaps,  where 
a  statute  requires  an  actual  notice  of 
the  prior  unrecorded  mortgage:  Mc- 
Cutchen  v.  Miller,  31  Miss.  65;  New- 
man v.  Chapman,  2  Rand.  93;  14  Am. 
Dec.  766.  [In  Green  v.  Rick,  ]  'n  Pa. 
St.  130,  6  Am.  St.  Rep.  670,  the  doc- 
trine was  held  not  applicable  in  a  suit 
in  which  a  bond  and  mortgage  were  in 
litigation,  but  the  land  bound  bj'  them 
was  not.  The  doctrine  is  applicable 
to  a  suit  to  enforce  the  lien  of  an 
attorney  for  his  services:  Wilson  v, 
Wright,  72  Ga.  848;  but  not  to  a  suit 
of    forcible    detainer    by  a    landlord 


against  his  tenant,  as  such  a  suit  in- 
volves no  question  of  title,  and  conse- 
quently does  not  charge  third  parties 
with  notice  of  an  assertion  of  title  by 
the  tenant  inconsistent  with  his  lease: 
Hoffman  v.  Blume,  64  Tex.  334;  nor 
to  an  action  coUusively  prosecuted, 
when  the  parties  to  it  all  know  that 
there  is  no  right  to  enforce:  Rippetoe 
V.  Dwyer,  65  Tex.  703.1 

>  [Miles  v.  Lefi,  60  Iowa,  168;  Gard- 
ner V.  Peckham,  13  R.  I.  102;  Hill 
V,  Scotland  Co.,  34  Fed.  Rep.  208.] 

*  Murray  v.  Lylburn,  2  Johns.  Ch. 
441;  Leitch  v.  Wells,  48  Barb.  637; 
48  N.  Y.  585;  Scudder  v.  Van  Am- 
burgh,  4  Edw.  Ch.  29;  Diamond  v. 
Lawrence  Co.  Bank,  37  Pa.  St.  353; 
78  Am.  Dec.  429;  Boiling  v.  Carter, 
9  Ala.  921;  Shelton  v.  Johnson,  4 
Sneed,  672;  70  Am,  Dec.  265.  This 
exception  has,  however,  been  admitted 
by  the  courts  with  great  caution,  and 
within  narrow  limits,  so  as  not  to  in- 
terfere with  that  freedom  of  transfer 
and  certainty  of  title  required  by  the 
interests  of  mercantile  and  commer- 
cial business.  It  has  never  been  ex- 
tended to  securities  or  other  personal 
property  which  are  negotiable  or  even 
semi-negotiable  in  the  transactions  of 


§  636 


EQUITY    JURISPRUDENCE. 


884 


doctrine  of  constructive  notice  from  lis  pendens  does  not 
embrace  suits  concerning  negotiable  instruments  or  mon- 
eys, so  as  to  affect  the  title  of  a  transferee  for  value  and 
in  good  faith  during  the  pendency  of  the  action,  even 
when  the  transfer  was  made  in  direct  violation  of  an 
injunction,  so  that  the  indorser  or  assignor  would  be 
punishable  for  the  contempt.^ 


commerce.  The  leading  case  is  Mur- 
ray V.  Lylburn,  2  Johns.  Ch.  441.  A 
bill  had  been  filed  against  one  Win- 
ter, who  held  land  as  trustee  for  the 
plaintiff,  charging  a  breach  of  trust; 
and  an  injunction  was  issued  restrain- 
ing W.  from  disposing  of  such  trust 
property  or  proceeds  thereof.  Pend- 
ing this  suit,  W.  sold  and  conveyed  a 
parcel  of  the  trust  land,  and  took 
back  a  bond  and  mortgage  for  the 
price.  These  securities  he  assigned 
to  Lylburn,  who  paid  value  for  them, 
and  had  no  actual  notice  of  the  pend- 
ing suit  against  W.  The  plaintiff 
thereupon  filed  this  supplemental  bill 
against  L.  and  W.  to  reach  the  bond 
and  mortgage  so  transferred.  Chan- 
cellor Kent,  after  saying  that  the 
plaintiff's  right  to  relief  against  L. 
depended  entirely  upon  the  former 
suit  being  constructive  notice  to  L., 
proceeded:  "The  object  of  that  suit 
was  to  take  the  whole  subject  of  the 
trust  out  of  W.'s  hands,  together  with 
all  the  papers  and  securities  relating 
thereto.  If  W.  had  held  a  number 
of  mortgages  and  other  securities  in 
trust,  when  the  suit  was  commenced, 
it  would  not  be  pretended  that  he 
might  safely  defeat  the  object  of  the 
suit  and  the  justice  of  the  court  by 
selling  these  securities.  If  he  pos- 
sessed cash,  as  proceeds  of  the  trust 
estate,  or  negotiable  paper  not  due,  or 
perhaps  movable  personal  property,  such 
as  horses,  cattle,  grain,  etc.,  I  am  not 
prepared  to  say  the  rule  is  to  be  car- 
ried so  far  as  to  affect  such  sales. 
The  safety  of  commercial  dealings 
would  require  a  limitation  of  the  rule; 
but  bonds  and  mortgages  are  not  the 
subjects  of  ordinary  commerce,  and 
they  formed  one  of  the  specific  sub- 
jects of  the  suit  against  W.  If  the 
trustee,  pending  the  suit,  changed  the 
land  into  personal  security,  I  see  no 
good  reason  why  the  cestui  que  trust 
should  not  be  at  liberty  to  affirm  the 
sale,  and  take  the  security;  and  who- 


ever afterwards  purchased  it  was 
chargeable  with  notice  of  the  suit," 
In  Leitch  v.  Wells,  48  Barb.  637,  the 
supreme  court  of  New  York  applied 
the  same  rule  to  a  purchaser  of  stocks 
during  the  pendency  of  a  similar  suit; 
but  this  decision  was  reversed  on  ap- 
peal: Leitch  v.  Wells,  48  N.  Y.  585. 
The  court  of  appeals  did  not  decide, 
however,  that  the  rule  cannot  apply 
to  stocks.  The  rule  seems  also  to 
have  been  held  applicable,  by  Judge 
Story,  to  a  suit  brought  for  the  settle- 
ment of  partnership  affairs,  and  to 
enforce  the  partner's  lien  upon  prop- 
erty of  the  firm:  Hoxie  v.  Carr,  1 
Sum.  173;  Dresser  v.  Wood,  15  Kan. 
344. 

1  The  evident  reasons  for  this  dis- 
tinction are  based  upon  the  exigencies 
of  commerce,  and  the  familiar  doc- 
trines respecting  negotiable  paper: 
Murray  v.  Lylburn,  2  Johns.  Ch.  441, 
per  Kent,  C;  Leitch  v.  Wells,  48 
N.  Y.  585;  Stone  v.  Elliott,  11  Ohio 
St.  252,  260;  Winston  v.  Westfeldt, 
22  Ala.  760;  58  Am.  Dec.  278;  Kieffer 
Ehler,  18  Pa.  St.  388,  391;  Hibernian 
Bank  v.  Everman,  52  Miss.  500;  May- 
berry  V.  Morris,  62  Ala.  113.  [Sea 
also  Carroll  Co.  v.  Smith,  111  U.  S. 
562;  Warren  Co.  v.  Marcy,  97  U.  S, 
"96.]  As  to  the  effect  of  a  "  creditor's 
suit,"  and  how  far  it  operates  as  no- 
tice to  a  purchaser  pendente  lite  of 
property  which  it  claims  to  reach  by 
means  of  an  equitable  lien,  see  Mc- 
Dermutt  v.  Strong,  4  Johns.  Ch.  687; 
Hadden  v.  Spader,  20  Johns.  554; 
Weed  V.  Pierce,  9  Cow.  722;  Edmes- 
ton  V.  Lyde,  1  Paige,  637;  19  Am. 
Dec.  454;  Corning  v.  White,  2  Paige, 
567;  22  Am.  Dec.  659;  Farnham  v. 
Campbell,  10  Paige,  598;  Miller  v. 
Sherry,  2  Wall.  237;  United  States 
Bank  v.  Burke,  4  Blackf.  141;  Norton 
V.  Birge,  35  Conn.  250;  Watson  v. 
Wilson,  2  Dana,  406;  26  Am.  Dec. 
459;  Blake  v.  Bigelow,  5  Ga.  437;  Mc- 
Cutchen  v.  Miller,  31  Miss.  65. 


885 


CONCERNING   NOTICE. 


§  637 


§  637.  What  Persons  are  Affected  by  the  Notice.  — 
Assuming  that  all  the  foregoing  requisites  exist,  the  con- 
structive notice  by  the  pendency  of  the  suit  extends  only 
to  those  who  derive  title  from  a  party  or  privy  pendente  lite. 
A  purchaser  of  the  very  land  described  in  the  pleadings 
from  one  who  is  not  a  party  to  the  suit,  or  a  privy  to 
such  party,  is  never  chargeable  with  the  constructive 
notice,^  If,  however,  a  person  has  acquired  a  prior  right 
to  the  specific  land,  the  commencement  of  a  suit  affecting 
the  same  land  will  not  invalidate  any  act  which  he  may 
subsequently  do  in  pursuance  of  such  antecedent  right, 
or  for  the  purpose  of  carrying  it  into  effect.* 


» Miller  v.   Sherry,   2    Wall.    237; 
Stuyvesant  v.  Hone,  1  Sand.  Ch.  419; 
Stuyvesant  v.  Hall,  2  Barb.  Ch.  151; 
Parka  v.  Jackson,   11  Wend.  442;  25 
Am.    Dec.  656;  French  v.  The  Loyal 
Co.,  5  Leigh,  627;  Clarksonv.  Morgan, 
6  B.  Mon.  441;  Scarlet  v.  Gorham,  28 
III.   319;  Parsons  v,   Hoyt,   24  Iowa, 
ir)4;  Herrington  v.  Herrington,  27  Mo. 
560;  [Spraguev.  White,  73  Iowa,  670.] 
Ill    Miller   v.    Sherry,   2    Wall.   237, 
Swayne,    J.,    said:    "Another   reason 
why  the  bill  could  not  operate  as  con- 
structive notice,  — Williams,  who  held 
the  legal  title,  was  not  a  party.     We 
apprehend  that  to  affect  a  person  as  a 
purchaser  pendente  lite,  it  is  necessary 
to  show  that  the  holder  of  the  legal 
title  was  impleaded    before  tlie   pur- 
chase which  is  to  be  set  aside."    In 
Bruadage  v.  Biggs,  25  Ohio  St.  652, 
656,   the  defendant,   by  a  cross-com- 
plaint, set  up  an  equitable  interest  in 
.  the  land,  the  legal  title  to  which  was 
in  the  plain tifif's  wife.    She  was  made 
a  party   in  this  cross-complaint,  and 
applied  by  her  attorney  and  obtained 
leave  from  the  court  to  answer.     The 
husband  and  wife,  pendente  lite,  united 
in  a  conveyance  of  the  land  to  A,  who 
paid  value,  and  had  no  actual  notice 
of  the  suit.     Held,  that  the  wife  was 
a  party;  that  A  was  a  purchaser  from 
a  party,  and  had  constructive  notice 
and  was  bound  by  the  result  of  the 
suit.      Fuller  v.  Scribner,    76  N.  Y. 
190,  holds  that  the  notice  binds  a  sub- 
sequent judgment  creditor  of  a  party 
whose  judgment  would   otherwise  be 
an  encumbrance.     [The  statutory  no- 
tice does  not  affect  persona  who  enter 


into  possession  adversely  to  all  the 
parties:  Irving  v.  Cunningham,  77  Cal. 
52.] 

*  Farmers'  Nat.   Bank  v.   Fletcher, 
44  Iowa.  252;  Stuyvesant  v.  Hone,  1 
Sand.  Ch.  419;  Stuyvesant  v.   Hall,  2 
Barb.  Ch.   151;  Parks  v.  Jackson,   11 
Wend.  442;  25  Am.  Dec.  656;  Clark- 
sou  V.  Morgan,  6  B.  Mon.  441;  Trim- 
ble v.  Boothby,  14  Ohio,  109;  45  Am. 
Dec.  526;  Gibler  v.  Trimble,  14  Ohio, 
323.     For  example,  the  bringing  a  suit 
against  A  as  the  owner  of  land  is  not 
notice  to  B,  a  prior  vendee  from  A, 
who  is  in  actual  possession,  and  will 
not   prevent   him  from   subsequently 
taking   the   necessary   steps   to   com- 
plete the  purchase  and  obtain  a  deed 
of  conveyance.     [Thus  a  statutory  lis 
pendens  is  ineffectual  against  a  mort- 
gagee whose  mortgage  antedated  the 
notice,  although  it   was  not  recorded 
until  after  the  notice  was  filed:  Ham- 
mond v.  Paxton,  58  Mich.  393.     And 
where  land  is  sold  to  a  bona  fide  pur- 
chaser, and  suit  is  subsequently  brought 
against  the  vendor  for  the  recovery  of 
the  property,  this  will  not  affect  the 
vendee  under  the  doctrine  of  lis  pen- 
dens.     Nor  will   such   suit   adversely 
affect  a  purchaser  from  such  vendee, 
although   the   purchaser    might   have 
been   chargeable   with    notice    of   the 
pending  suit:  Planters'  Loan  and  Sav. 
Bank  v.  Johnson,  70  Ga.  302.    To  oper- 
ate as  notice,  the  purchase  must  have 
been  make  from  one  who  was  a  party 
to  the  suit  at  the  time,  and  it  is  not 
enough   if    he    be   brought    in    after- 
wards:    Marchbanks     v.     Banks,    44 
Ark.  48.] 


§§  638,  639  EQUITY    JURISPRUDENCE.  886 

§  638.  To  a  Purchaser  from  Either  Litigant  Party.  — 
The  question  j-et  remains  whether  the  rule  of  construct- 
ive notice  applies  to  a  purchaser  pendente  lite  from  either 
party  to  the  litigation.  The  principle  upon  which  the 
doctrine  is  based,  and  all  the  reasons  of  policy  by  which 
it  is  supported,  clearly  extend  alike  to  both  the  litigants. 
In  the  great  majorit}''  of  instances,  it  has  undoubtedly 
been  a  purchaser  from  the  defendant  who  has  been 
charged  with  the  constructive  notice.  The  plaintiff, 
however,  is  equally  prevented  from  alienating  the  sub- 
ject-matter of  the  controversy,  to  the  prejudice  of  the  • 
defendant,  wherever,  from  the  nature  of  the  suit,  he  might 
have  in  the  result,  by  the  final  decree,  a  right  established 
as  against  the  plaintiff.*  Finally,  is  a  purchaser  from 
one  defendant  pendente  lite  affected  by  the  right  of  an- 
other defendant  in  the  same  suit?  This  special  question 
has,  upon  careful  consideration,  been  answered  in  the 
negative.  It  has  been  held  that  where  a  person  without 
actual  notice  of  a  suit  purchases  from  one  of  the  defend- 
ants property  which  is  the  subject  of  it,  he  is  not,  in 
consequence  of  the  pendency  of  the  suit,  affected  by  an 
equitable  title  of  another  defendant  which  appears  on  the 
face  of  the  proceedings,  but  of  which  he  has  no  notice, 
and  to  which  it  is  not  necessary  for  any  purposes  of  the 
suit  to  give  effect.^ 

§  639.  The  Statutory  Notice  of  Lis  Pendens.  —  The 
general  rule  concerning  constructive  notice  by  lis  pendens, 
although  firmly  settled,  has  always  been  regarded  by  the 
courts  as  a  very  harsh  one  in  its  application  to  bona  fide 
purchasers  for  value;  it  has  only  been  tolerated  from  the 
supposed   necessity.     It    has   not    been    a   favorite   with 

'  For  example,  in  a  suit  brought  by  Bellamy  v.  Sabine,  1  De  Gex  &  J.  566, 

a  devisee  against  the  heirs,  to  estab*  5S0,  per  Lord  Cranworth. 

lish  a  will,  the  final  decree  might  de-  *  Bellamy  v.  Sabine,  1  De  Gex  &  J. 

clare  the  devise  void  and  establish  the  566.     The  full  court  of  appeal  in  chan- 

title  of    the   defendant.     Plainly,    in  eery.  Lord  Chancellor  Cranworth  and 

such  a  case,  the  plaintiff  cannot  alien-  Lord  Justices  Knight  Bruce  and  Tur- 

ate  the  land  pendente  lite,  and  thus  cut  ner,  held  that  the  case  did  not  come 

off  the  defendant's   possible   ultimate  either  within  the  principle  of  the  rule 

rights:    Garth  t.  Ward,  2  Atk.  174;  nor  within  the  authorities. 


887  CONCERNING    NOTICE.  §  640 

courts  of  equity,  and  has  never  been  enlarged  in  its 
operation  beyond  its  well-settled  limits.*  These  consid- 
erations have  led  the  English  Parliament  and  the  legis- 
latures of  many  states  to  interfere,  and  to  create  most 
important  statutory  modifications  and  restrictions.  It 
should  be  observed  that  wherever  the  terms  of  these 
statutes,  and  the  alterations  made  by  them,  apply  only  to 
suits  concerning  real  estate,  which  is  true  in  much  of  the 
state  legislation,  —  the  rule  as  to  suits  concerning  per- 
sonal property  remains  unchanged,  the  same  as  at  the 
common  law.^ 

§  640.  Modern  Statutory  Provisions.  —  By  the  English 
statute,  a  pending  suit  will  not  ajffect  a  purchaser  for  value 
and  without  express  notice,  unless  a  notice  of  lis  pendens 
has  been  properly  registered  in  compliance  with  the  stat- 
utory directions.'  One  quite  general  type  of  the  American 
statutes  enacts  that  in  every  suit  relating  to  or  affecting 
real  estate  the  plaintiff  may  at  the  time  of  commencing 
the  action,  or  afterwards,  prior  to  final  judgment,  file  or 
procure  to  be  recorded  in  the  clerk's  or  recorder's  office 
of  the  county  in  which  the  land  is  situated  a  written 
notice  describing  the  lands  affected  and  the  general  na- 
ture of  the  action,  and  that  no  suit  concerning  real  estate 
shall  be  notice  to  a  purchaser  pendente  lite  for  value  and 
without  actual  notice  unless  and  until  such  a  notice  of 
lis  pendens  has  been  thus  filed  or  recorded.*     The  terms 

*  See  Leitch  v.  Wells,  48  N.  Y.  585,  the  pendency  of  the  suit  were  regia- 

609,  per  Earl,  J.;  Hayden  v.  Backlin,  tered,  and  that  the  registered  notice^ 

9  Paige,  512,  per  Walworth,  C.  should  become  void  at  the  end  of  five 

'  Leitch  V.  Wells,  48  N.  Y.  585,  602,  years,   unless  it  should    be   re-regis- 

per  Hunt,  J.     Speaking  of  the  statute  tered.] 

in  New  York,  the  learned  judge  says:        *  Kew  Tori.  —  Code  Proc,  sec  132' 

"This   relaxation   of   a  rigorous  rule  (old  code);  Code  Civ.  Proc.  (new  code),, 

applies  to  real  estate  only,  and  as  to  Bliss's  ed.,  vol.  2,  p.  104,  sec.  1670. 
personal  property  the  rule  remains  aa        California.  —  Code  Civ.  Proc.   1880,. 

at  the  common  law."  p.  142,  sec.  409.    [See  Pearson  v.  Creed, 

»  Stats,  2  &   3  Vict.,  c  11,  sec.  7.  78  Cal.    144.     Under    the   California 

[By  this  act,  as  amended  by  18  &  19  statute,  a  party  acquiring  a  homestead 

Vict.,  c.  15,  it  is  provided  that  a  lis  interest  in  property  after  filing  a  lis 

pendefu  should  not  bind  a  purchaser  pendens  is  a  purchaser,  and  charged 

or  mortgagee  pendente  lite,  without  ex-  with    constructive   notice:    Roach   v. 

press  notice  thereof,  unless  a  notice  of  Riverside  W.  Co.,  74  CaL  263.     The 


§640 


EQUITY   JURISPRUDENCE. 


888 


of  these  statutes  apply  alike  to  legal  and  to  equitable 
actions.  The  second  type  of  these  statutes  dififers  from 
the  former  one  only  in  the  provisions  being  more  general, 
and  extending  to  all  suits  which  could  possibly  furnish 
an  occasion  for  the  operation  of  the  original  doctrine. 
The  constructive  notice  in  all  actions  to  which  the  equi- 
table rule  would  have  applied  is  made  to  depend  upon  the 
filing  or  recording  of  a  proper  notice.'  It  is  only  neces- 
sary to  add  that  all  the  special  rules  collected  in  the  fore- 
going paragraphs  concerning  the  commencement  of  the 
lis  pendens,  its  continuance  as  long  as  the  suit  is  diligently 
prosecuted,  its  termination  by  the  final  judgment  which 
ends  the  action,  the  sufficient  description  or  identification 
of  the  subject-matter  by  the  allegations  of  the  pleadings, 
and   the   persons  who  are   affected   by  the  constructive 


notice  does  not  affect  persons  who 
enter  into  possession  adversely  to  all 
the  parties  to  the  action  in  which  the 
notice  is  filed:  Irving  v.  Cunningham, 
77  Cal.  52.] 

[Colorado.  —  Code  Proc  1890,  sec. 
3G.] 

Connecticut. — Rev.  Stats.  1875,  p. 
402,  sec.  4;  [Gen.  Stats.  1888,  sec. 
916.] 

lllinoM.—'Rev.  Stats.  1880,  p.  149, 
sec.  9;  I  Kurd's  Rev.  Stats.  1889,  c.  11, 
sec.  9.] 

Iowa.— 2  Rev,  Code  1880,  p.  664, 
sees.  2628,  2629;  [McClain's  Code, 
1888,  sees.  3834,  3835.] 

Michigan. — 2  Comp.  Laws  1871,  p. 
1535,  sec.  29;  p.  1805,  sec.  10;  [How- 
ell's Stats.  1882,  sees.  6619,  7995.] 

Minnesota. — Gen.  Stats.  1878,  p. 
819,  sec.  34. 

Missouri.  —  Winslow'a  Code  Proc. 
1879,  p.  103,  sec.  420. 

Nevada.  —  Stats.  1869,  p.  215,  sec. 
128. 

New  Jersey.  — Rev.  1877,  p.  49,  sec. 
43. 

North  Carolina.  —  Code  Civ.  Proc. 
1868.  p.  36,  sec.  90. 

Ohio.  — 2  Rev.  Stats.  1880,  p.  1233, 
sec.  5056;  [Benton  v.  Shafer,  47  Ohio 
St.  117.] 

Oregon.  —  Code  Civ.  Proc.  1863,  p. 
38,  sec.  149. 

Pennsylvania, — Dunlop's    Dig.,    p. 


677,  sec.  6;  [Brightly'a  Purdon'a  Dig. 
1883,  p.  641,  sec.  24.] 

Rhode  Island.  —Gen.  Stats,  1872,  p. 
456,  sec.  12;  [Pub.  Stats.  1882,  p.  567, 
sec.  12.] 

South  Carolina. —Rev.  Stats.  1873, 
p.  600,  sec.  155;  [Code  Civ,  Proc.  1882, 
sec.  153.] 

Virginia.— Code  1860,  p.  770,  sec. 
5;  [Code  1SS7,  sec.  3566;  Hum  v. 
Kelly,  79  Va.  415.] 

West  Virginia.— 2 Rey.  Stats.  1879, 
p.  932,  sec.  14. 

Wisconsin. — 2  Rev.  Stats.  1871,  p. 
1428,  sec.  7;  [Sanborn  and  Berryman's 
Stats.  1889,  sec.  3187.] 

'  In  some  of  these  statutes  the  oper- 
ation of  the  statutory  notice  is  con- 
fined to  particular  kinds  of  personal 
property. 

Kansas.  —  Dassler's  Comp.  Laws 
1881,  p.  612  [1885,  c.  80],  sec.  81. 

Mai}ie.  —  Rev.  Stats.  1871,  p.  620, 
gee.  24;  p.  626,  sec.  56;  [1883,  c.  81, 
sees.  24,  59.] 

Massachusetts.  —  Gen.  Stats.  1860, 
p.  626,  sec.  51;  p.  627,  sec.  57;  also 
Supp.  1860,  p.  12,  sec.  1;  Supp.  1873, 
p.  46,  sec.  1;  [Pub.  Stats.  1882,  c.  126, 
see.  13.] 

New  Hampshire.  — Gen.  Laws  1878, 
p.  518,  sec.  3;  p.  519,  sec.  16. 

Vermont.— Gen.  Stats.  1870,  p.  294, 
sec.  37;  p.  997,  sec.  1;  [Rev.  Law8 
1880,  sec.  874.] 


889  CONCERNING   NOTICE.  §  641 

notice,  are  still  in  force,  and  apply  to  all  cases  which 
come  within  the  operation  of  the  statutory  provisions.* 

§  641.  5.  By  Judgments.  —  By  the  original  doctrine  of 
equity,  independent  of  all  statutory  changes,  it  was  settled 
that  a  final  judgment  or  decree  by  which  the  lis  pendens 
is  ended  and  the  controversy  is  terminated  was  not  a 
constructive  notice  to  persons  not  parties  to  the  suit,* 
except  to  a  purchaser  pendente  lite?  It  should  be  re- 
membered in  this  connection  that  a  decree  in  chancery 
originally  acted  only  upon  the  person  of  a  defendant,  and 
did  not  create  any  interest  or  title  in  or  lien  upon  the 
property  afifected  by  the  suit.*  While  this  original  rule 
was  still  unmodified  by  statute,  a  purchaser  of  the  prop- 
erty affected  by  a  judgment,  even  though  it  was  not  dock- 
eted, would  be  bound  by  it,  provided  he  had,  prior  to  the 
purchase,  received  actual  notice  of  it.'  If  it  was  shown 
that  a  subsequent  purchaser  had  made  a  search  for 
judgments,  actual  notice  of  an  existing  judgment  might 
also  be  inferred  from  that  fact.*  The  British  Parliament 
has,  within  the  past  generation,  completely  changed  the 
original  law  concerning  the  efioct  of  judgments,  and  has 

'  See,  as  illustrations,  Todd  v.  Out-  Riverside  W.  Co.,  74  Cal.  263;  Benton 

law,  79  N.  C.  2?,b;  Majors  v.  Cowell,  v.  Shafer,  47  Ohio  St.  117.] 

51  Cal.  478;  Dresser  v.  Wood,  15  Kan.  '  Worsley  v.   Earl  of  Scarborough, 

344;   Mills   v.    Bliss,   55   N.    Y.    139;  3  Atk.  392;  Churchil  v.  Grove,  1  Ch. 

Sheridan  v.  Andrews,  49  N.  Y.  47S;  Cas.  35;    Freem.     Ch.     176;    Lane   v. 

Brown  V.   Goodwin,    75   N.   Y.   409;  Jackson,  20  Beav.  535;  Lee  v.  Green, 

Mitchell  V.  Smith,  53  N.  Y.  413;  Ay-  6  De  Gex,  M.  &  G.  155. 

rauLt  V.  Murphy,  54  N.  Y.  203;  Fuller  •  The  notice  then  arose   from  the 

V.    Scribner,  76   N.  Y.   190;   Page  v.  Us  pendens,  and  not  by  virtue  of  any 

Waring,  76  N.  Y.  463;  Farmers'  Nat.  particular  attribute  of  the  judgment 

Bank  v.  Fletcher,  44  Iowa,  252;  Stuy-  itself.     See  ante,  §§  633,   634,  on  the 

vesant  v.  Hall,  2  Barb.  Ch.  151;  Stuy-  effect  of  a  Us  pendens. 

vesant   v.    Hone,    1    Sand.    Ch.    419;  *  See  Lee  v.  Green,  6  De  Gex,  M.  8t 

White  V.  Perry,  14  W.  Va.  66;  May-  G.  155,  168,  per  Cranworth,  L.  C. 

berry  v.  Morris,  62   Ala.  113;  Tred-  *  Davis    v.     Strath  more,    16    Ves. 

way  V.  McDonald,  51  Iowa,  663;  Jones  419. 

V.  McNarrin,  68  Me.  334;  28  Am.  Rep.  «  Procter  v.  Cooper,  2  Drew.  1;  18 
66;  Weeks  v.  Tomes,  16  Hun,  349;  Jar.  444;  1  Jur.,  N.  S.,  149.  As  to 
Jaffray  v.  Brown,  17  Hun,  575;  Drake  the  effect  of  notice  or  want  of  notice 
V.  Crowell,  40  N.  J.  L.  58.  [See  also  of  a  registered  judgment  upon  a  pur- 
Hayes  V.  Nourse,  114  N.  Y.  607;  chaser,  see  Knight  v.  Pocock,  24  Beav. 
Hovey  v.  Elliott,  118  N.  Y.  132;  436;  Governors  of  the  Gray  Coat  Hos- 
Valentine  v.  Austin,  124  N.  Y.  400;  pital  v.  Westminster  etc.  Comm'rs,  1 
Sprague  v.  White,  73  Iowa,  670;  Pear-  De  Gex  &  J.  531;  Freer  T.  Hesse.  4 
son  V.  Creed,  78  Cal.  144;   Roach  v.  De  Gex,  M.  &  G.  495. 


§  641  EQUITY    JURISPRUDENCE.  890 

adopted  another  policy  for  England  and  Ireland,  which  is 
carried  out  by  very  stringent  statutory  enactments.  By  a 
progressive  series  of  statutes,  a  system  of  registration  has 
been  established  for  all  judgments  and  decrees;  if  duly 
registered  within  the  times  and  in  the  modes  prescribed 
bj'  the  statutes,  they  operate  as  constructive  notice;  all 
judgments  and  decrees  not  thus  duly  registered  within 
the  times  and  in  the  manner  prescribed  are  declared  to  be 
void  or  to  lose  their  priority,  both  in  law  and  in  equity, 
as  against  subsequent  purchasers,  mortgagees,  and  cred- 
itors, notwithstanding  any  notice  which  the  latter-named 
persons  may  have  had.*  Under  these  statutes,  no  notice, 
either  constructive  or  actual,  can  take  the  place  of  a  reg- 
ular registry.  A  subsequent  purchaser,  mortgagee,  or 
creditor  obtaining  an  interest  in  or  claim  on  the  land, 
where  the  prior  judgment  or  decree  was  not  properly 
registered  in  pursuance  of  the  statute,  is  protected,  even 
though  he  had  received  the  most  complete  actual  notice 
of  such  judgment  or  decree.  The  legislative  policy  is, 
that  a  purchaser  or  encumbrancer  should  not  be  obliged 
to  look  beyond  the  official  records  or  books  of  registry; 
if  a  faithful  search  discloses  no  judgment,  the  statute  has 
made  him  absolutely  secure.* 

'  See  the  following  English  statutes:  of  any  snch  judgment,  decree,  order, 

1  &  2  Vict.,  c.  110;  2  &  3  Vict.,  c.  11;  3  or  rule  to  any  such  purchaser,  mort- 

&  4  Vict.,  c.  82;  18  &  19  Vict.,  c.  15;  23  gagee.  or  creditor  in  any  wise  notwith- 

&  24  Vict.,  c.  38;  27  &  28  Vict.,  c.  112.  stauding."    The  next  section  (sec.  6  of 

As  an  illustration  of  the  provisions  of  the  same  act  of  18  &  19  Vict.,  c.  15), 

these  statu  tes  and  of  the  system  which  after  reciting  provisions  of  the  prior 

they  establish,  I  quote  a  part  of  sec-  statutes,    and   explaining    the    same, 

tion  4  of  the  act  of  18  &  19  Vict.,  c.  15.  adds:    "So  that  notice  of  any  judg- 

After  reciting  the   provisions  of  the  ment,     decree,     or     rule     not     duly 

act  of  1  &  2  Vict.,  c.  110,  as  enlarged  registered  shall  not  avail  against  pur- 

by  the  act  of  3  &  4  Vict.,  c.  82,  said  sec-  chasers,  mortgagees,  or  creditors  as  to 

tion  enacts  "  that  no  judgment  or  de-  lands,  tenements,  or  hereditaments." 
cree,  order  or  rule,  which   might   be         *  Greaves  v,  Tofield,  L.  R.  14  Ch. 

registered  under  said  act  of  the  first  Div.    563,    565,    per    Jessel,    M.    R. ; 

and  second  years  of  her  Majesty  shall  p.    571,    per    James,    L.    J.;   p.    575, 

affect  any  lands,  tenements,  or  here-  per  Baggallay,  L.  J.;  Lee  v.   Green, 

ditaments,  at  law  or  in  equity,  as  to  6  De  Gex,  M.  &  G.  155,  168,  per  Cran- 

purchasers,  mortgagees,  or  creditors,  worth,  L.  C;  Beavan  v.  Earl  of  Ox- 

unless  and  until  such  a  memoraudum  ford,  6  De  Gex,  M.  &  G.  492,  499,  600; 

or  minute  as  in  the  said  act  mentioned  Hickson  v.  CoUis,  1  Jones   &  L.  94, 

ehall  have  been  left  with  the   proper  113,  per  Lord  St.  Leonards;  Shaw  v. 

officer  of  the  proper  court,  any  notice  Neale,  6  H.  L.  Gas.  581;  reversing  29 


891  CONCERNING    NOTICE.  §§  642,  643 

§  642.  American  Legislation.  —  A  statutory  policy 
with  respect  to  judgments  has  also  beeu  adopted  in  this 
country,  which  is  substantially  the  same  throughout  all 
the  states.  The  state  statutes  have  generally  provided, 
with  variations  in  the  detail,  a  mode  of  docketing  judg- 
ments at  law;  and  the  same  method  has  been  extended 
in  many  states  to  equitable  decrees  and  judgments  for 
the  recovery  of  money.  This  docketed  judgment  or  de- 
cree is  generally  made  a  lien,  for  a  prescribed  period  of 
time,  upon  all  lands  of  the  judgment  debtor  situated 
within  the  same  county,  and  a  constructive  notice  to  all 
subsequent  purchasers  and  encumbrancers  of  such  lands. 
Intended  purchasers  or  encumbrancers  are  therefore 
obliged,  for  their  own  protection,  to  make  a  search  of  the 
official  records  over  the  period  during  which  the  statu- 
tory effect  is  given  to  the  docketed  judgment.  In  many 
of  the  states  provision  is  also  made  by  the  statutes  for  the 
registration  or  recording  of  equitable  decrees,  and  for  the 
effect  of  such  recording  or  registration  upon  those  per- 
sons who  subsequently  acquired  interests  in  the  property 
covered  by  the  decree. 

§  643.  In  giving  an  interpretation  to  these  statutes 
concerning  the  docketing  of  judgments  and  registration 
of  decrees,  and  in  determining  the  questions  which 
have  arisen  therefrom  concerning  the  constructive  notice 
created  by  the  docket  or  record,  and  concerning  any 
notice  which  may  supply  the  want  of  a  proper  docket 
or  record,  rules  have  been  adopted  in  the  various  states 
quite  analogous  to  those  established  by  the  courts  with 
reference  to  the  recording  or  registration  of  deeds,  mort- 
gages, and  other  instruments.  The  statement  and  dis- 
cussion of  these  rules  and  of  the  questions  connected 
therewith,  so  far  as  they  fall  within  the  domain  of  equity, 

Beav.  157.      For  the  statutory  system  v.  CoUia,  1  Jones  &  L.  94, 113;  Eyre  v. 

of  registration  established  in  Ireland,  McDowell,  9  H.  L.  Cas.  619;  see  also 

see  the  following  acts:  3  &  4  Vict.,  c.  the  English  editor's  note  to  Le  Neve 

105;ll&12Vict.,c.  120;13&14Vict.,  v.  Le   Neve,  2  Lead.    Cas.    Eq.,    4th 

c.  29;  34  &  35  Vict.,  c  72;  and  Hicksoa  Am.  ed.,  sees.  140,  141,  142. 


§§  644,  645  EQUITY   JURISPRUDENCE.  892 

will  therefore  fiud  their  proper  place  under  the  next  fol- 
lowing section  concerning  priorities.* 

§  644.  6.  By  Registration  or  Recording  of  Instru- 
ments.—  The  subject  to  be  considered  under  this  subdi- 
vision is  one  of  the  highest  practical  importance,  both  at 
law  and  in  equity,  throughout  all  the  American  states. 
While  the  decisions  of  the  English  courts  growing  out  of 
the  local  registration  statutes  of  that  country  are  few,  and 
of  little  assistance  to  the  American  lawyer,  those  arising 
under  our  own  statutory  system  are  exceedingly  numer- 
ous, and  often  involve  questions  of  great  magnitude  and 
difficulty.  Many  of  the  questions  suggested  by  these  re- 
cording acts,  and  among  them  those  which  are  the  most 
difficult,  and  which  have  occasioned  the  greatest  conflict 
of  judicial  opinion,  properly  belong  to  the  general  subject 
of  priorities,  and  will  be  examined  in  the  subsequent  sec- 
tions which  treat  of  Priorities  and  the  Effects  of  Notice, 
and  of  Purchasers  in  Good  Faith  without  Notice.  In 
the  present  subdivision  I  shall  simply  consider  the  effect 
of  the  statutory  record  as  a  notice;  when,  how  far,  and  of 
what  the  record  is  a  notice;  and  when  and  how  far  any 
other  notice  may  supply  the  want  of  that  created  by  a 
statutory  registration.  The  whole  discussion  will  be  sep- 
arated into  the  following  subordinate  heads:  1.  Statement 
of  the  statutory  system;  2.  General  theory,  object,  and 
scope  of  the  statutes;  3.  Requisites  of  the  record,  in  order 
that  it  may  be  a  constructive  notice;  4.  Of  what  the  rec- 
ord is  a  constructive  notice;  5.  To  whom  it  is  a  notice; 
6.  Effect  of  other  kinds  of  notice  in  the  absence  of  a  rec- 
ord; 7.  What  kind  of  notice  is  sufficient  to  produce  such 
effect;  8.  Judgments  under  the  recording  acts. 

§  645.  (1)  The  Statutory  System  in  England.  —  No  gen- 
eral system  of  registration  has  ever  been  adopted  in  Eng- 
land. For  certain  special  reasons,  however,  local  statutes 
were  passed  early  in  the  last  century  providing  for  a 
registration  in  two  or  three  counties  or  parts  of  counties. 

»  See  post,  §§  721-724. 


893  CONCERNING    NOTICE.  §  645 

Other  statutes  have  extended  the  method  of  registration 
into  Ireland,  The  provisions  of  the  different  English 
statutes  are  the  same.  They  enact,  in  substance,  that  a 
"  memorial"  of  all  deeds  and  conveyances  affecting  lands 
within  the  specified  county  may  be  registered  in  a  pre- 
scribed manner,  and  that  "  every  such  conveyance  shall 
be  adjudged  fraudulent  and  void  against  any  subsequent 
purchaser  or  mortgagee  for  a  valuable  consideration,"  un- 
less a  memorial  thereof  shall  be  registered  before  the  regis- 
tering of  a  memorial  of  the  conveyance  under  which  such 
subsequent  purchaser  or  mortgagee  shall  claim.*  It  will 
be  observed  that  this  language  providing  for  registration 
is  permissive,  not  compulsory;  and  nothing  is  said  con- 
cerning the  registry  operating  as  a  notice,  either  actual  or 
constructive,  to  subsequent  purchasers  and  encumbran- 
cers. In  construing  this  statute,  the  English  courts  have 
given  a  broad  meaning  to  the  word  "  conveyance,"  in  the 
clause  which  provides  for  the  registration  of  any  "  deed  or 
conveyance."  They  hold  that  it  denotes  any  instrument 
which  carries  from  one  person  to  another  an  interest, 
whether  legal  or  equitable,  in  land.  It  would  therefore 
embrace  any  instrument  in  writing,  though  not  under 
seal,  which  created  an  equitable  lien  or  charge,  as  well 
as  one  creating  an  estate.^ 

'  See  Registry  Act    for  the   West  compelled  to    give   eflFect    to  it.     In 

Riding  of  Yorkshire,  2  &  3  Anne,  c.  otlier   words,    the    prior    registry    in 

4;  Registry  Act  for  Middlesex,  7  Anne,  Ireland  is  a  constructive  notice  to  all 

c.  120;  for  North  Riding  of  Yorkshire,  subsequent    purchasers.     In    this   re- 

8  Geo.  II.,  c.  6;  for  East  Riding  of  epect  the  Irish  act  is  the  same  in  its 

Yorkshire,  6  Anne,  c.  35;  for  Kingston-  scope  and  efifect  as  the  American  sys- 

upon-Hull,  6  Anne,  c.  35;  Irish  Regis-  tern.     See  the  following  cases,  which 

try  Act,    6  Anne,  c.   2.     There   is   a  give   a   construction  to  this   statute: 

very   substantial    difference    between  Bushell  v.  Bushell,  1  Schoales  &  L.  98; 

the  wording  of  the  Irish  act  and  that  Latouche  v.  Lord  Dunsany,  1  Schoalea 

of  the  English  statutes,  and  it  more  &  L.  159,  160;  Thompson  v.  Simpson, 

resembles  in  its  design  and  effect  the  1    Dru.   &  War.   459;    Drew  v.   Lord 

system  which  prevails  in  the  United  Norbury,  3  Jones  &  L,  267;  9  Ir.  Eq. 

States.    It  expressly  gives  an  absolute  171;  Mill  v.  Hill,  12  Ir.  Eq.  107;  3  H. 

priority   to  the   deed   or   conveyance  L.  Cas.  828;  Hunter  v.  Kennedy,  1  Ir. 

first  registered,  and  a  subsequent  pur-  Ch.  148;  Corbett  v.  Cantillon,  5Ir.  Ch. 

chaser  for  value  holding  the  legal  es-  126;  In  re  Driscoll,  1  I.  R.  Eq.  285;  2 

tate,  even  though   he   has  no  actual  Lead.  Cas.  Eq.,  note  of  English  editor, 

notice  of  an  equitable  estate  previously  4th  Am.  ed.,  119. 

registered,    is  nevertheless  bound  by  ^  Credland  v.  Potter,  L.  R.   10  Ch. 

such    prior    registered    interest,   and  8,  12,  per  Cairns,  L.  C.     A  mortgage 


§646 


EQUITY    JURISPRUDENCE. 


894 


§646.  In  the  United  States.  —  While  there  is  some 
variation  in  the  detail  among  the  statutes  of  the  various 
states,  the  central  conception  and  essential  plan  of  the 
system  are  substantially  the  same  in  all.  Many  of  the 
acts  provide  in  general  terms  for  the  recording  of  deeds 
and  conveyances;  others  specifically  enumerate  the  kinds 
of  writings  which  may  be  registered,  including  deeds, 
leases,  mortgages,  assignments  of  mortgages  and  of  leases, 
agreements  for  the  purchase  and  sale  of  land,  and  in  fact 
all  species  of  written  instruments  by  which  any  estate, 
interest,  or  encumbrance,  legal  or  equitable,  in  or  upon 
land,  is  created  or  transferred.'     In  most  of  the  states  this 

had  been  given  which  provided  for 
future  advances  to  be  made  by  the 
mortgagee,  and  for  hia  being  secured 
by  it  with  respect  to  such  advances. 
This  mortgage  had  been  duly  regis- 
tered under  the  West  Riding  act. 
The  mortgagee  made  a  subsequent 
further  advance,  and  to  secure  its 
payment  the  mortgagor  gave  a  written 
instrument,  not  under  seal,  creating  a 
further  charge  upon  the  premises. 
The  question  arose  whether  this  in- 
strument should  have  been  registered 
80  as  to  give  the  mortgagee  priority 
over  a  subsequent  second  mortgage 
which  was  registered.  The  court  held 
that  the  instrument  was  a  "convey- 
ance, "  and  should  have  been  registered. 
Lord  Cairns  said:  "There  is  no  magi- 
cal meaning  in  the  word  'convey- 
ance ';  it  denotes  an  instrument  which 
carries  from  one  person  to  another  an 
interest  in  land.  Now,  an  instrument 
giving  to  a  person  a  charge  upon  land 
gives  him  an  interest  in  the  land;  if 
he  has  a  mortgage  already,  it  gives 
him  a  further  interest;  and  so,  whether 
made  in  favor  of  a  person  who  has  al- 
ready a  charge,  or  of  another  person, 
it  is  a  conveyance  of  an  interest  in  the 
land."  I  see  no  reason  why  this  de- 
cision should  not  apply,  and  why  the 
same  interpretation  should  not  be 
given,  to  the  word  "conveyance," 
when  it  is  used  in  the  analogous 
statutes  of  the  American  states. 

^  For  additional  cases  interpreting 
these  statutes,  see  post,  §  664.  Some 
knowledge  of  the  material  portions 
of    these    different    statutory    forms 


is  absolutely  essential  to  any  correct 
understanding  of  the  rules  laid  down 
by  the  courts.  The  decisions  in  one 
state  might  be  entirely  misleading  in 
another  state,  unless  the  peculiar 
statutory  language  in  the  first  were 
observed.  As  mentioned  in  the  text, 
several  types  of  legislation  prevail  in 
the  various  states.  I  have  arranged 
the  statutes  into  classes,  according  to 
these  types,  which  are  determined  by 
the  material  and  controlling  terms 
found  in  each.  The  statutes  of  each 
class  are  substantially  alike,  with 
respect  to  these  main  features,  al- 
though their  language  may  vary  con- 
siderably. In  almost  every  state  it  is 
enacted  that  filing  or  depositing  the 
instrument  for  record  in  the  proper 
ofiSce  has  the  same  effect  with  respect 
to  notice,  priority,  etc.,  as  the  actual 
registration  produces. 

First  Class.  —  No  period  is  specified 
within  which  the  record  must  be 
made.  No  express  mention  is  made 
of  notice,  actual  or  constructive,  in 
place  of  a  record.  The  material  pro- 
vision is,  in  substance,  that  every  con- 
veyance not  duly  recorded  shall  be 
void  as  against  subsequent  purchasers 
or  mortgagees  in  good  faith  and  for  a 
valuable  consideration  whose  con- 
veyance is  first  duly  recorded.  In 
several  of  these  states,  creditors  are 
joined  with  subsequent  purchasers. 
In  some,  "  conveyance  "  includes  every 
instrument  affecting  land;  and  assign- 
ments of  mortgages  are  often  expressly 
mentioned  in  statutes  belonging  to  all 
the  classes. 


895 


CONCERNING   NOTICE. 


646 


language  authorizing  a  registration  is   permissive  only, 
but  in  a  few  of  them  it  is  virtually  mandatory.     Every 


New  York.  —2  Rev.  Stats.,  p.  1119, 
Bee.  165;  1  Fay's  Dig.  of  Laws  1876,  p. 
580;  [1  Rev,  Stats.,  p.  762,  sees.  37,  38; 
p.  755,  sees.  1  et  seq.;  2  Rev.  Stats.,  p. 
286,  sec.  61;  Laws  1S26,  c.  313;  Laws 
1843,  c  199;  4  Rev,  Stats.,  8th  ed., 
2469.]  See  Westbrook  v.  Gleason,  79 
N.  Y.  23,  and  cases  cited;  Judson  v. 
Dada,  79  N.  Y,  373;  Page  v.  Waring, 
76  N.  Y.  463;  Lacustrine  etc.  Co.  v. 
Lake  Guano  etc.  Co.,  82  N.  Y,  476; 
Hoyt  v.  Thompson,  5  N.  Y.  347;  New- 
ton  V.  McLean,  41  Barb.  285;  Schutt 
V.  Large,  6  Barb.  373;  Truscott  v. 
King,  6  Barb.  340;  Fort  v,  Burch,  6 
Barb.  60;  [Bacon  v.  Van  Schoonhoven, 
87  N,  Y.  447;  Brewster  v.  Carnes,  103 
N.  Y.  556;  Mutual  L.  Ins.  Co.  v.  Dake, 
87  N.  Y.  257;  Ackerman  v.  Hunsicker, 
85  N.  Y.  49;  McPherson  v.  Rollins, 
107  N.  Y,  322;  1  Am.  St.  Rep.  826. 
The  assignment  of  a  mortgage  is  within 
the  operation  of  the  statute:  Brewster 
V.  Carnes,  103  N.  Y.  556;  Bacon  v. 
Van  Schoonhoven,  87  N.  Y.  447.] 

California.  —  Civ.  Code,  sees.  1107, 
1213-1217,  2934,  2935,  2950.  See  Odd 
Fellows'  Sav.  Bank  v.  Banton,  46  CaL 
603;  McMinn  v,  O'Connor,  27  Cal.  238; 
Fogarty  v.  Sawyer,  23  Cal.  570;  Wood- 
worth  V.  Guzman,  1  Cal.  203;  Call  v. 
Hastings,  3  Cal.  179;  Bird  v,  Dennison, 
7  Cal.  297;  Chamberlain  v.  Bell,  7  CaU 
292;  68  Am.  Dec.  260;  Dennis  v.  Bur- 
ritt,  6  Cal.  670;  Hunter  v.  Watson,  12 
Cal.  363;  73  Am.  Dec.  543;  McCabe  v. 
Grey,  20  Cal.  509;  Snodgrass  v.  Rick- 
etts,  13  Cal.  359;  Landers  v.  Bolton, 
26  Cal.  393;  Frey  v.  Cliflford,  44  Cal. 
335;  Packard  v.  Johnson,  51  Cal.  545; 
Wilcoxson  v.  Miller,  49  Cal.  193; 
Patterson  v.  Donner,  48  Cal.  369; 
Long  V.  DoUarhide,  24  Cal.  218;  Fair 
V.  Stevenot.  29  Cal.  486;  Mahoney  v. 
Middleton,  41  Cal.  41 ;  Jones  v.  Marks, 
47  Cal.  242;  O'Rourke  v.  O'Connor,  39 
Cal.  442;  Smith  v.  Yule,  31  Cal.  180; 
Thompson  v.  Pioche,  44  Cal.  508;  Law- 
ton  V.  Gordon,  37  Cal.  202;  Vassault 
V.  Austin,  36  Cal.  691;  [Hassey  v. 
Wilke,  55  Cal.  525;  Frink  v.  Roe,  70 
Cal.  296;  Scott  v.  Sierra  Lumber  Co., 
67  Cal.  71;  Meherin  v.  Oaks,  67  Cal. 
57;  Karns  v.  Olney,  80  Cal.  90.] 

Colorado. — Gen.  Laws,  p.  139,  c. 
18,  sec.  17;  [Mills's  Stats.  1891.  sec. 
446.] 


Dakota.  —  Rev.  Code  1877,  p.  341, 
sec.  671. 

Idaho. —"Rev.  Laws  1875,  p.  601. 

Michiqan. — Comp.  Laws  1871,  pp. 
1345,  1346,  sec.  423;  [Howell's  Stats. 
1882,  sec.  5683.]  See  Doyle  v.  Stevens, 
4  Mich.  87;  Warner  v.  Whittaker,  0 
Mich.  133;  72  Am.  Dec.  65;  Barrows 
V.  Baughman,  9  Mich.  213;  Willcoi 
V.  Hill,  11  Mich.  256,  263;  Rood  r. 
Chapin,  Walk.  Ch,  79;  Godfroy  ▼. 
Disbrow,  Walk.  Ch.  260;  [In galls  v. 
Bond,  66  Mich.  338;  Heim  v.  Ellis,  49 
Mich.  241;  Edwards  v.  McKeruan,  55 
Mich.  521.] 

Minnesota. —Si&\s.  1878,  p.  537,  o. 
40,  .see.  21;  Smith  v.  Gibson,  15  Minn. 
89,  99;  Coy  V.  Coy,  15  Minn.  119,  126; 
[Butman  v.  James,  34  Minn.  547; 
Byers  v.  Orensstein,  42  Minn.  386; 
Bailey  v.  Griffin,  40  Minn.  319;  Mars- 
ton  V.  Williams,  45  Minn.  116;  Gieb 
V.  Reynolds,  35  Minn.  331.] 

J/on<ana.  —  Laws  1872,  pp.  400,  401. 

Neiiada. — Comp.  Laws  1873,  p.  38, 
sees.  252-254;  [Gen.  Stats.  1885,  sec. 
2595.]  See  Grellet  v.  Heilshorn,  4 
Nev.  526. 

North  Carolina.  —  Battle's  Rev. 
1873,  p.  .354,  c.  35,  "sec.  12  [Code  1883, 
sec.  1254]:  Unless  recorded,  convey- 
ance is  void  as  against  ereditora  and 
subsequent  purchasers  for  value.  No 
notice  whatever  will  take  the  place  of 
a  record:  Robinson  v.  Willoughby, 
70  N.  C.  358;  Fleming  v.  Burgin,  2 
Ired.  Eq.  584;  Leggett  v.  Bullock, 
Busb.  283;  [Killebrew  v.  Hineg,  104 
N.  C.  182;  17  Am.  St.  Rep.  672;  Hin- 
ton  V.  Leigh,  102  N.  C.  28;  Duke  v. 
Markham,  105  N.  C.  131;  18  Am.  St. 
Rep.  889;  Davia  v.  Inscoe,  84  N.  C. 
396.] 

Wasfiington. — Laws  1859,  p.  299. 

Wisco7mn.  —  Rev.  Stats.  1871,  p. 
1147,  sec.  27  [Sanborn  and  Berryman's 
Stat.  1889,  sec.  2241].  See  Ely  v,  Wil- 
cox, 20  Wis.  551;  91  Am.  Dec.  436. 
Possession  a  constructive  notice:  Ely 
V.  Wilcox,  20  Wis.  551;  91  Am.  Dec. 
436;  Stewart  v.  McSweeney,  14  Wis. 
468;  Fery  v.  Pfeiffer,  18  Wis.  510;  Gee 
V,  Bolton,  17  Wis.  604;  [Girardia  v. 
Lampe,  58  Wis.  267.] 

Connecticut.  — Rev.  1875,  p.  353, 
sec.  11  [Gen.  Stats.  1888,  sec.  2961]: 
Quite  different  in  terms  from  the  fore* 


§646 


EQUITY   JURISPRUDENCE. 


896 


such  conveyance  or  other  instrument,  unless  recorded,  is 
declared  to  be  void  as  against  subsequent  purchasers  or 


going.  No  conveyance  is  effectual 
agaiust  any  other  person  except  the 
grantor  and  his  heirs,  until  recorded. 
Record  of  an  instrument  creating  an 
equitable  interest  is  notice  to  every 
one  of  such  interest.  See  Hartmyer 
V.  Gates,  1  Root,  61;  Ray  v.  Bush,  1 
Root,  81;  Franklin  V.  Cannon,  1  Root, 
500;  Welch  v.  Gould,  2  Root,  287; 
Judd  V.  Woodruff,  2  Root,  298.  Pri- 
ority:  St,  Andrews  v.  Lockwood,  2 
Root,  239;  Hall's  Heirs  v.  Hall,  2 
Root,  383;  Beers  v.  Hawley,  2  Conn. 
467;  Hinman  v.  Hinman,  4  Conn.  575; 
Hine  v.  Robbins,  8  Conn.  342;  Wheaton 
V.  Dyer,  15  Conn.  307.  Defective  deed 
no  notice:  Watson  v.  Wells,  5  Conn.. 
468;  Carter  v.  Champion,  8  Conn.  549; 
21  Am.  Dec.  695;  Sumner  v.  Rhoda, 
14  Conn.  135.  Equitable  conveyance: 
Dickenson  v.  Glenney.  27  Conn.  104. 

New  Hampshire.  — Gen.  Laws  1878, 
p.  323,  c.  135,  sec.  4:  Like  Connecticut. 
S'ee  Patten  v.  Moore,  32  N.  H.  382, 
384. 

Rhode  Island.  —  Gt&n.  Stats.  1872,  p. 
350,  c.  162,  sec.  4  [Pub.  Stats.  1882, 
p.  443,  sec.  4]:  Like  Connecticut. 

Vermont.  —Gen.  Stats.  1870,  p.  448, 
sec.  7  [Rev.  Laws  1880,  sec  1931]: 
Like  Connecticut.  See  Griswold  v. 
Smith,  10  Vt.  452. 

Second  Class.  —  No  period  is  speci- 
fied within  which  a  record  must  be 
made.  It  is  provided  in  substance 
that  convej'ances  not  recorded  are 
void  as  to  subsequent  purchasers  and 
encumbrancers  in  good  faith  without 
notice  whose  instruments  are  first  re- 
corded. In  some  states,  creditors  are 
added  to  subsequent  purchasers. 

Arkansas.  — Dig.  1874,  p.  275,  sec. 
861  [Dig.  1884,  sec.  671J:  No  deed 
or  instrument  fi>r  the  conveyance  of 
any  real  estate,  or  by  which  the  title 
thereto  may  be  affected,  shall  be  valid 
against  a  subsequent  purchaser  for  a 
valuable  consideration  without  actual 
notice,  or  against  any  creditor,  unless 
it  be  filed  for  record.  See  Byers  v. 
Engles,  16  Ark.  543;  Hamilton  v. 
Fowlkes,  16  Ark.  340;  also  Dig.  1874, 
p.  770,  sec  4288.  Mortgages  are  a  lien 
only  from  time  of  filing  for  record: 
See  Dacoway  v.  Gait,  20  Ark.  190; 
[and  create  no  lien  against  subsequent 
purchasers   even    with  notice,   unless 


duly  recorded:  Ford  v.  Burks,  37 
Ark.  91;  Dodd  v.  Parker,  40  Ark.  540; 
Martin  v.  Ogden,  41  Ark.  191.] 

Delaware.  —  Laws  1874,  p.  504,  c 
83,  sees.  17,  19:  As  to  mortgages,  like 
Arkansas.  Deeds  must  be  recorded 
within  one  year,  or  else  invalid  against 
subsequent  fair  creditors,  mortgagees, 
or  purchaisers  for  a  valuable  considera- 
tion and  without  notice. 

Florida.  — Bush's  Dig.,  p.  151  [Mc- 
Clellan's  Dig.  1881,  p.  215]:  Unless 
recorded,  void  as  against  creditors 
and  subsequent  purchasers  for  value 
and  without  notice. 

Illinom.  —  Kurd's  Rev.  Stats.  1880, 
p.  271,  sec  30  [18S9,  c.  30,  sec.  30]: 
Unless  recorded,  are  void  as  against 
creditors  and  subsequent  purchasers 
for  value  without  notice:  [Warder  v. 
Cornell,  105  HI.  169;  Carpenter  v. 
Mitchell,  54  HI.  126.] 

/owa.  —  Miller's  Rev.  Code  1880, 
p.  527,  sec  1941;  [McClain's  Code, 
18SS,  sec  3112]:  Substantially  same 
as  last.  See,  concerning  notice,  Sen- 
ter  V.  Turner,  10  Iowa,  517;  Brinton 
V.  Seevers,  12  Iowa,  389;  Dargin  v. 
Beeker,  10  Iowa.  571;  Koous  v. 
Grooves,  20  Iowa,  373;  Bringholff  v. 
Munzenmaier,  20  Iowa,  513;  Gardner 
V.  Cole,  21  Iowa,  205;  WiUard  v. 
Kramer,  36  Iowa,  22.  Subsequent 
purchasers:  Calvin  v.  Bowman,  10 
Iowa,  529;  Scoles  v.  Wilsey,  11  Iowa, 
261;  Miller  v.  Bradfonl,  12  Iowa,  14 
Bostwick  v.  Powers,  12  Iowa,  456 
English  V.  Waples,  13  Iowa,  570 
Haynes  v.  Seachrest,  13  Iowa,  455 
Breed  v.  Conley,  14  Iowa,  2G9  81 
Am.  Dec.  485;  Stewart  v.  Huff,  19 
Iowa,  557;  Gower  v.  Doheney,  33 
Iowa,  36;  [iEtna  L.  Ins.  Co.  v.  Hes- 
ser,  77  Iowa,  381.] 

Kansas.  —  Dassler's  Comp.  Laws 
1879,  p.  212,  sec.  1043  [1885,  c  22, 
sec.  20]:  Filing  for  record  is  notice. 
Until  so  filed,  instruments  are  not 
valid  except  between  the  parties  and 
as  to  persons  having  actual  notice. 
See,  concerning  notice,  School  Dist. 
V.  Taylor,  19  Kan.  287;  Simpson  v. 
Munder,  3  Kan.  172;  Brown  v.  Simp- 
son, 4  Kan.  76;  Claggett  v.  Crall,  12 
Kan.  393,  397;  Wickersham  v  Chi- 
cago  etc.  Co.,  18  Kan.  487;  26  Am. 
Rep.  784;  Johnson  v.  Clark,  18  KaQ< 


897 


CONCERNING   NOTICE. 


§  646 


encumbrancers  in  good  faith  for  a  valuable  consideration 
whose  muniments  of  title  are  first  put  on  record.     In  sev- 


157,  164;  Jones  r.  Lapham,  15  Ran. 
540. 

Kfnttirh/.  —  Gen.  Stats.  1873,  p. 
256  [1887,  c.  24],  eec.  10:  Until  filed 
for  record  are  invalid  against  subse- 
quent purchasers  for  value  without 
notice,  or  against  creditors.  See 
Graves  v.  Ward,  2  Duvall,  301.  Efifect 
of  notice:  Forepaugh  v.  Appold,  17 
B.  Mon.  625,  631.  [The  notice  re- 
quired to  affect  an  antecedent  creditor 
of  a  voluntary  conveyance  must  be 
actual,  and  constructive  notice  arising 
from  registration  of  the  deed  is  in- 
sufficient: Ward  V.  Thomas,  81  Ky. 
452.] 

Jhiine.  —  B.ev.  Stats.  1871,  p.  560, 
c.  73,  sec.  8:  Unless  recorded,  are  not 
valid  against  any  one  except  the 
grantor,  his  heirs,  devisees,  and  per- 
sons having  actual  notice.  See  Porter 
V.  Sevey,  43  Me.  519;  Goodwin  v. 
Cloudman,  43  Me.  577;  Merrill  v. 
Ireland,  40  Me.  569;  Hanly  v.  Morse, 
32  Me.  2S7;  Spofford  v.  Weston,  29 
Me.  140;  Butler  v.  Stevens,  26  Me. 
484;  Roberts  v.  Bourne,  23  Me.  165; 
39  Am.  Dec.  614;  Veazie  v.  Parker,  23 
Me.  170;  Pierce  v.  Taylor,  23  Me.  246; 
Rackleff  v.  Norton,  19  Me.  274;  Law- 
rence V.  Tucker,  7  Me.  195;  Kent  v. 
Plummer,  7  Me.  464. 

Massachusetts.  —  Gen.  Stats.,  p.  466, 
c.  89,  sees.  1-3  [Pub.  Stats.  1883,  c. 
120,  sec.  4]:  Same  as  Maine.  See 
Stetson  V.  Gulliver,  2  Gush.  494,  497; 
Dole  V.  Thurlow,  12  Met.  157,  163; 
Bayley  v.  Bailey,  5  Gray,  505,  510; 
Marshall  v.  Fisk,  6  Mass.  24,  30;  4 
Am.  Dec.  76;  Coffin  v.  Ray,  1  Met. 
212;  Flynt  v.  Arnold,  2  Met.  619; 
Curtis  v.  Mundy,  3  Met.  405;  Hough- 
ton V.  Bartholomew,  10  Met.  138; 
Pomroy  v.  Stevens,  11  Met.  244; 
Stewart  v.  Clark,  13  Met.  79. 

Mississippi.  —  Rev.  Code  1871,  p. 
503.  [Code  1880,  sees.  1209-1212]: 
Unless  filed  for  record,  are  void  against 
creditors  and  subsequent  purchasers 
for  value  without  notice:  [Nugent  v. 
Priebatsch,  61  Miss.  402.  Error  of 
clerk  in  making  record:  Mangold  v. 
Barlow,  61  Miss.  593;  48  Am.  Rep. 
84.] 

Missouri.  —  Wagner's  Stats.  1872, 
p.  217  c.  25,  sees.  25,  26:  Same  as 
Kansas.  See  Pi,eed  v.  Ownby,  44  Mo. 
2  Ea  JuE.— 57 


204;  Valentine  V.  Harner,  20Mo.  133; 
Davis  V.  Ownsby,  14  Mo.  170;  55  Am. 
Dec.   105. 

Nebraska. — Comp.  Stats.  1881,  p. 
389,  c.  73,  sec.  16:  Unless  recorded, 
are  void  against  subsequent  purchasers 
and  encumbrancers  iu  good  faith  and 
without  notice  who  obtain  the  first 
record.  See,  as  to  constructive  notice, 
Edminster  v.  Higgins,  6  Nob.  269; 
Gal  way  v.  Malchow,  7  Neb.  289,  over- 
ruling Bennet  v.  Fooks,  1  Neb.  465; 
Metz  v.  State  Bank  of  Brownville,  7 
Neb.  171;  Colt  v.  Dn  Bois,  7  Neb.  394; 
Dorsey  v.  Hall,  7  Neb.  465;  Mansfield 
V.  Gregory,  8  Neb.  435;  Berkley  v. 
Lamb,  S  Neb.  399.  Consideration  ne- 
cessary: Merriman  v.  Hyde,  9  Neb. 
120.  Priority:  Harral  v.  Gray,  10 
Neb.  189;  Lincoln  etc.  Ass'n  v.  Hass, 
10  Neb.  583;  Hooker  v.  Hammill,  7 
Neb.  234;  Jones  v.  Johnson  Harvester 
Co.,  8  Neb.  451. 

New  Mexico.  —  Comp.  Laws  1865,  c. 
44:  Substantially  same  as  Kansas. 

Tennessee.  —  Code,  sees.  2005,  2032. 
Unless  recorded,  void  against  existing 
or  suljsequent  creditors,  or  Iionn  fide 
purchasers  without  notice.  Filing  for  - 
record  is  notice.'  See  Thomas  v. 
Blackemore,  5  Yerg.  113,  124;  Hays 
V.  McGuire,  8  Yerg.''92,  100;  Vance  v. 
McNairy,  3  Yert;.  176;  24  Am.  Dec. 
553;  Shields  v.  Mitchell,  10  Yerg.^8; 
May  V.  McKeenon,  6  Humph.  209. 

Texas. — Paschal's  Dig.,  sees.  4334, 
4988,  4994:  Substantially  same  as  Illi- 
nois. 

West  Virginia.  —  Code  1870,  c.  74,. 
sees.  5-8:  Substantially  as  Illinois: 
[Cox  V.  Wayt,  20  W.  Va.  807;  Houlti 
V.  Donahue,  21  W.  Va.  294.] 

Third  Class, —  The  peculiar  features, 
of  the  statutes  of  this  class  are,  that 
they  require  the  record  to  be  made 
within  a  specified  period  after  execu- 
tion of  the  instrument,  or  else  it  is- 
void  as  against  subsequent  purchasers, 
who  are  without  notice,  and  in  some 
states  creditors  are  added.  Filing  for 
record  is  generally  made  equivalent  to 
an  actual  recording. 

Alabama.  — Code  1867,  p.  364,  sees. 
1557,  1558  [Code  1886,  sees.  1810, 
1811]:  Conveyances  of  unconditional 
estates,  mortgages,  and  similar  instru- 
ments to  secure  a  debt  created  at  tha 


646 


EQUITY  jurisprudence:. 


898 


eral  of  the  states  the  effect  of  a  notice  of  a  prior  unregis- 
tered instrument  is  expressly  recognized  by  the  statute; 


date  thereof  are  void  as  to  purchasers 
for  a  valuable  consideration,  mort- 
gagees, and  judgment  creditors,  having 
no  notice,  unless  recorded  within  tfiJ-ee 
months  [thirty  da3's]  from  their  date. 
Other  deeds  and  mortgages  are  void 
as  to  the  same  parties,  unless  recorded 
before  the  rights  of  such  parties  ac- 
crue. See  Coster  v.  Bank  of  Georgia, 
24  Ala.  37;  De  Vendal  v.  Malone,  25 
Ala.  272;  Gray's  Adm'rs  v.  Cruise,  36 
Ala.  559;  [Chadwick  v.  Carson,  78 
Ala.  116;  Wood  v.  Lake,  62  Ala.  489.] 
Notice  in  place  of  recording:  Wallis 
V.  Rhea,  10  Ala.  451;  12  Ala.  646; 
Jordan  v.  Mead,  12  Ala.  247;  Dearing 
V.  Watkins,  10  Ala.  20;  Boyd  v.  Beck, 
29  Ala.  703;  Wjatt  v.  Stewart,  34 
Ala.  716.  Valid  without  a  record  be- 
tween the  parties  and  against  creditors 
not  by  judgment:  Ohio  Life  etc.  Co. 
V.  Ledyard,  8  Ala.  866;  Daniel  v.  Sor- 
rells,  9  Ala.  436;  Andrews  v.  Burns, 
11  Ala.  691;  Smith  v.  Branch  Bank,  21 
Ala.  125;  Center  v.  P.  &  M.  Bank,  22 
Ala.  743.  Filing  for  record  creates 
notice,  and  a  mistake  in  copying  by 
the  recorder  does  not  aiTect  it:  Mims 
V.  Mims,  35  Ala.  23.  [Equitable  inter- 
ests are  not  required  to  be  recorded: 
Bailey  v.  Timberlake,  74  Ala.  221. 
A  conveyance  recorded  witliin  the 
three  months  allowed  by  the  statute 
has  relation  to  and  takes  efifect  from 
the  day  of  its  execution:  Copeland  v. 
Kehoe,  67  Ala.  594.] 

District  of  Columbia,  —  Rev,  Stats. 
1873,  pp.  52,  53:  Must  be  recorded 
within  six  months,  or  else  void  as  to  all 
subsequent  purchasers  without  notice. 

Georgia. —  Code  1873,  sees.  1955- 
1960:  Deeds  must  be  recorded  within 
one  year,  and  mortgages  within  three 
months  [thirty  days:  Code,  1S82J;  other- 
wise they  lose  their  priority  over  sub- 
sequent deeds,  purchases,  and  liens 
recorded  in  time,  and  without  notice 
of  the  first.  A  record  after  the  pre- 
scribed period  is  notice  from  that  time. 
See  Hardawa}'  v.  Semmes,  24  Ga.  305. 
As  to  notice,  Herndon  v.  Kimball,  7 
Ga.  432;  50  Am.  Dec.  406;  R,ushin  v. 
Shields,  11  Ga.  636;  56  Am.  Dec.  436; 
Felton  v.  Pitman,  14  Ga.  536;  VVyatt 
V.  Elam,  19  Ga.  335;  Burkhalter  v.  Ec- 
tor. 25  Ga.  55;  Lee  v.  Cato,  27  Ga. 
637;  73  Am.  Dec.  746;  Allen  v.  Hold- 


ing, 29  Ga.  485;  32  Ga.  418;  Williams 
V.  Logan,  32  Ga.  165;  Williams  v. 
Adams,  43  Ga.  407. 

Ohio.  —  \  Rev.  Stats.  1880,  p.  1034, 
sees.  4133,  4134:  All  instruments  for 
the  conveyance  or  encumbrance  of 
land  must  be  recorded  within  six 
months;  otherwise  are  deemed  fraudu- 
lent as  to  any  subsequent  bona  fide 
purchaser  having  at  the  time  of  his  pur- 
chase no  knowledge  of  the  existence 
of  such  prior  instrument.  Record 
made  after  the  six  months  is  notice 
from  the  date  thereof.  See  Doe  v. 
Bank  of  Cleveland,  3  McLean,  140; 
Smith  v.  Smith,  13  Ohio  St.  532; 
Lessee  of  Cunningham  v.  Buckingham, 
1  Ohio,  264;  Lessee  of  Allen  v.  Parish, 

3  Ohio,  107;  Northrup'a  Lessee  v. 
Brehmer,  8  Ohio,  392;  Lessee  of  Irvin 
V,  Smith,  17  Ohio,  226;  Spader  v.  Law- 
ler,  17  Ohio,  371;  49  Am.  Dec.  463; 
Leiby's  Ex'rs  v.  Wolf,  10  Ohio,  83; 
Price  V.  Methodist  Episcopal  Church, 

4  Ohio,  515;  Stansell  v.  Roberts,  13 
Ohio,  148;  42  Am.  Dec.  193;  May  ham 
v.  Coombs,  14  Ohio,  428;  Bloom  v. 
Noffgle,  4  Ohio  St.  45;  Bercaw  v.  Cock- 
erill,  20  Ohio  St.  163. 

South  Carolina.  —  Rev.  Stats.  1873, 
pp.  422,  sec.  1,  424:  Conveyances 
must  be  recorded  within  six  months  and 
mortgages  within  sixty  days,  or  else 
invalid  against  subsequent  creditors, 
purchasers,  and  encumbrancers  for 
value  and  without  notice.  [Gen.  Stats. 
1882,  sec,  1776:  The  time  allowed 
for  recording  both  mortgages  and  con- 
veyances ia  forty  davs.]  See  Williams 
V.  Beard,  1  S.  C.  309;  Boyce  v.  Shiver, 
3  S.  C.  515;  Steele  v.  Mansell,  6  Rich. 
437;  Stokes  v.  Hodges,  11  Rich,  Eq. 
135;  Bank  of  State  v.  S,  C.  Mfg.  Co., 
3  Strob.  190;  Tact  v.  Crawford,  1 
McCord,  265;  Massey  v.  Thompson,  2 
Nott  &  McC.  105;  Dawson  v.  Dawson, 
Rice  Eq.  243;  McFall  v.  Sherrard, 
Harp.  295.  [Failure  to  record  does 
not  invalidate  the  instrument  as  to  the 
parties  thereto:  Wingo  v.  Parker,  19 
S.  C.  9.] 

Virginia. —  Code  1873,  c.  114,  sees. 
4-9  [Code  1887,  sees.  2463-2469]: 
Mortgages,  unless  recorded,  are 
void  as  to  creditors  and  subsequent 
purchasers  for  value  and  without  no- 
tice.    Deeds,  unless  recorded  within 


899 


CONCERNING    NOTICE. 


§  646 


in  a  few  of  them  such  a  notice  is  required  to  be  "actual"; 
while  in  the  majority  the  legislation  is  silent  upon  the 


sixty  days,  are  void  as  to  same  parties. 
See  Beverley  v.  Ellis,  1  Raud.  102; 
Bird  V.  Wilkinson,  4  Leigh,  266;  Beck's 
Adin'rs  V.  De  Babtists,  4  Leigh,  349; 
Lane  v.  Mason,  5  Leigh,  520;  McClure 
V.  Thistle's  Ex'rs,  2  Gratt.  182;  Glaze- 
brook's  Adin'r  v.  Ragland's  Adin'r,  8 
Gratt.  344.  [Unrecorded  contract  for 
sale  of  real  estate  is  void  as  to  credi- 
tors, whether  with  or  without  notice: 
Dobyn  v.  Waring,  82  Va.  159.] 

Fourth  Class.  —  The  statutes  of  this 
class  resemble  those  of  the  last  one,  in 
requiring  the  record  to  be  made  within 
a  prescribed  period  of  time  after  the 
execution;  but  they  make  no  mention 
of  the  presence  or  absence  of  notice  in 
connection  with  the  subsequent  pur- 
chasers, etc.,  who  obtain  a  first  record. 

Indiana.  —  Gavin  and  Herd's  Stats., 
p.  260,  sec.  16,  p.  261  [Rev.  Stats. 
18S8,  sec.  2931]:  Every  conveyance, 
etc.,  not  recorded  within  ninety  days 
{forty-Jive  days]  is  void  against  a  subse- 
quent purchaser  or  mortgagee  in  good 
faith  and  for  a  valuable  consideration. 
See  Reasoner  v.  Edmundson,  5  Ind. 
393. 

Maryland.— "Rev.  Code  1878,  p.  385, 
sees.  16-19  [Rev.  Code  1888,  art. 
21,  sees.  13-16]:  Instruments  must  be 
recorded  within  six  months,  and  then 
take  e£Fect  from  their  date;  otherwise 
they  are  not  valid  for  purpose  of  pass- 
ing title.  See  Byles  v.  Tome,  39  Md. 
461;  Cooke's  Lessee  v.  Kell,  13  Md. 
409;  Hoopes  v.  Knell,  31  Md.  550; 
Building  Ass'n  v.  Willson,  41  Md.  514. 
Effective  from  date  when  recorded: 
Owens  V.  Miller,  29  Md.  144;  Leppoc 
V.  National  Union  Bank,  32  Md.  136; 
Knell  V.  Building  Ass'n,  34  Md.  67; 
Carson's  Adm'rs  v.  Phelps,  40  Md. 
97;  Lester  v.  Hardesty,  29  Md.  50; 
Estate  of  Leiman,  32  Md.  225; 
3  Am.  Rep.  132.  Priority:  Cockey 
V.  Milne's  Lessee,  16  Md.  207;  Wil- 
lard's  Ex'rs  v.  Ramsburg,  22  Md.  206; 
Nelson  V.  Hagerstown  Bank,  27  Md. 
51;  Walsh  v.  Boyle,  30  Md.  267;  Glenn 
V.  Davis,  35  Md.  215;  6  Am.  Rep.  389; 
Busey  v.  Reese,  38  Md.  264;  Homer  v. 
Grosholz,  38  Md.  521;  Abrams  v.  Shee- 
han,  40  Md.  446;  Kane  v.  Roberts,  40 
Md.  590.  [Must  be  properly  acknov^l- 
edged:  Stiler  v.  McComaa,  66  Md. 
135.] 


New  Jersey.  —  Rev.,  p.  155,  sec.  14: 
No  instrument  is  valid  against  subse- 
quent purchasers  or  encumbrancers  in 
good  faith,  unless  tiled  for  record 
within  fifteen  days  from  its  date.  [A 
recording  in  the  wrong  book  is  not 
notice:  Parsons  v.  Lent,  34  N.  J.  Eq. 
66.  A  lease  is  a  conveyance  within  the 
meaning  of  the  statute,  and  is  entitled 
to  be  recorded:  Spielmann  v.  Kliest,  36 
N.  J.  Eq.  202;  Laws  of  1872,  p.  93.] 

Oregon. — Gen.  Laws,  p.  651,  sec. 
26  [Hill's  Laws  1887,  sec.  3027]: 
Unless  recorded  within  five  days,  ia 
void  against  subsequent  purchaser  in 
good  faith  and  for  value  whose  instru- 
ment is  first  recorded.  [The  assign- 
ment of  a  mortgage  is  not  required 
to  be  recorded:  Watson  v.  Dundee 
etc.  Mortgage  Co.,  12  Or.  474.] 

Pennsylvania.  — Purdon's  Dig.,  p. 
321,  sec.  71  [1  Purdon's  Dig.  1883, 
p.  583,  sec.  94]:  Instruments  executed 
within  the  state  must  be  recorded 
within  six  months,  those  executed  out 
of  the  state  within  one  year,  otherwise 
they  do  not  operate  to  pass  the  title. 
See,  as  to  parties  against  whom  un- 
recorded instrument  is  valid,  Nice's 
Appeal,  54  Pa.  St.  200;  Speer  v. 
Evans,  47  Pa.  St.  141;  Britton's  Ap- 
peal, 45  Pa.  St.  172;  Mellor's  Appeal, 
32  Pa.  St.  121;  Adams's  Appeal,  1  Pa. 
St.  447.  Priority:  Brooke's  Appeal, 
64  Pa.  St.  127;  Dungan  v.  Am.  etc. 
Ins.  Co.,  52  Pa.  St.  253;  Bratton's  Ap- 
peal, 8  Pa.  St.  164;  Foster's  Appeal,  3 
Pa.  St.  79;  Ebner  v,  Goundie,  5 
Watts  &  S.  49;  Poth  v.  Anstatt,  4 
Watts  &  S.  307;  Lightner  v.  Mooney, 
10  Watts,  407.  Judgment  creditors: 
Cover  V.  Black,  1  Pa.  St.  493;  Stewart 
v.  Freeman,  22  Pa.  St.  123.  Applies 
to  a  bojia  fide  purchaser  only:  Plumer 
V.  Robertson,  6  Serg.  &  R.  179;  Poth 
V.  Anstatt,  4  Watts  &  S.  307;  Bracken 
V.  Miller,  4  Watts  &  S.  102;  Hoffman 
V.  Strohecker,  7  Watts,  90;  32  Am. 
Dec.  740;  Jaques  v.  Weeks,  7  Watts, 
261;  Union  Canal  Co.  v.  Young,  1 
Whart.  432;  30  Am.  Dec.  212;  Sailor 
v.  Hertzog,  4  Whart.  264;  Snider  v. 
Snider,  3  Phila.  160.  Notice:  Ch«n 
V.  Barnet,  11  Serg.  &  R.  389;  Harris 
V.  Bell,  10  Serg.  &  R.  39;  Bogga  v. 
Varner,  6  Watts  &  S.  469;  Parke  v. 
Chadwick,  8  Watts  &  S.  96;  Miller  v. 


§§  647,  648  EQUITY   JURISPRUDENCE.  90O 

subject  of  notice  in  the  place  of  recording,  and  its  efifect 
is  thus  left  to  judicial  construction.  It  would  be  impossi- 
ble to  give  in  the  text  any  more  exact  account  of  this  legis- 
lative system,  but  I  have  added  in  the  preceding  foot-note 
an  abstract  of  the  statutes,  the  states  being  arranged  in 
classes,  according  to  the  varying  types  of  their  legislation. 

§  647.  (2)  General  Theory,  Scope,  and  Object  of  the 
Statutes. —  Under  this  head  I  shall  explain,  without  en- 
tering into  any  discussion  of  details,  the  general  inter- 
pretation which  has  been  put  upon  this  legislation  by  the 
courts;  its  general  object,  scope,  and  design;  how  far  it 
is  intended  that  a  record  should  be  constructive  notice  to 
those  who  acquire  rights  in  the  same  subject-matter;  and 
what  kinds  and  classes  of  interests  are  thus  affected  by  a 
notice. 

§  648.  The  English  Theory.  —  A  very  narrow  interpre- 
tation has  been  put  upon  their  local  registry  acts  by  the 
English  courts.  As  the  language  authorizing  a  registra- 
tion is  permissive  merely,  and  as  the  statute  is  silent 
respecting  any  notice,  it  is  settled  that  the  registry  of  a 
deed  or  conveyance  is  not  of  itself  a  notice  so  as  to  affect 
a  subsequent  purchaser  who  has  obtained  the  legal  estate.* 

Cresson,  5  Watts  &  S.  284;  Green  v.  Louisiana.  —  Rev.  Code  1875,  p. 
Drinker,  7  Watts  &  S.  440;  Krider  v.  417,  sec.  2266t  This  statute  dififers 
Lafferty,  1  Whart.  308;  Epley  v.  much  from  all  others  m  its  language 
Witherow,  7  Watts,  167;  Rankin  v.  and  details,  although  not  much  per- 
P&rt^r,  7  Waitts,  387;  Kerns  v.  Swope,  haps  in  its  effects.  All  instruments 
2 'Watts,  75;  Lewis  v.  Bradford,  10  affecting  real  property  are  utterly  void 
Watts,  67;  Randall  v.  Silverthorn,  4  as  to  third  persons  unless  publicly 
Pa.  St.  173;  Hetherin^ton  v.  Clark,  30  inscribed  on  the  records  of  the  parish. 
Pa.  St.  393.  Equitable  title  included:  and  become  effective  as  to  such  per- 
Bellas  V.  McCarty,  10  Watts,  13.  As-  sons  from  the  time  of  filing  for  record; 
signmentof  mortgage:  Philips  v.  Bank  but  they  are  valid  as  against  the  par- 
of  Lewistown,  18  Pa.  St.  394;  Mott  ties  and  their  heirs. 
V.  Clark,  9  Pa.  St.  399;  49  Am.  Dec.  '  Morecock  v.  Dickins,  Amb.  678; 
566.  Mortgage  of  personal  property:  Bushell  v.  Bushell,  I  Schoales  &  L.  90, 
Lightner  v.  Mooney,  10  Watts,  407;  103;  Ford  v.  White,  16  Beav.  120; 
Hoffman  v.  Strohecker,  7  Watts,  86;  Underwood  v.  Lord  Courtown,  2 
32  Am.  Dec.  740;  [Green  v.  Rick,  121  Schoales  &  L.  40;  Wiseman  v.  West- 
Pa.  St.  130;  6  Am.  St.  Rep.  760;  Boyd  land,  1  Younge  &  J.  117;  Hodgson  v. 
V.  McCullough,  137  Pa.  St.  15.]  Dean,  2  Sim.  &  St.  221.  Thus  a  prior 
Wyoming.  —  Comp.  Laws,  c  40:  equitable  encumbrance,  though  regis- 
Mnst  be  recorded  within  three  months,  tered,  will  not  affect  a  subsequent 
and  is  then  notice  to  and  takes  prece-  purchaser  without  notice  who  has  ob- 
dence  of  subsequent  purchasers.  tained  the  legal  estate:   Morecock  v. 


901 


CONCERNING    NOTICE. 


§G49 


If,  however,  it  be  shown  that  a  subsequent  purchaser 
made  a  search  of  the  proper  records,  then  it  may  be  pre- 
sumed that  he  thereby  obtained  actual  notice  of  a  prior 
conveyance  which  was  registered.*  The  same  restricted 
and  imperfect  view  was  taken  by  a  few  of  the  early 
American  cases,  which  appear  to  have  held  that  a  record 
did  not  operate  as  an  absolute  constructive  notice  to  sub- 
sequent purchasers,  and  that  the  statutes  did  not  embrace 
conveyances  of  equitable  rights  and  iuterests,  so  that  the 
record  of  such  a  conveyance  would  not  be  a  notice.' 

§  649.  The  American  Theory.  —  A  broader  and  more 
effective  interpretation  has  been  established  throughout 
the  American  states  by  an  overwhelming  weight  of  judi- 


Dickins,  Amb.  678;  Bushell  v.  Bnsh- 
ell,    1   Schoales   &    L.    90,    103.     The 

Irish  acts  seem  to  be  different  in  this 
respect:  See  ante,  note  under  §  645, 
and  cases  there  cited.  A  prior  con- 
veyance of  an  equitable  interest,  if 
registered,  would  doubtless  take  pre- 
cedence of  a  subsequent  equitable  in- 
terest also  registered,  in  pursuance  of 
the  general  doctrine  that  among 
equities  otherwise  equal,  the  one  prior 
in  time  must  prevail. 

'  Hodgson  V.  Dean,  2  Sim.  &  St. 
221 ;  Lane  v.  Jackson,  20  Beav.  535. 

2  Grimstone  v.  Carter,  3  Paige,  421, 
437;  24  Am.  Dec.  230;  Doswell  v. 
Buchanan,  3  Leigh,  3(55;  23  Am.  Dec. 
280.  See  also  Gouverneur  v.  Lynch, 
2  Paige,  300;  De  Ruyter  v.  Trustees 
etc.,  2  Barb.  Ch.  556;  Ludlow  v.  Van 
Ness,  8  Bosw.  178;  Swigert  v.  Bank 
etc.,  17  B.  Mon.  268,  290;  Corn  v. 
Sims,  3  Met.  (Ky.)  .348;  Walker  v. 
Gilbert,  1  Freem.  Ch.  75;  Kelly  v. 
Mills,  41  Miss.  267;  Jaques  v.  Weeks, 
7  Watts,  261,  268,  272.  I  add  a  short 
extract  from  the  opinion  in  Grimstone 
V.  Carter,  3  Paige,  421,  437,  24  Am. 
Dec.  230,  which  well  illustrates  this 
partial  theory.  A  deed  had  been 
given,  absolute  on  its  face,  but  really 
intended  as  a  security  for  a  debt, 
and  it  was  accompanied  by  a  ver- 
bal agreement  by  the  grantee  — 
the  creditor  —  to  reconvey  upon  pay- 
ment. The  land  having  been  con- 
veyed by  the  grantee  to  a  subsequent 
purchaser,  the  question  was,  how'far 


the  latter's  rights  were  affected  by  the 
verbal  agreement.  The  court  held 
that  the  recording  or  not  recording  of 
such  agreement  was  wholly  immaterial 
upon  this  question;  the  subsequent 
purchaser  would  be  bound  by  the 
agreement,  if  he  had  notice  of  it, 
whether  it  was  recorded  or  not;  he 
would  not  be  bound,  in  the  absence  of 
notice,  even  though  it  had  been  re- 
corded. Chancellor  Walworth  said: 
The  design  of  the  recording  act  was 
"to  protect  a  subsequent  bona  Jide 
purchaser  against  a  previous  convey- 
ance of  the  legal  estate,  or  of  some 
part  thereof,  and  which  conveyance 
would  be  valid  as  against  the  subse- 
quent purchaser  or  mortgagee  if  the 
recording  act  had  not  been  passed. 
But  a  subsequent  bona  fide  purchaser 
needed  the  aid  of  the  registry  act  to 
protect  him  against  a  prior  equity  or 
a  mere  agreement  to  convey.  Having 
the  legal  title  under  his  conveyance, 
he  would  be  able  to  defend  his  title  at 
law;  and  the  plea  that  he  was  a  bona 
fide  purchaser  for  a  valuable  consider- 
ation would  afford  him  a  full  protec- 
tion against  an  equitable  claim  of 
which  he  had  no  previous  notice."  In- 
dependently of  any  judicial  construc- 
tion opposed  to  this  view,  it  will  be 
seen  that  the  statutes  of  many  states 
are  directly  in  conflict  with  it,  since 
they  provide  in  express  terms  for  the 
recording  of  agreements  to  convey 
and  other  instruments  creating  only 
an  equitable  interest. 


§  649  EQUITY    JURISFRUDENCE.  902 

cial  authority.  The  recording  statutes  have  been  regarded 
with  the  utmost  favor,  and  our  whole  system  of  convey- 
ancing and  of  land  titles  has  been  based  upon  them. 
Indeed,  the  tendency  of  modern  legislation  has  been  to 
enlarge  their  scope  and  to  define  their  operation,  so  that 
they  should,  in  terms,  include  every  kind  of  instrument 
by  which  the  ownership  and  enjoyment  of  land  can  be 
afiected.  By  this  theory  the  object  of  the  legislation  is, 
that  the  proper  record  of  every  such  instrument  should 
be  absolute  notice  of  its  contents,  and  of  all  rights,  titles, 
or  interests,  legal  and  equitable,  created  by  or  embraced 
within  it,  to  every  person  subsequently  dealing  with  the 
subject-matter  whose  duty  or  interest  it  is  to  make  a 
search  of  the  records.  The  intention  is,  to  compel  every 
person  receiving  such  an  instrument  to  place  it  upon  the 
records,  in  order  that  he  may  thereby  protect  his  own 
rights  as  well  as  those  of  all  others  who  may  afterwards 
acquire  an  interest  in  the  same  property.  It  was  designed 
that  the  public  records  should,  in  this  manner,  furnish 
an  accurate  and  complete  transcript  and  exhibition  of  all 
estates,  titles,  interests,  claims,  encumbrances,  and  charges, 
both  legal  and  equitable,  in  and  upon  every  parcel  of  land 
which  had  come  into  private  ownership  within  the  terri- 
torial limits  over  which  the  particular  record  extends;  and 
that  a  person  about  to  deal  with  respect  to  any  parcel  of 
land  should  be  able  to  discover,  or  find  the  means  of  dis- 
covering, every  existing  and  outstanding  estate,  title,  or 
interest  in  it  which  could  afi'ect  the  rights  of  a  bona  fide 
purchaser.  This  is  the  theory  of  the  legislation  as  estab- 
lished by  judicial  interpretation;  and  this  general  design 
has,  as  far  as  possible,  been  carried  into  efiect  by  the 
courts.^     It  is  therefore  settled,  even  independently  of  the 

'Birdv.  Dennison,  7Cal.  297;Cham-  Grant   v.  Bissett,  1  Caines  Cas.   112; 

berlain   v.  Bell,  7   Cal.  292;   68  Am.  Jackson  v.  Given,  8  Johns.  137;  5  Am. 

Dec.  260;  Call  v.  Hastings,  3  Cal.  179;  Dec.    328;    Jackson    v.    Van   Valken- 

Woodworth  v.  Guzman,    1    Cal.   203;  burgh,  8   Cow.    260;   Rounds  v.  Mc 

Dennis  v.  Burritt,  6  Cal.  670;  Hunter  Chesney,  7  Cal.  360;  Cook  v.  Travis, 

V.  Watson,  12  Cal.  363;  73  Am.  Dec.  20  N.   Y.  400;    Wood   v.   Chapin,   13 

643;   McCabe   v.   Grey,  20   Cal.   509;  N.  Y.  509;  67  Am.  Dec.  62;  Webster 


903 


CONCER^'IXG    NOTICE. 


§650 


express  terms  of  many  state  statutes,  that  equitable  estates 
and  interests,  as  well  as  legal,  are  embraced  within  the 
intent  and  operation  of  the  recording  acts,  and  that  any 
instrument  creating  or  conve^'ing  such  an  interest,  which 
is  duly  recorded,  must  thereby  obtain  all  the  benefits 
which  depend  upon  or  flow  from  the  fact  of  registration 
under  these  statutes.' 

§  650.  (3)  Requisites  of  the  Record,  in  Order  that  It 
may  be  a  Constructive  Notice.  —  Since  the  constructive 
notice  arising  from  a  registration  is  unknown  to  the  com- 
mon law,  and  is  entirely  a  creation  of  the  statute,  it  is 
plain  that  the  provisions  of  the  statute  must  be  exactly 


V.  Van  Steenbergh,  46  Barb.  21 1 ;  Tay- 
lor V.  Thomas,  5  N.  J.  Eq.  331 ;  Losey 
V.  Simpson,  11  N.  J.  Eq.  246;  Routh 
V.  Spencer,  38  Ind.  393;  Holbrook  v. 
Dickenson,  56  111.  497;  Hogd^u  v. 
Guttery,  58  111.  431;  Harrington  v. 
Allen,  48  Miss.  493;  Ohio  L.  Ins.  Co. 
V.  Ledyard,  8  Ala.  866;  Peycliaud  v. 
Citizens'  Bank,  21  La,  Ann.  262; 
Harang  v.  Plattsmier,  21  La.  Ann. 
426;  [Spielmann  v.  Kliest,  36  N.  J. 
Eq.  202.] 

>  Digman  v.  McCoIInm,  47  Mo.  372, 
375,  376:  U.  S.  Ins.  Co.  v.  Shriver,  3 
Md.  Ch.  381;  Alexander  v.  Webster, 
6  Md.  359;  Alderson  v.  Ames,  6  Md. 
62;  Gen.  Ins.  Co.  v.  U.  S.  Ins.  Co., 
10  Md.  517;  69  Am.  Dec.  174;  Bellas 
V.  McCarty,  10  Watts,  13;  Paissell'a 
Appeal,  15  Pa.  St.  319;  Siter  v.  Mc- 
Clanachan,  2  Gratt.  280;  Hunt  v. 
Johnson,  19  N.  Y.  279;  Doyle  v.  Teas, 
4  Scam.  202;  Wilder  v.  Brooks,  10 
Minn.  50;  88  Am.  Dec.  49;  Dickenson 
V.  Glenney,  27  Conn.  104;  Parkist  v. 
Alexander,  1  Johns.  Ch.  394;  Boyce 
V.  Shiver,  3  S.  C.  515.  A  mortgage 
by  a  vendee  of  his  equitable  interest 
under  a  land  contract:  Bank  of  Greens- 
boro V.  Clapp,  76  N.  C.  4S2;  Crane  v. 
Turner,  7  Hun,  357;  67  N.  Y.  437. 
In  U.  S.  Ins.  Co.  v.  Shriver,  3  Md. 
Ch.  381,  the  conrt  stated  the  doctrine 
as  follows:  The  legislative  intent  was, 
"that  all  rights,  encumbrances,  or 
conveyances  touching,  connected  with, 
or  in  any  way  concerning  land  should 
appear  upon  the  public  records.  It 
followed  that  conveyances  of  equita- 
ble interests  in  land  were  within  the 


registry  acts;  and  that  a  convej'ance 
of  such  an  interest  which,  though 
subsequent  in  date,  is  first  recorded 
must  be  preferred,  unless  the  grantee 
had  actual  notice  of  the  prior  unregis- 
tered deed." 

As  illustrations:  A  subsequent  pur- 
chaser has  constructive  notice  of  a 
prior  recorded  encumbrance,  —  e.  g., 
a  mortgage  or  a  deed  of  trust,  —  even 
though  the  encumbrancer's  own  title, 
which  was  a  mere  agreement  to  con- 
vey, was  not  recorded:  Digman  v. 
McCollum,  47  Mo.  372,  375,  376.  An 
agreement  in  writing  to  convey  land, 
though  not  under  seal,  creating  an 
equitable  interest,  is  protected  by  a 
record:  Brotherton  v.  Livingston,  3 
Watts  &  S.  334;  Schutt  v.  Large,  6 
Barb.  373;  Kiser  v.  Heuston,  38  111. 
252;  and  see  cases  cited  at  the  com- 
mencement of  this  note.  The  record 
of  a  voluntary  conveyance  or  deed 
without  consideration  is  notice  to  a 
subsequent  purchaser,  and  tends  to 
remove  the  presumption  of  bad  faith 
or  fraud  as  against  such  purchaser: 
Beal  v.  Warren,  2  Gray,  447;  Mayor 
V.  Williams,  6  Md.  235;  Williams  v. 
Bank,  11  Md.  198;  Cooke's  Lessee  v. 
Kell,  13  Md.  469,  493. 

The  doctrine  stated  in  the  text  and 
sustained  by  the  decisions  cited  ia 
this  note  has  been  aflBrmed  by  several 
state  statutes,  which,  in  terms,  provide 
for  the  recording  of  contracts  for  the 
sale  of  land,  and  other  instruments 
creating  a  mere  equitable  interest. 
See  ante,  note  under  §  646.  [Edwzirda 
T.  McKernan,  55  Mich.  52L] 


§§  651,  652  EQUITY   JURISPRUDENCE.  904 

complied  with,  or  else  there  will  be  no  resulting  notice. 
Certain  requisites  are  prescribed  by  the  legislation;  they 
are  all  essential;  without  them,  the  object  of  the  proceed- 
ing would  wholly  fail.  I  purpose  to  state  and  explain 
these  requisites  as  they  have  been  inferred  from  the 
statutory  provisions,  and  settled  by  the  decisions.  They 
relate  to  the  form,  execution,  and  contents  of  the  instru- 
ment, and  to  the  form  and  manner  of  the  registration. 

§  651.  The  Form  and  Kind  of  Instrument.  —  The  rec- 
ord operates  as  a  constructive  notice  only  when  the  instru- 
ment itself  is  one  of  which  the  registration  is  required 
or  authorized  by  the  statute.  The  voluntary  recording, 
therefore,  of  an  instrument,  when  not  authorized  by  the 
statute,  would  be  a  mere  nullity,  and  would  not  charge 
subsequent  purchasers  with  any  notice  of  its  contents  or 
of  any  rights  arising  under  it.* 

§  652.  Execution  of  the  Instrument.  — The  record  does 
not  operate  as  a  constructive  notice,  unless  the  instru- 
ment is  duly  executed,  and  properly  acknowledged  or 
proved,  so  as  to  entitle  it  to  be  recorded.  The  statutes 
generally  require,  as  a  condition  to  registration,  that  the 
instrument  should  be  legally  executed,  and  that  it  should 
be  formally  acknowledged  or  proved,  and  a  certificate 
thereof  annexed.  If  a  writing  should  be  placed  upon  the 
records  with  any  of  these  preliminaries  entirely  omitted 

*  A3  examples:   The   entry    upon  a  authorized   by  the  statute:   James  v. 

certain    record-book     in    the    county  Morey,  2  Cow.  246;  14  Am.  Dec.  475; 

clerk's    office   of    lands    sold   by   the  Mott  v.  Clark,  9  Fa.  St.  400;  49  Am. 

United  States,  being  required  by  the  Dec.  566;  see  also  Graves  v.  Graves, 

statute  only  for  purposes  of  taxation,  6  Gray,  391 ;  Villard  v.  Robert,  1  Strob. 

is  not  a  constructive  notice  to  subse-  Eq.  393;  Bossard  v.    White,  9  Rich, 

quent  purchasers  of  the  facts  contained  Eq.  4S3;  Galpin  v.  Abbott,  6  Mich.  17; 

in  it:    Betser  v.  Rankin,  77  111.   289.  Reed  v.   Coale,  4  Ind.  283;  Brown  v. 

The  record  of  a  deed  transferring  per-  Budd,  2  Ind.  442;  Commonwealth  v. 

sonal  property  is  not  a  constructive  Rodes,  6  B.   Mon.  171,  181;  Parret  v. 

notice  of  such  transfer,  even  when  the  Shaubhut,  5  Minn.  323;  Burnham  v. 

deed  was  also  a  conveyance  of  land,  Chandler,  15  Tex.  441;  Lewis  v.  Baird, 

and  as  such   was   entitled   to   be   re-  3  McLean,  56:  [Watson  v.  Dundee  etc. 

corded:  Pitcher  v.  Barrows,  17  Pick.  Mfg.  Co.,  12  Or.  474.    That  the  record 

361;    28    Am.    Dec.    306;    Boggs    v.  operates  as  notice  in  cases  where  the 

Varner,  6  Watts  &  S.  469.     [See  also  conveyances  are  merely  authorized  aa 

Scott  V.  Sierra  Lumber  Co.,  67  Cal.  71.  J  well  aa  where  they  are  required  to  be 

The  same  is  true  of  the  recording  of  registered,  see  Neslin v.  Wells,  104  U.S. 

au  assignment  of  a  mortgage  when  not  434;  Pepper's  Appeal,  77  Pa.  St.  373,] 


905 


CONCERNING    N0TIC3. 


§  653 


or  defectively  performed,  such  a  record  would  be  a  mere 
voluntary  act,  and  would  have  no  effect  upon  the  rights 
of  subsequent  purchasers  or  encumbrancers.* 

§  653.  Form  and  Manner  of  the  Record. —  Further- 
more, the  record  of  an  instrument  which  is  itself  duly 
executed  and  entitled  to  be  registered  does  not  operate  as 
a  constructive  notice,  unless  it  is  made  in  the  proper  form 
and  manner,  in  the  proper  book,  as  required  by  the  stat- 
ute. The  policy  of  the  recording  acts  is,  that  those  per- 
sons who  are  affected  with  constructive  notice  should  be 
able  to  obtain  an  actual  notice,  and  even  full  knowledge, 
by  means  of  a  search.  A  search  could  not  ordinarily  be 
successful  and  lead  the  party  to  the  knowledge  which  he 
seeks,  if  the  instrument  were  recorded  in  a  wrong  book. 
This  rule,  therefore,  instead  of  being  arbitrary  and  tech- 
nical, is  absolutely  essential  to  any  effective  working  of 
the  statutory  system.*     For  the  same  reason  the  operation 

^  This  rule  has  been  applied  under  a 
great  variety  of  circumstances,  and  to 
many  kinds  of  defects  and  imperfec- 
tions: Pringle  v.  Dunn,  37  Wis.  449, 
460,  461;  1^  Am.  Rep.  772;  Brown  v. 
Luut,  37  Me.  423;  De  Witt  v.  Moul- 
ton,  17  Me.  418;  Stevens  v.  Morse,  47 
N.  H.  532;  Isham  v.  Bennington  Iron 
Co.,  19  Vt.  230;  Blood  v.  Blood,  23 
Pick.  80;  Sumner  v.  Rhodes,  14  Conn. 
135;  Carter  v,  Cliampion,  8  Conn.  548; 
21  Am.  Dec.  695;  Parkist  v.  Alexan- 
der, 1  Johns.  Ch.  394;  Green  v.  Drinker, 
7  Watts  &  S.  440;  Heister  v.  Fortuer, 

2  Binn.  40;  4  Am.  Dec.  417;  Strong  v. 
Smith,  3  McLean,  362;  Cockey  v. 
Milne,  IG  Md.  200;  Johns  v.  Reardon, 

3  Md.  Ch.  57;  5  Md.  81;  Herudon  v. 
Kimball,  7  Ga.  432;  50  Am.  Dec.  406; 
AVork  V.  Harper,  24  Miss.  517;  Thomas 
V.  Grand  Gulf  Bank,  9  Smedes  &  M. 
201;  Graham  V.  Samuel,  1  Dana,  166; 
Halstead  v.  Bank  of  Kentucky,  4  J.  J. 
Marsh.  554;  White  v.  Denman,  1  Ohio 
St.  110;  Reynolds  v.  Kingsbury,  15 
Iowa,  238;  Barney  v.  Little,  15  Iowa, 
527;  Brinton  v.  Seevres,  12  Iowa,  389; 
Hodgson  v.  Butts,  3  Cranch,  140; 
Shults  V,  Moore,  1  McLean,  521 ;  Har- 
per V.  Reno,  1  Freem.  Ch.  323;  [Stiler 
V.  McComas,  66  Md.  135;  Girardin  v. 
Lainpe,  58  Wis.  267.]  The  legisla- 
ture, however,  may  provide  that  a  de- 


fective acknowledgment  shall  not  in- 
validate a  record,  and  may  even  cure 
such  a  defect  by  a  retroactive  statute  as 
between  the  parties,  but  not  as  against 
one  who  has  already  purchased  the 
land  id  good  faith:  Watson  v.  Mer- 
cer, 8  Pet.  88;  Gillespie  v.  Reed,  3 
McLean,  377;  Barnet  v.  Barnet,  15 
Serg.  &  R.  72;  Tate  v.  Stool tzfoos,  16 
Serg.  &  R.  35;  16  Am.  Dec.  546; 
Hughes  v.  Cannon,  2  Humph.  589; 
Pteed  v.  Kemp,  16  111.  445;  Allen  v. 
Moss,  27  Mo.  354;  Brown  v.  Simpson, 
4  Kan.  76;  V>^allace  v.  Moody,  26  Cal. 
387.  The  statutes  in  a  few  states  pro- 
vide that  an  instrument  filed  for  rec- 
ord shall  be  a  notice,  although  not 
properly  acknowledged,  but  that  the 
record  cannot  be  used  as  evidence 
without  the  acknowledgment. 

»  Pringle  v.  Dunn,  37  Wis.  449,  460, 
461 ;  19  Am.  Rep.  772;  Van  Thorniley 
V.  Peters,  26  Ohio  St.  471.  If  the 
law  prescribes  that  deeds  should  be 
recorded  in  certain  books,  —  "  books  of 
deeds,"  —  and  that  mortgages  should 
be  entered  in  another  set  of  books,  — 
"  books  of  mortgages, "  —  the  record  of 
a  mortgage  in  a  "book  of  deeds,"  or 
of  a  deed  in  a  "book  of  mortgages," 
would  be  wholly  inoperative  as  a  con- 
strwtlve  notice:  Leech's  Appeal,  44 
Pa.  St.   140;    Calder  v.  Chapman,  52 


§653 


EQUITY    JURISPRUDENCE. 


906 


of  a  record  as  constructive  notice  is  limited  territorially. 
A  record  is  not  a  notice  with  respect  to  any  land  situated 
in  a  different  county  from  that  in  which  the  registration 
is  made.  The  statutes  uniformly  require  the  instrument 
to  be  registered  in  the  same  county  in  which  the  land  is 
situated;  a  record  in  a  different  county  is  therefore  in- 
operative as  a  constructive  notice.' 


Pa.  St.  359;  91  Am.  Dec.  163;  McLan- 
ahaa  v.  Reeside,  9  Watts,  508;  36  Am. 
Dec.  136;  Colomer  v.  Morgan,  13  La. 
Ann.    202;    Succession   of  CordevioUe 
V.  Dawson,  26  La.  Ann.  534;  Fisher  v, 
Tunnard,  25  La.  Auu.  179;  Verges  v. 
Prejean,  24  La.   Ann.  78;   Grimstone 
V.     Carter,    3    Paige,    421;     24    Am. 
Dec.  2.30;  [See  also  Parsons  v.  Lent,  34 
N.  J.  Eq.  67.J     In  Leech's  Appeal.  44 
Pa.    St.    140,    a   peculiar    instrument 
which  was  actually  given  as  security 
for  a  debt,  and  was  therefore  held  to 
be   a  mortgage,  and  not   an   absolute 
conveyance,  had  been   recorded   in   a 
book   of  deeds;   this  record  was  held 
to  be  inoperative  as  a  notice.     In  Mc- 
Lanahan  v.  Reeside,  9  Watts,  508,  36 
Am.  Dec.  136,  a  deed   absolute  on  its 
face  was  given,  accompanied  by  a  sep- 
arate written  defeasance,  both  consti- 
tuting a  mortgage.     They  were  both 
recorded  in  the  same  book,  but  at  dif- 
ferent pages,  several  pages  intervening 
between  the  two.     The  court  held  that 
no  notice  was   thereby  given   of   the 
instrument   as  a  mortgage,  because   a 
party  making  a  search,  and  finding  the 
deed  absolute  on  its  face,  would  be  mis- 
led, and  suppose  that  there  was  no  other 
instrument  affecting  the  title:  Viele  v. 
Judson,  82  N.  Y.  32.     [In  Marston  v. 
Williams,  45  Minn.  116,  it  was,  how- 
ever, held  that  the  recording  of  the  deed 
alone,  without  the  defeasance,  was  no- 
tice.   See  also  Kemper  v.  Campbell,  44 
Ohio  St.  210;  Bank  of  Mobile  v.  T.  Sav. 
Inst.,  62  Miss.  250;  contra,  GuUey  v. 
Macy,  84  N.  C.  434;  Ives  v.  Stone,  51 
Conn.    446.]     It   might    be   supposed 
that  the  same  rule  should  apply  to  a 
proper   indexing.     But   in   Mut.  Life 
Ins.  Co.  V.  Dake,  1  Abb.  N.  C.  381,  it 
was  expressly  held   that  the  index  is 
not   an    essential   part  of  the  record; 
that   a   mortgage   otherwise   duly  re- 
corded is  notice,  although  not  indexed. 
To  the  same  effect    are  Curtis  v.  Ly- 
man, 24  Vt.   838:  58    Am.    Rep.   17'4; 
Bishop  V.  Schneider,    46   Mo.   472;  2 


Am.     Rep.     533;     Throckmorton     v. 
Price,  28  Tex.  605;  91  Am.  Dec.  334; 
Board  of   Commissioners  v.  Babcock, 
5  Or.  472.     And  the  same  as  to  a  mis- 
take in  indexing:     Green  v.  Garring- 
tou,  16  Ohio  St.  548;  but  see,  per  con- 
tra,  Speer  v.  Evans,  47   Pa.  St.    141, 
per  Woodward,  J.     [The   statutes   in 
many  of  the  states  contain  provisions 
to   the   effect    that    the  recording    is 
deemed  to  be  complete  and  to  become 
operative  from  the  moment  the  instru- 
ment is  left  with  the  proper  officer  for 
record.     In  such  cases  it  would  seem 
to  follow,  and  it  has  been  repeatedly  so 
decided,  that  no  subsequent  error  or 
omission  of  the  officers  whose  duty  it 
is   to  make   the  record,  such  as  a  re- 
cording in  a  wrong  book,  a  mistake  in 
indexing,  or  even  an  entire  omission 
to  make  the  record,  will  destroy  the 
effectiveness  of  the  recording  as  con- 
structive notice:  Mangold  v.  Barlow, 
61  Miss.  593;  48  Am.  Rep.  84;  Balen 
V.  Mercier,  75   Mich.  42;  Mutual   L. 
Ins.  Co.  v.  Dake,  87  N.  Y.  257;  Don- 
ald v.  Beals,  57  Cal.   399;  Meherin  v. 
Oaks,  67  Cal.  57.     This  result  will  not 
follow  if  at   the  time  the  instrument 
is  left  with  the  officer  he  is  instructed 
not   to  record  until   subsequently  or- 
dered   to   do  so:  Haworth  v.  Taylor, 
108  III.  275.     But  after  the  recording 
has  once  been  accomplished,  its  effect- 
iveness is  not  defeated  by  the  subse- 
quent careless  or  accidental  loss,  as  by 
fire,  of  the  record:  Heim  v.  Ellis,  49 
Mich.  241;  Franklin  Savings  Bank  v. 
Taylor,  131  111.376.  In  ^Etna  Life  Ins. 
Co.  v.  Hesser,  77   Iowa,  381,  14  Am. 
St.  Rep.  297,  it  was  held  that  an  error 
in  indexing  a  judgment  destroyed  its 
effectiveness    as   constructive    notice. 
In   this  case  the   judgment  against  a 
person  named  "Hesser"was  indexed 
under  the  name  of  "  Hesse."] 

»  King  V.  Portis,  77  N.  C.  25.  If  a 
deed  or  mortgage  covered  lands  situ- 
ated in  two  different  counties,  and  it 
was  recorded  in  one  of  them  only,  it 


907  CONCERNING   NOTICE.  §  654 

§  654.  Contents  of  the  Record.  —  A  record  is  a  con- 
structive notice  only  when  and  so  far  as  it  is  a  true  copy, 
substantially  even  if  not  absolutely  correct,  of  the  instru- 
ment which  purports  to  be  registered,  and  of  all  its  provis- 
ions. Any  material  omission  or  alteration  will  certainly 
prevent  the  record  from  being  a  constructive  notice  0/  the 
original  instrument,  although  it  may  appear  on  the  registry 
books  to  be  an  instrument  perfect  and  operative  in  all  its 
parts.  The  test  is  a  plain  and  simple  one.  It  is,  whether 
the  record,  if  examined  and  read  by  the  party  dealing 
with  the  premises,  would  be  an  actual  notice  to  him  of  the 
original  instrument  and  of  all  its  parts  and  provisions. 
By  the  policy  of  the  recording  acts,  such  a  party  is  called 
upon  to  search  the  records,  and  he  has  a  right  to  rely 
upon  what  he  finds  there  entered  as  a  true  and  complete 
transcript  of  any  and  every  instrument  affecting  the  title 
to  the  lands  with  respect  to  which  he  is  dealing.  A  rec- 
ord can  only  be  a  constructive  notice,  at  most,  of  whatever 
is  contained  within  itself.^     Finally,  the  record  will  not 

would  be  efifective  as  to  part  of  the  received  actual  notice  from  such  a 
land  conveyed,  but  inoperative  as  a  search  of  the  records.  In  my  opinion, 
notice  with  respect  to  the  other  part:  this  decision  pushes  the  doctrine  of 
Astor  V.  Wells,  4  Wheat.  466;  Lewis  actual  notice  based  upon  indirect  evi- 
V.  Baird,  3  McLean,  56;  Stevens  v,  dence  to  the  furthest  extreme.  I  se- 
Brown,  3  Vt.  420;  23  Am.  Dec.  215;  riously  doubt  its  correctness.  See 
Perrin  v.  Reed,  35  Vt.  2;  Kerns  v.  ante,  §  600,  and  note  thereunder. 
Swope,  2  Watts,  75;  Hundley  v.  ^  As  illustrations  of  such  mistakes 
Mount,  8  Smedes  &  M.  387;  Crosby  affecting  the  operation  of  the  record 
V.  Huston,  1  Tex.  203;  Sb.  John  v.  as  a  constructive  notice  would  be  an 
Conger,  40  111.  535;  Stewart  v.  Mo-  error  in  the  description  or  location  of 
Sweeney,  14  Wis.  468.  the  premises  included  in  the  original 
In  Kerns  v.  Swope,  2  Watts,  75,  a  deed  or  mortgage;  an  error  in  the 
prior  deed  of  land  lying  in  two  coun-  name  of  a  grantor  or  mortgagor;  an 
ties  had  been  recorded  in  one  of  them  error  in  the  amount  of  the  debt  for 
only,  and  so  was  not  constructive  no-  which  a  mortgage  is  a  security,  and 
tice  with  respect  to  the  land  situated  the  like:  Jennings  v.  Wood,  20  Ohio, 
in  the  other.  A  subsequent  purchaser  261;  Miller  v.  Bradford,  12  Iowa,  14; 
bought  and  took  a  conveyance  of  both  Hughes  v.  Debnam,  8  Jones,  1:27; 
tracts.  The  court  held  that  while  Wyatt  v.  Barwell,  19  Ves.  439.  [But 
this  purchaser  was  not  charged  with  the  registry  of  a  de^d  executed  by 
constructive  notice  with  respect  to  the  J.  N.  H.,  in  which  he  calls  himself 
land  situated  in  one  of  the  counties,  J.  H.,  by  which  latter  name  he  is 
there  arose  a  presumftion  of  fact  that  equally  well  known,  ia  not  sach  a  mis- 
he  had  examined  the  record,  and  had  take  as  will  prevent  the  registry  as 
thus  obtained  ac<Ma/ notice  of  the  deed  operating  as  constructive  notice:  Gil- 
of  both  parcels;  that  a  jury  might  lespie  v.  Rogers,  146  Mass.  610.]  In 
rely  upon  such  presumption  of  fact,  one  case  a  mortgage  was  given  to  se- 
aud  might  tind  as  a  fact  that  he  had  cure  three  thousand   dollars.     In  re- 


654 


EQUITY   JURISPRUDENCE. 


908 


be  a  notice,  unless  it  and  the  original  instrument  of  which 
it  is  a  copy  correctly  and  sufficiently  describe  the  prem- 
ises which  are  to  be  affected,  and  correctly  and  sufficiently 
state  all  the  other  provisions  which  are  material  to  the 
rights  and  interests  of  subsequent  parties.  The  premises 
should  at  least  be  so  described  or  identified  that  a  subse- 
quent purchaser  or  encumbrancer  w^ould  have  the  means 
of  ascertaining  with  accuracy  what  and  where  they  were.* 


cording  it,  by  a  mistake  of  the  clerk 
or  copyist  in  the  registry  office,  the 
record  was  made  to  read  only  three 
hundred  dollars.  It  was  held  to  be  a 
constructive  notice  only  to  the  extent 
of  three  hundred  dollars,  and  to  con- 
stitute a  lien  only  for  that  amount  as 
against  a  subsequent  grantee  or  mort- 
gages who  had  no  actual  notice,  and 
who,  it  was  held,  had  a  right  to  rely 
on  the  record  as  correctly  stating  the 
amount  of  the  debt  and  the  extent  of 
the  lien:  Peck  v.  Mallams,  10  N.  Y. 
509;  Beekman  v.  Frost,  18  Johns.  544; 
9  Am.  Dec.  246;  Terrell  v.  Andrew 
Co.,  44  Mo.  309;  Jennings  v.  Wood, 
20  Ohio,  261.  In  this  connection  the 
question  has  arisen  concerning  the 
effect  of  a  deed  of  land  absolute  on  its 
face,  but  accompanied  by  a  written 
defeasance,  and  thus  constituting  in 
reality  a  mortgage.  It  is  held  that 
both  must  be  recorded  together  as  a 
mortgage,  in  order  that  the  registry 
may  be  constructive  notice  of  the  whole 
instrument  as  a  mortgage.  If  the 
deed  alone  is  recorded,  without  the 
accompanying  defeasance,  it  is  clear 
that  the  record  will  not  be  constructive 
notice  of  the  entire  instrument  in  its 
intended  character  as  a  mortgage;  so 
far  as  the  registry  would  operate,  the 
instrument,  as  a  mortgage,  would  be 
in  the  position  of  a  wholly  unrecorded 
mortgage,  as  against  subsequent  pur- 
chasers and  encumbrancers:  Brown  v. 
Dean,  3  Weud.  208;  James  v.  Morey, 
2  Cow.  246;  14  Am.  Dec.  475;  Dey  v. 
Dunham,  2  Johns.  Ch.  182;  Friedley 
V.  Hamilton,  17  Serg.  &  R.  70;  17  Am. 
Dec.  638;  Jaques  v.  Weeks,  7  Watts, 
261,  287;  Edwards  v.  Trumbull,  50 
Pa.  St.  509;  Hendrickson's  Appeal,  24 
Pa.  St.  363.  In  this  last-mentioned 
case,  Black,  J.,  said,  concerning  such 
a  record:  "  A  mortgage,  when  in  the 
shape  of  an  absolute  conveyance  with 


a  separate  defeasance,  the  former  being 
recorded  and  the  latter  not,  gives  the 
holder  no  rights  against  a  subsequent 
encumbrancer.  It  is  good  for  nothing 
as  a  conveyance,  because  it  is  in  fact 
not  a  conveyance;  and  it  is  equally 
worthless  as  a  mortgage,  because  it 
does  not  appear  by  the  record  to  be 
a  mortgage."  To  the  same  effect  is 
Corpman  v.  Baccastow,  84  Pa.  St.  363. 
This  dictum  concerning  the  effect  of 
such  a  record  as  a  conveyance  is  cer- 
tainly opposed  to  the  doctrine  which 
generally  prevails  through  the  states, 
and  to  the  policy  of  the  recording  acts. 
A  subsequent  purchaser  for  a  valuable 
consideration  from  the  grantee,  under 
such  circumstances,  would,  according 
to  the  generally  accepted  doctrine,  ob- 
tain a  good  title  as  against  the  grantor 
and  all  persons  claiming  through  him, 
as  was  held  in  Cogan  v.  Cook,  22  Minn. 
]  37.  The  statutes  In  most  states  con- 
tain an  express  provision  concerning 
the  recording  of  absolute  deeds  accom- 
panied by  a  defeasance. 

1  Partridge  v.  Smith,  2  Biss.  183, 
185,  186;  Galway  v.  Malchow,  7  Neb. 
285;  Herman  v.  Deming,  44  Conn. 
124;  Murphy  v.  Hendricks,  57  Ind. 
593;  Thorp  v.  Merrill,  21  Minn.  336; 
Sanger  v.  Craigue,  10  Vt.  555;  Broth- 
erton  v,  Livingston,  3  Watts  &  S.  334; 
Banks  v.  Ammon,  27  Pa.  St.  172; 
Mundy  v.  Vawter,  3  Gratt.  518;  Lally 
V.  Holland,  1  Swan,  396;  Martindale 
V.  Price,  14  Ind.  115;  Rodgers  v.  Kav- 
anaugh,  24  111.  583;  Nelson  v.  Wade, 
21  Iowa,  49;  Jones  v.  Bamford,  21 
Iowa,  217.  In  Partridge  v.  Smith,  2 
Biss.  183,  185,  186,  a  deed  was  re- 
corded in  a  couuty  where  the  land 
conveyed  was  situated.  The  descrip- 
tion was  erroneous  in  some  important 
particulars;  but  there  were  no  other 
premises  in  the  county  which  at  all 
answered    to    the   description.      The 


909  CONCERNING   NOTICE.  §  655 

The  same  rule  applies  to  the  record  of  mortgages  and  all 
other  encumbrances  which  can  be  recorded.  The  lan- 
guage, both  of  the  original  and  of  the  record,  must  be  such 
that  if  a  subsequent  purchaser  or  encumbrancer  should 
examine  the  instrument  itself,  he  would  obtain  thereby 
an  actual  notice  of  all  the  rights  which  were  intended  to 
be  created  or  conferred  by  it.^  It  seems  also  to  result 
from  the  terms  of  the  statute  that  the  recording  of  a  copy 
is  not  equivalent  to  the  record  of  the  original  instrument, 
and  is  not  operative  as  a  notice.^ 

§  655.  (4)  Of  What  the  Record  is  a  Notice.  —  The 
doctrine  formulated  under  this  head  is  merely  the  sum- 
ming up  and  result  of  the  various  special  rules  which 
have  been  stated  in  the  preceding  paragraphs.  When  all 
the  foregoing  requisites  to  a  valid  registration  have  been 
complied  with,  —  when  an  instrument  is  one  entitled  to  be 
recorded,  and  has  been  duly  executed  and  acknowledged 
or  proved,  and  has  been  recorded  in  the  proper  manner 

court,  while  admitting  the  general  the  error  is,  then  the  record  is  con- 
rule  as  stated  in  the  text,  held  that  structive  notice  o£  the  mortgage  upon 
there  was  sufficient  in  the  record  to  the  lots  intended  to  be  described;  but 
put  a  subsequent  purchaser  on  an  in-  if  it  is  not  apparent  what  the  error  is, 
quiry,  and  it  therefore  operated  as  a  the  record  is  not  constructive  notice, 
notice  that  the  land  had  been  con-  ....  The  premises  should  at  least 
veyed.  See  also  Thonihill  v.  Burthe,  be  so  described  or  ideutitied  that  a 
29  La.  Ann.  639;  Slater  v.  Breese,  36  subsequent  purchaser  would  have  tlie 
Mich.  77;  Shepard  v.  Shepard,  36  means  of  ascertaining  with  accuracy 
Mich.  173;  Boon  v.  Pierpont,  28  N.  J.  what  and  where  they  were.  The  lan- 
Eq.  7, — which  are  illustrations  of  mis-  guage,  both  of  the  mortgage  and  of  the 
takes  and  omissions  immaterial  be-  record  of  it,  must  be  such  that  if  a 
cause  the  other  portions  of  the  descrip-  subsequent  purchaser  should  examine 
tion  are  reasonably  sufficient  to  enable  the  instrument  itself  he  would  ob- 
any  one  to  identify  the  land.  Slater  tain  thereby  an  actual  notice  of  all  the 
V.  Breese,  36  Mich.  77,  is  an  especially  rights  which  were  intended  to  be  cre- 
instructive  decision  on  this  point.  [See  ated  or  conferred  by  it. "] 
also  Carter  v.  Hawkins,  62  Tex.  393;  i  Youngs  v,  Wilson,  27  N.  Y.  351; 
Bailey  v.  Galpin,  40  Minn.  319;  Maul  reversing  24  Barb.  510;  Babcock  v. 
V.  Rider,  59  Pa.  St.  167.  In  Bright  Bridge,  29  Barb.  427;  Bell  v.  Fleming, 
V.  Buckman,  39  Fed.  Rep.  247,  this  12  N.  J.  Eq.  13,  490;  Pettibone  v. 
rule  was  thus  stated:  "The  descrip-  Griswold,  4  Conn.  158;  10  Am.  Dec. 
tion  of  the  property  upon  which  the  106;  Hart  v.  Chalker,  14  Conn.  77; 
mortgage  is  an  encumbrance  must  be  Viele  v.  Judson,  82  N.  Y.  32  (record  . 
such  as  reasonably  to  enable  subse-  of  an  assignment  of  a  mortgage). 
quent  purchasers  to  identify  the  land;  '  Ladley  v.  Creighton,  70  Pa.  St. 
otherwise  the  record  of  the  mortgage  490.  Unless  the  recording  is  done  iu 
is  not  notice  of  any  encumbrance  upon  pursuance  of  the  express  provisions  of 
it.  If  the  description  in  the  mortgage  a  statute  permitting  a  copy  to  be  proved 
ia  erroneous,  and  it  ia  apparent  what  and  recorded  when  the  original  is  lost. 


§  656  EQUITY   JURISPRUDENCE.  910 

and  in  the  proper  county,  —  then  such  record  becomes  a 
constructive  notice  not  only  of  the  fact  that  the  instru- 
ment exists,  but  of  its  contents,  and  of  all  the  estates, 
rights,  titles,  and  interests,  legal  and  equitable,  created 
or  conferred  by  it  or  arising  from  its  provisions/  The- 
inquiry  therefore  remains.  To  what  classes  of  persons  does 
this  notice  extend  ? 

§  656.  (5)  To  Whom  the  Record  is  a  Notice.  — What 
classes  of  persons  are  thus  charged  with  constructive  no- 
tice by  a  regular  and  lawful  registration  ?  The  answer 
to  this  question  must  depend  upon  the  language  of  the 
recording  acts.  While  the  terms  of  the  various  state 
statutes  may  differ,  in  respect  to  this  matter,  in  some  of 
their  subordinate  and  qualifying  phrases,  they  all  agree 
in  the  main  and  substantial  provision;  they  all  declare 
that  an  unrecorded  conveyance  is  invalid  only  as  against 
subsequent  purchasers  or  encumbrancers,  and,  as  a  neces- 
sary inference,  that  the  record  only  operates  as  a  notice  to 
the  same  persons.^  In  several  of  the  statutes  the  quali- 
fication is  added  that  the  subsequent  purchaser  who  is 
thus  protected  must  be  one  "  in  good  faith  and  for  a  val- 
uable consideration  ";  in  many  of  them  this  language  is 

*  Bancroft  v.  Consen,  13   Allen,  50;  87;  Buchanan  v.  International  Bank, 

Orvis  V.  Newell,  17  Conn.  97;  Bush  v.  78  111.  500;  Ogdeu  v.  Walters,  12  Kan; 

Golden,    17   Conn.    594;    Harrison   v.  282;  McCabe  v.    Grey,   20   Cal.    509- 

Oachelin,  23  Mo.  117,  127;  Mesick  v.  Dennis  v.  Burritt,  6  Cal.  670;  Monte; 

Sunderland,  6  Cal.  297;  George  V.Kent,  fiore   v.    Browne,  7   H.    L.  Cas.    241. 

7    Allen,   16;  Hetherington  v.   Clark,  Viele  v.  Judson,  82  N,  Y.  32  (as  to  the 

30  Pa.  St.  393;  Morris  v,  Wadsworth,  effect  of   record  of  an  assignment  of 

17   Wend.   ]03;  Thomson  v.  Wilcox,  a  mortgage;  it  is  notice  of  the  rights 

7  Lans.    376;   Youngs   v.  Wilson,  27  of  the  assignee  as  against  any  subse- 

iST.  Y.  351;  Dimon  V.  Dunn,   15  N.   Y.  quent  acts  of  the  mortgagee  affecting 

498;  Parkist  v.  Alexander,   1    Johns,  the    mortgage;    it    protects    as  well 

Ch.  394;  Humphreys  v.  Newman,  51  against  a  discharge  as  against  an  as- 

Me.  40;  Hall  v.  McDuff,  24  Me.   311;  signment    by   the    mortgagee).       [See 

Tripe  v.  Marcy,  39  N.  H.  439;  Leach  also  McPherson  v.  Rollins,  107  N.  Y. 

V.  Beattie,  33Vt.  195;Bolles  V.  Chaim-  .322;  1  Am.   St.  Rep.  826;  Warder  v. 

cey,  8  Conn.  389;  Peters  v.  Goodrich,  Cornell,  105  111.  169;  Meyer  v.  Portia. 

3   Conn.   146;   Barbour  v.  Nichols,  3  45  Ark.  420;  Stokes  v,  Riley,  121  111. 

R.  1. 187;  Souder  v.  Morrow,  33  Pa.  St.  166;  Lovejoy  v.  Raymond,  58  Vt.  509; 

83;  Clabaugh  v.   Byerlv,  7  Gill,  354;  Geilev.  Reynolds,  35  Minn.  331.] 

48  Am.    Dec.  575;  Grandin  v.  Ander-  ■'  Hunter  v.  Watson,  12  Cal.  363;  73 

so-n,  15  Ohio  St.  286;  Kyle  v.  Thomp-  Am.   Dec.   543;  Dennis  V.  Burritt,  6 

son,  11  Ohio  St.   616;  Leiby  v.  Wolf,  CaL  670. 
10  Ohio,  83;  Doyle  v.  Stevens,  4  Mich, 


911 


CONCERNING    NOTICE. 


§657 


absent;  but  whether  expressed  or  omitted  by  the  legisla- 
ture, it  has  uniformly  entered  into  and  formed  a  part  of 
the  judicial  interpretation.  In  some  instances  "credi- 
tors "  are  expressly  added. 

§  657.  Not  to  Prior  Parties.  —  It  is  a  fundamental  prop, 
osition,  therefore,  established  with  complete  unanimity, 
that  a  registration  properly  made  docs  not  operate  as  con- 
structive notice  to  all  the  world,  but  only  to  those  persons 
who,  under  the  policy  of  the  legislation,  are  compelled  to 
search  the  records  in  order  to  protect  their  own  interests. 
It  is  equally  well  settled  that  such  record  is  not  notice  to 
the  holders  of  antecedent  rights, — that  is,  to  those  who 
have  acquired  their  rights  before  the  time  when  the  record 
is  made,  —  and  this  is  so  even  when  the  antecedent  right 
may,  in  pursuance  of  the  statute,  be  defeated  by  the  fact 
of  the  prior  record.  In  other  words,  the  registration  of 
an  instrument  does  not  act  as  a  notice  backwards  in  time.' 


1  See  Maul  v.  Rider,  59  Pa.  St.  167, 
171.  This  language,  often  used  by  the 
courts,  is,  however,  a  vicious  reason- 
ing in  a  circle,  and  does  not  really  de- 
termine who  are  charged  with  notice. 
It  simply  says:  "Those  persons  are 
affected  with  notice  who  are  compelled 
to  search  the  records  in  order  to  pro- 
tect their  own  interests;  and  on  the 
other  hand,  those  persons  who  are 
charged  with  notice  must  make  a 
search  of  the  records."  We  are  thus 
simply  carried  round  in  a  circle. 

"Birnie  v.  Main,  29  Ark.  591; 
Ward's  Ex'r  v.  Hague,  25  N.  J.  Eq. 
397;  Leach  v.  Beattie,  33  Vt.  195; 
Kyle  V.  Thompson,  11  Ohio  St.  616. 
There  is  an  important  difference  be- 
tween the  operation  of  a  registration, 
nnder  the  express  terms  of  a  statute, 
to  defeat  an  antecedent  convej'ance 
which  is  unrecorded,  and  the  effect  of 
a  registration  as  a  notice  which  has 
been  established  by  the  courts  as  a 
necessary  inference  from  these  pro- 
visions of  the  statute.  Indeed,  it  is 
solely  because  the  registration  of  a  con- 
veyance does,  in  compliance  with  the 
statute,  defeat  a  prior  unrecorded 
title  that  the  record  of  a  prior  title  ia 
held  to  be  a  constructive  notice  to  mtb- 
$equeiU    purchasers.     As  illustrations 


of  the  proposition  stated  in  the  text, 
see  Stuyvesant  v.  Hall,  2  Barb.  Ch. 
151;  Stuyvesant  V.  Hone,  1  Sand.  Ch. 
419;  Taylor  v.  Maris's  Ex'rs,  5  Rawle, 
51.  The  doctrine",  and  the  circum- 
stances under  which  it  may  be  applied, 
are  so  well  explained  by  the  case  re- 
ported in  1  Sand.  Ch.  419,  and  2  Barb. 
Ch.  151,  that  a  quotation  will  be  in- 
structive. The  facts  were,  briefly,  as  fol- 
lows: A  tract  of  land  was  mortgaged  to 
Stuyvesant,  and  his  mortgage  was  duly 
recorded.  Hone  subsequently  acquired 
a  lien  thereon  by  a  second  mortgage, 
which  he  foreclosed  by  a  suit  in  chan- 
cery, and  the  land,  which  had  been 
divided  into  fifty-six  building  lots,  was 
sold  under  the  decree  to  Thorne.  T. 
afterwards  gave  a  mortgage  upon  part 
of  these  lots  back  to  H.  All  the  con- 
veyances and  mortgages  growing  out  of 
these  proceedings  were  duly  recorded, 
but  S.  had  no  notice  of  the  foreclos- 
ure suit  nor  ot  any  of  the  proceed- 
ings. Afterwards  H.  foreclosed  T. 'a 
mortgage  by  a  suit  in  chancery,  and 
filed  the  statutory  notice  of  lis  ■pendens. 
During  the  pendency  of  the  suit,  S., 
who  had  no  notice  of  it,  released  to 
T.  forty-two  of  the  fifty-six  lots  from 
his  own  (S.'s)  mortgage.  The  fourteen 
lots  left  subject  to  S.'g  mortgage  wera 


§  658 


EQUITY    JURISPRUDENCE, 


912 


§  658.  Only  to  Purchasers  under  Same  Grantor.  Effect 
of  Perfect  Record  Title — Break  in  Record  Title.  —  It  is  not, 
however,  every  subsequent  purchaser  who  comes  within 
the  purview  of  the  statute.  The  mere  fact  that,  subse- 
quently to  the  registering  of  a  deed  of  certain  premises,  a 
third  person  purchases  the  same  premises,  from  any  source 
of  title,  from  any  grantor  whatsoever  claiming  to  own 
them,  does  not  render  the  purchaser  necessarily  chargeable 
with  notice  of  the  prior  recorded  conveyance.*    The  only 


part  of  those  which  T.  had  mortgaged 
to  H.,  and  all  of  T.'s  lots  not  mort- 
gaged to  H.  were  released  by  S.  S. 
now  brings  a  suit  to  foreclose  his 
own  mortgage,  and  it  was  claimed  in 
defense  that  by  his  releasing  the  forty- 
two  lots  he  had  destroyed  the  lien  of 
his  mortgage  on  the  remaining  four- 
teen lots.  The  court  held,  —  1.  ThatS. 
was  not  charged  with  constructive 
notice  of  the  first  suit,  nor  of  the  sale 
under  the  decree  in  it;  2.  That  nei- 
ther the  second  suit,  nor  the  notice 
of  Us  pendens  filed  in  it,  operated  as  no- 
tice to  S. ;  3.  That  the  recording  of 
the  subsequent  deeds  of  T.  and  of  T.'s 
mortgages  was  not  notice  to  S. ;  and 
that  S.  on  releasing  was  not  bound  to 
search  the  records  for  subsequent  con- 
veyances or  encumbrances.  The  vice- 
chancellor  said  on  the  question  (1 
Sand.  Ch.  419,  425):  "Notice  by  the 
recording  of  conveyances  is  created  by 
the  statutes,  and  its  effect  is  to  be 
learned  from  their  provisions,  and  the 
adjudications  thereon.  The  statute 
enacts  that  every  conveyance  not  re- 
corded shall  be  void  as  against  any 
subsequent  purchaser  in  good  faith, 
etc.,  whose  conveyance  shall  be  first 
recorded.  Neither  the  provision  itself 
nor  the  objects  of  a  registry  law 
have  any  reference  to  prior  encum- 
brances already  recorded.  The  effect 
of  recording  a  conveyance  is  not  retro- 
spective, nor  was  it  designed  to 
change  rights  already  vested  and  se- 
cured by  a  recorded  deed  or  mortgage. 
It  simply  protects  a  purcluiser  who  takes 
the  precaution  to  seaixh  the  reccrrds  and 
record  his  own  conveyance  against  prior 
unrecorded  conveyances  of  which  he  had 
no  notice."  The  vice-chancellor  then 
refers  to  Cheesebrough  v.  Millard,  1 
Johns.  Ch.  414,  7  Am.  Dec.  494,  and 
also  shows  th;>t  there  is  nothing  in  tSe 


case  of  Guion  v.  Knapp,  6  Paige,  42,  29 
Am.  Dec.  741,  opposed  to  the  conclusion 
at  which  he  had  arrived.  This  decision 
was  affirmed  by  Chancellor  Walworth, 
in  2  Barb.  Ch.  151,  157,  158;  and  his 
opinion  upon  the  question  substantially 
repeats  the  reasoning  of  the  vice-chan- 
cellor, that  a  deed  subsequently  made 
and  recorded  by  the  mortgagor  is  not 
notice  to  a  prior  mortgagee  whose 
mortgage  is  on  record,  so  that  he  may 
release  part  of  the  premises  without 
destroying  his  lien.  See  also  Howard 
Ins.  Co.  V.  Halsey,  8  N.  Y.  271;  59 
Am.  Dec.  478;  Hill  v.  McCarter,  27 
N.  J.  Eq.  41;  Hoy  v.  Bramhall,  19 
N.  J.  Eq.  563;  97  Am.  Dec.  687;  Van- 
orden  v.  Johnson,  14  N.  J.  Eq.  376;  82 
Am.  Dec.  254;  Blair  v.  Ward,  10  N.  J. 
Eq.  126;  George  v.  Wood,  9  Allen,  80; 
85  Am.  Dec.  741;  Taylor  v.  Maris,  5 
Rawle,  51;  Leiby  v.  Wolf,  10  Ohio,  83; 
James  v.  Brown,  11  Mich.  25;  Cooper 
v.  Bigly,  13  Mich.  463;  Doolittle  v. 
Cook,  75  111.  354;  Iglehart  v. 
Crane,  42  111.  261;  Deuster  v.  Mc- 
Camus,  14  Wis.  .307;  Straight  v.  Harris, 
14  Wis.  509;  Halsteads  v.  Bank  of 
Kentucky,  4  J.  J.  Marsh.  558.  [See 
also  Cogswell  v.  Stout,  32  N.  J.  Eq. 
240;  Ackerman  v.  Hunsicker,  85  N.  Y. 
49;  39  Am.  Rep.  621;  Karns  v.  Olney, 
80  Cal.  90.  In  Lewis  v.  Barnhardt,  43 
Fed.  Rep.  854,  it  was  held  that  after 
a  vendee  has  taken  possession  under 
his  contract  and  made  valuable  im- 
provements, recording  a  will  affecting 
the  vendor's  title  is  not  constructive 
notice  to  him,  although  made  before 
the  delivery  of  his  deed,  since  his  title 
relates  back  to  the  execution  of  his  con- 
tract.] 

'  This  is  clearly  shown  by  the  uni- 
form mode  in  which  the  records  of 
deeds,  mortgages,  etc.,  are  indexed  in 
the  public  offices  of  record.     The  in- 


913 


CONCERNING   NOTICE. 


§  658 


subsequent  purchaser  who  is  charged  with  notice  of  the 
record  of  a  conveyance  is  one  who  claims  under  the  same 
grantor  from  the  same  source  of  title.  If  two  titles  to 
the  same  land  are  distinct  and  conflicting,  the  superiority 
between  them  depends,  not  upon  their  being  recorded, 
but  upon  their  intrinsic  merits.  It  is  a  settled  doctrine, 
therefore,  that  a  record  is  only  a  constructive  notice  to 
subsequent  purchasers  deriving  title  from  the  same  gran- 
tor.*    Intimately  connected  with,  and  indeed  a  branch 


dexes  are  never  arranged  according  to 
the  parcels  of  land,  so  that  a  person 
making  search  follows  the  ownership 
of  a  particular  parcel  irrespective  of 
the  sources  of  title;  they  are  always 
arranged  according  to  the  grantors  and 
grantees,  mortgagors  and  mortgagees. 
The  records  can  only  disclose  the  title 
to  a  particular  tract,  so  far  as  they  en- 
able one  making  search  to  trace  the 
ownership  from  one  grantor  or  mort- 
gagor to  another.  Records  are  only 
constructive  notice  of  a  title  of  which 
they  enable  a  party  to  obtain  actual 
notice  or  knowledge  by  means  of  a 
search. 

1  Baker  v,  GrifHn,  50  Miss.  158; 
Tilton  V.  Hunter,  24  Me.  29;  Bates  v. 
Norcross,  14  Pick.  224;  George  v. 
Wood,  9  Allen,  80;  85  Am.  Dec.  741; 
Murray  v.  Ballon,  1  Johns.  Ch.  566; 
Embury  v.  Conner,  2  Sand.  98;  Stuv- 
vesant  v.  Hall,  2  Barb.  Ch.  151,  158; 
Page  V.  Waring,  76  N.  Y.  463;  Cook 
V.  Travis,  20  N.  Y.  402;  Farmers'  L. 
&  T.  Co.  V.  Maltby,  8  Paige,  361 ;  Cal- 
der  V.  Chapman,  52  Pa.  St.  359;  91 
Am.  Dec.  163;  Woods  v.  Farmere,  7 
Watts,  382;  32  Am.  Dec.  772;  Light- 
ner  v.  Mooney,  10  Watts,  412;  Heth- 
erington  v.  Clark,  30  Pa.  St.  393,  395; 
Keller  v.  Nutz,  5  Serg.  &  R.  246;  Hoy 
V.  Bramhall,  19  N.  J.  Eq.  563;  97  Am. 
Dec.  6S7;  Losey  v.  Simpson,  11  N.  J. 
Eq.  246;  Whittington  v.  Wright.  9 
Ga.  23;  Brock  v.  Headen,  13  Ala.  370; 
Dolin  V.  Gardner,  15  Ala.  758;  Leiby 
V.  Wolf,  10  Ohio,  80,  83;  Blake  v. 
Graham,  6  Ohio  St.  580;  67  Am.  Dec 
360;  Iglehartv.  Crane,  42  111.  261;  St. 
John  V.  Conger,  40  111.  535;  Crockett 
V.  Maguire,  10  Mo.  34;  Long  v.  Dollar- 
hide,  24  Cal.  218,  453;  [see  also  Grun- 
dies  V.  Reid,  107  111.  304;  Lehman  v. 
Collins,  69  Ala.  127;  Lumpkin  v. 
Adams,  74  Tex.  97;  Nidever  v.  Ayers, 
2  Eq.  Juk.— 53 


83  Cal.  39;  Hoult  v.  Donahue,  21  W. 
Va.  294.]  Chancellor  Walworth  thus 
states  the  doctrme  in  Stuyvesant  v. 
Hall,  2  Barb.  Ch.  151:  "The recording 
of  a  deed  or  mortgage,  therefore,  is 
constructive  notice  only  to  those  who 
have  subsequently  acquired  some  in- 
terest or  right  in  the  property  under 
the  grantor  or  mortgagor."  While  this 
general  doctrine  is  accepted  with  com- 
plete unanimity,  and  is  indeed  essen- 
tial to  any  just  working  of  the  registry 
system,  there  is  some  difference  of  ju- 
dicial opinion  in  its  application  to  par- 
ticular conditions  of  ict.  In  the  case, 
which  is  not  uncommon,  where  A  con- 
veys to  B,  and  the  deed  is  not  re- 
corded, and  B  then  conveys  the  land 
to  C,  who  puts  his  deed  upon  record, 
it  is  held  in  many  decisions  that  this 
registration  of  the  second  deed  is  not 
a  constructive  notice  to  one  who  sub- 
sequently purchases  from  A;  both  par- 
ties, it  is  said,  do  not  claim  under  the 
same  grantor,  B,  and  the  records  do 
not  furnish  any  clew  to  the  true  chain 
of  title:  Roberta  v.  Bourne,  23  Me. 
165;  39  Am.  Dec.  614;  Harris  v.  Ar- 
nold,  1  R.  L  125;  Cook  v.  Travis,  22 
Barb.  338;  eO  N.  Y.  402;  Losey  v. 
Simpson,  1 1  N.  J.  Eq.  246;  Lightner  v. 
Mooney,  10 Watts,  407;  Calder  v.  Chap- 
man, 52  Pa.  St.  359;  91  Am.  Dec.  163; 
Fenne  v.  Sayre,  3  Ala.  478;  Chicago 
V.  Witt,  75  111.  211.  In  this  last  case 
A,  a  grantee  in  an  unrecorded  deed, 
conveyed  to  B,  and  B  to  C;  these  two 
latter  deeds  were  both  recorded;  but 
neither  of  them  referred  to  A's  deed, 
nor  contained  any  recital  of  it.  Held, 
that  the  record  of  these  two  deeds  was 
not  notice  of  the  unrecorded  deed  to 
A.  In  like  manner,  and  for  a  like  rea- 
son, if  A  conveys  to  B  by  a  deed 
which  is  not  put  upon  record,  and  B 
^ivcs  a  mortjiage  on  the  laud,  even  a 


§  658  EQUITY    JURISPRUDENCE.  914 

of,  this  same  doctrine,  is  the  question,  How  far  back  is  a 
purchaser  bound  to  search  the  record  title  of  his  own  ven- 
dor? If  the  records  show  a  good  title  vested  in  the  vendor 
at  a  certain  date,  and  nothing  done  by  him  after  that  time 
to  impair  or  encumber  the  title,  it  would  seem  that  the 
policy  of  the  registry  acts  is  thereby  accomplished;  the 
purchaser  is  protected;  he  is  not  bound  to  inquire  farther 
back,  and  to  ascertain  whether  the  vendor  has  done  acts 
which  may  impair  his  title  prior  to  the  time  at  which  it 
was  vested  in  him  as  indicated  by  the  records.  This  view 
is  supported  by  many  decisions, — it  seems  by  the  weight 
of  authority,  —  which  hold  that  a  purchaser  need  not 
prosecute  a  search  for  deeds  or  mortgages  made  by  his 
own  vendor,  farther  back  than  the  time  at  which  the  title 
is  shown  by  the  records  to  have  been  vested  in  such  ven- 
dor; or  in  other  words,  a  purchaser  is  not  bound  by  the 
registry  of  deeds  or  mortgages  from  his  veudor  made 
prior  to  that  time.*    The  record  title  is  so  far  a  protection 

purchase-money  mortgage,  back  to  his  White  v.  Patten,  24  Pick.  324;  Somea 
grantor.  A,  and  this  mortgage  is  re-  v.  Skinner,  3  Pick.  52;  Tefft  v.  Mun- 
corded,  the  record,  it  is  held,  is  not  a  son,  57  N.  Y.  97;  Doyle  v.  Peerless 
constructive  notice  to  a  subsequent  Pet.  Co.,  44  Barb.  2.39;  Farmers'  L.  & 
purchaser  from  A,  either  of  the  niort-  T.  Co.  v.  Maltby,  8  Paige,  361. 
gage  itself,  or  of  the  conveyance  to  B:  '  Farmers'  Loan  Co.  v.  Maltby,  8 
Veazie  v.  Parker,  23  Me.  170;  Pierce  Paige,  361;  Page  v.  Waring,  76  N.  Y. 
V.  Taylor,  23  Me.  246;  Felton  v.  Pit-  46.3,  467-469;  Hetzel  v.  Barber,  69 
man,  14  Ga.  530.  It  is  a  well-settled  N.  Y.  1;  Doswell  v.  Buchanan,  3  Leigh, 
application  of  the  law  of  estoppel  that  365,  381;  23  Am.  Dec.  280;  Calder  v. 
if  A,  having  no  title,  conveys  or  mort-  Chapman,  52  Pa.  St.  359;  91  Am.  Dec. 
gages  to  B,  with  covenant  of  title,  163;  Buckingham  v.  Hanna,  2  Ohio 
and  afterwards  acquires  the  title,  this  St.  551;  Losey  v.  Simpson,  11  N.  J. 
title  will  inure  to  the  benefit  of  B  by  Eq.  246.  In  Farmers'  Loan  Co.  v. 
operation  of  the  estoppel;  and  in  some  Maltby,  8  Paige,  361,  a  vendee  in  a 
states  the  same  effect  is  produced  with,  contract  for  the  purchase  of  land  which 
out  any  covenant  of  warranty.  If,  was  unrecorded  —  the  mere  equitable 
therefore,  A  thus  conveys  or  mortgages  owner  —  gave  a  mortgage  on  the 
to  B,  and  B's  deed  or  mortgage  is  duly  premises  to  one  A,  which  was  imme- 
recorded,  and  if  after  A  acquired  the  diately  put  on  record.  This  vendee 
title  he  gives  another  deed  or  mort-  afterwards  obtained  the  legal  title  by 
gage  to  C,  and  C's  deed  or  mortgage  a  deed  from  his  vendor,  which  deed 
and  the  conveyance  of  title  to  A  are  was  at  once  recorded;  he  then  con- 
recorded  together,  it  is  settled  that  veyed  the  land  to  the  defendant,  B,  for 
the  estoppel  binds  A's  assignee,  C,  aa  a  valuable  consideration,  and  this  sec- 
well  as  himself,  and  that  through  the  oud  deed  was  also  recorded.  The 
estoppel  B  obtains  the  precedence  over  court  held  that  the  recording  of  the 
C:  Pike  V.  Galvin,  29  Me.  183;  Wark  mortgage  to  A,  being  prior  to  the  time 
V.  Willard,  13  N.  H.  389;  Kimball  v.  when  the  title,  as  appeared  bytherec- 
Blaisdell,  5  N.  H.  533;  22  Am.  Dec.  crd,  was  vested  in  the  mortgagor,  did 
476;   Jarvia  r.   Aikens,    25  Vt.    635;  not  operate  as  constructive  notice  to 


915 


CONCERNING    NOTICE. 


§659 


under  the  statutes  to  purchasers  relying  upon  it,  that  if 
an  instrument  appearing  on  its  face  to  be  an  absolute  con- 
veyance is  recorded,  a  subsequent  purchaser  in  good  faith 
and  for  a  valuable  consideration  from  the  grantee  named 
in  it  obtains  a  title  free  from  all  secret  trusts,  and  from 
all  outstanding  equities  not  appearing  on  the  record, 
which,  if  recorded  or  otherwise  disclosed,  might  have 
shown  the  instrument  to  be  in  reality  a  mortgage.* 

§  659.  (6)  Effect  of  Other  Kind  of  Notice,  in  the 
Absence  of  a  Registration.  —  May  any  other  kind  of  no- 
tice, actual  or  constructive,  supply  the  want  of  a  regis- 


the  grantee,  B,  who  took  his  deed  after 
the  legal  title  was  vested  in  his 
grantor.  Chancellor  Walworth  said, 
in  substance,  that  as  the  mortgagor 
had  not  the  legal  title  when  the  mort- 
gage to  A  was  given,  but  only  a  con- 
tract to  purchase  the  land  from  one  S., 
it  followed  that  the  defendant,  B,  was 
not  charged  with  constructive  notice 
by  the  record  of  such  mortgage.  In 
taking  a  conveyance,  B  would  not 
search  for  mortgages  by  his  grantor 
prior  to  the  date  of  his  deed  from  S. 
[See  also  Bingham  v.  Kirkland,  34 
N.  J.  Eq,  229;  Boyd  v.  Mundorf,  30 
N.  J.  Eq.  545.  In  the  latter  case  it  is 
held  that  a  vendor  who  takes  back  a 
purchase-money  mortgage,  which  is 
recorded  at  the  same  time  as  the  deed 
to  the  vendee,  is  entitled  to  priority 
over  a  prior  recorded  mortgage  exe- 
cuted by  the  vendee  on  the  same  land, 
as  the  vendor  was  not  obliged  to  search 
for  encumbrances  prior  to  his  vendee 
obtaining  his  title.]  See,  however, 
Digman  v.  McCollum,  47  Mo.  372, 
375,  376,  which  appears  to  be  in  direct 
conflict  with  the  rule  as  stated  in  the 
text,  and  with  the  foregoing  cases 
cited  in  this  note.  It  holds  that  a 
subsequent  purchaser  has  a  construct- 
ive notice  of  a  recorded  encumbrance, 
—  a  mortgage, — although  the  mort- 
gagor's title  was  unrecorded  and  waa 
purely  equitable, — e.  g.,  an  unregis- 
tered agreement  to  convey  the  laud. 
For  the  case  where  a  grantee  or  mort- 
gagee in  good  faith,  and  holding  a 
record  title  which  appears  to  be  per- 
fect, may  really  have  no  title  because 
a  grantor  or  mortgagor  in  the  chain  of 
title  had  knowledge   of  a  prior  un- 


recorded deed  or  mortgage,  see  post^ 
§  760,  and  cases  there  cited;  Elynt  v. 
Arnold,  2  Met.  619;  Mahoney  v.  Mid- 
dleton,  41  CaL  41,  50;  Fallas  v.  Pierce, 
30  Wis.  443;  Sims  v.  Hammond,  33 
Iowa,  368;  Van  Rensselaer  v.  Clark, 
17  Wend.  25;  31  Am.  Dec.  2S0;  Goelet 
V.  McManus,  1  Hun,  300;  Ring  v. 
Richardson,  3  Keyes,  450;  Schutt  v. 
Large,  6  Barb.  373.  These  cases  over- 
rule the  earlier  decisions  in  Connecti- 
cut V.  Bradish,  14  Mass.  296,  303; 
Trull  V.  Bigelow,  16  Mass.  406;  8  Am. 
Dec.  144;  Gliddon  v.  Hunt,  24  Pick. 
221;  Ely  v.  Wilcox,  20  Wis.  523,  530; 
91  Am.  Dec.  436.  See  also  post,  §  761, 
when  a  purchaser  may  be  charged  with 
notice  of  a  prior  unrecorded  convey- 
ance, though  there  is  a  break  in  the 
chain  of  record  title:  Crane  v.  Turner, 
7  Hun,  357;  67  N.  Y.  437. 

^  For  example,  if  a  deed  absolute  on 
its  face  is  accompanied  by  a  written 
defeasance,  and  the  deed  is  recorded, 
but  the  defeasance  is  not,  this  rule  ap- 
plies; also,  if  such  a  deed  is  accom- 
panied by  a  verbal  agreement  or 
defeasance  which,  in  equity  at  least, 
might  render  it  a  mortgage.  The 
same  is  true  with  a  deed  absolute  on 
its  face,  but  accompanied  with  such 
parol  acts  as  constitute  the  grantee  a 
constructive  trustee  or  trustee  in 
invitum  for  the  benefit  of  the  grantor, 
or  of  some  third  person:  Jaques  v. 
Weeks  7  Watts,  26 1,  271;  Orvis  v. 
Newell,  17  Conn.  97;  Bush  v.  Golden, 
17  Conn.  594;  Harrison  v.  Cachelin, 
23  Mo.  117,  126;  Mesick  v.  Sunder- 
land,  6  Cal.  297;  Hart  v.  Farmers' 
and  Merchants'  Bank,  33  Vt.  262; 
Bailey  v.  Myrick,  50  Me.  171. 


§  659  EQUITY   JURISPRUDENCB.  916 

tration  ?  In  other  words,  if  a  subsequent  purchaser  for 
a  valuable  consideration  has  put  his  conveyance  upon 
record,  but  at  the  time  of  his  purchase  was  affected  with 
notice  that  there  was  a  prior  outstanding  but  unregistered 
conveyance  of  the  same  premises  from  the  same  grantor, 
would  he  be  protected  by  his  record  notwithstanding  the 
notice  ?  or  would  the  notice  operate,  like  the  constructive 
notice  arising  from  a  registry,  to  postpone  his  own  inter- 
est to  that  conferred  by  the  prior  unregistered  instru- 
ment? This  question  was  presented  to  the  English 
courts  of  chancery  at  an  early  day,  and  was  settled  by 
them  in  accordance  with  the  general  principles  of  equity; 
and  their  decisions  have  with  great  uniformity  been 
adoj)ted  and  followed  by  the  American  courts.  It  is  the 
established  doctrine  that  a  notice  of  some  kind,  of  an 
existing,  prior,  unrecorded  conveyance,  operates,  like  the 
constructive  notice  arising  from  a  registry,  to  postpone  a 
subsequent  and  recorded  instrument.  If  a  subsequent 
purchaser,  even  for  a  valuable  consideration,  had  re- 
ceived notice  of  a  prior  unrecorded  instrument,  then  he 
cannot  acquire  or  retain  the  precedence  from  a  registra- 
tion of  his  own  conveyance;  his  conveyance,  though 
recorded,  is  subordinate  and  postponed  to  the  prior  un- 
recorded one  of  which  he  had  received  notice.*  This 
conclusion,  reached  originally  by  the  court  of  chancery, 
has,  in  England,  furnished  a  rule  for  that  tribunal  alone, 
and  has  not  been  accepted  by  the  courts  of  law;^  in  this 
country  it  is  recognized  and  enforced  alike  by  the  courts 

*  This   doctrine,  which   is  nakedly  Benham  v,  Keane,  3  De  Gex,  F.  &  J. 

stated  in  the  text  without  its  reasons,  318;  Ford  v.  W^hite,  16  Beav.  120,  123, 

•was  settled  by  Lord  Hardwicke  (A.  D.  124. 

1747),  in  the  celebrated  case  of  Le  Neve         '  Doe  v.  Allsop,  5  Barn.  &  Aid.  142. 

V.    Le  Neve,  Amb.  436;  2  Lead.  Cas.  It  must  be,  however,  since  the  provis- 

Eq.,  4th  Am.  ed.,  109;  Davis  v.  Earl  ion  of  the  Supreme  Court  of  Judica- 

of  Strathmore,  16  Ves.  419,  per  Lord  ture  Act,  giving  the  rules  of  equity  a 

Eldon;  Greaves  v.  Tofield,  L.   R.    14  binding  efficacy  wherever  they  conflict 

Ch.    Div.    563;    Credland    v.    Potter,  with  those  of  the  law  concerning  the 

L.  R.   10  Ch.  8;  RoUand  v.  Hart,  L.  same  matter,  that  the  doctrine  is  now 

R.   6  Ch.   678;  Chadwick   v.  Turner,  enforced  in  legal  as  well  as  in  equita- 

L.  R.  1  Ch,  310;  Hine  v.  Dodd,  2  Atk.  ble  suits  by  the  English  courts. 
275;  Wyatt  v.  Barwell,  19  Ves.  435; 


917  CONCERNING    NOTICE.  §  660 

of  equity  and  of  law,  for  the  reason  that  both  have  juris- 
diction in  matters  of  fraud.'  The  doctrine  is,  in  fact,  a 
mere  application  of  the  broader  general  principle  that  a 
person  who  purchases  an  estate,  although  for  a  valuable 
consideration,  after  notice  of  a  prior  equitable  right, 
makes  himself  a  mala  fide  purchaser,  and  will  be  held  a 
trustee  for  the  benefit  of  the  person  whose  right  he  sought 
to  defeat.' 

§  660.  Fraud  the  Foundation  of  the  Rule.  —  In  the 
very  earliest  cases  which  first  established  the  rule  con- 
cerning the  eflect  of  notice  of  a  prior  unregistered  con- 
veyance to  a  subsequent  purchaser  who  had  put  his  deed 
or  mortgage  upon  record,  the  decision  was  expressly 
based  upon  the  positively  fraudulent  character  of  the 
purchaser's  conduct.  It  was  said  in  the  plainest  terms 
that  the  act  of  the  purchaser  in  endeavoring  to  obtain  a 
precedence  through  the  operation  of  the  statute,  while  he 
had  knowledge  or  notice  of  the  prior  right  held  by  an- 
other person,  was  in  itself  a  fraud,  —  an  attempt  to  obtain 
a  fraudulent  advantage,  —  and  to  uphold  it  would  be  suffer- 
ing the  statute  to  be  used  as  a  means  of  accomplishing  a 
fraudulent  purpose.  The  same  theory  has  been  reaffirmed 
by  the  succeeding  decisions  of  the  English  courts  down 
to  the  present  day.'     It   is  especially  important  in  its 

^  Tuttle  V.  Jackson,  6  Wend.  213,  subsequent  English  case:   See  quota- 

227;  21  Am.  Dec.  306;  Britton's  Ap-  tion  ante,  §  591.     See   also  Davis  v. 

peal.  45  Pa.  St.  172.    See  post,  §  759.  Earl  of  Strathmore,  16  Yea.  419;  Wyatt 

'  Thus  a  deed  which  for  any  defect  v.  Harwell,  19  Ves.  435;  Hine  v.  Dodd, 

does  not  convey  the  legal  title,  or  a  2  Atk.  275;  Ford  v.  White,   16  Beav. 

mortgage  which   is   inoperative   as   a  120,    123,    124;  Benham   v.    Keane,  3 

valid  legal  mortgage,  may  be  good  in  De  Gex,   F.   &  J.   318;   Chadwick   v. 

equity  as  an  agreement  to  convey  or  Turner,  L.  R.  1  Ch.  310,  319;  RoUand 

to  mortgage,  and  a  subsequent  pur-  v.  Hart,  L.    R.  6  Ch.   678,   681,    684; 

chaser  with  notice  of  such  an  equita-  Greaves  v.  Tofield,  L.  R.  14  Ch.  Div. 

ble  right  will  take  the  property  subject  563,    571,    575,    577.     In   RoUand  v. 

thereto:     See  Le   Neve   v.  Le  Neve,  Hart,  L.   R.  6  Ch.   678,  Lord   Hath- 

Amb.  436,  per  Lord  Hardwicke;  Davis  erley    thus    sums    up     the    doctrine: 

V.  Earl  of   Strathmore,    16  Ves.   419,  "It    is    not    perhaps    very    easy    to 

428;    Jennings    v.    Moore,    2    Vern.  see  the  exact  shades  of  distinction  be- 

609;  Mackreth  v.  Symmons,   15  Ves.  tween  the  cases;  but  this  appears  to 

349.  be  decided  from  the  time  of   Hine  v. 

^  In  the  leading  case  of  Le  Neve  v.  Dodd,  2  Atk.  275,  downwards,  that  a 

Le  Neve,  Amb.  436,  Lord  Harkwicke  mere  suspicion  of  fraud  is  not  enough, 

used  language  which  has  been  either  and  there  must   be  actual  notice  im» 

quoted  or  approved  in  almost  every  plying  fraud  in  the  person  registering 


§  660  EQUITY   JURISPRUDENCE.  918 

bearing  upon  the  question  whether  a  constructive  as  well 
as  an  actual  notice  of  a  prior  unregistered  couvej^ance 
will  affect  the  rights  of  a  subsequent  purchaser  who  has 
complied  with  the  requirements  of  the  recording  acts. 
In  fact,  all  of  the  doubt,  confusion,  and  conflict  of  opin- 
ion with  reference  to  the  respective  effects  of  constructive 
and  of  actual  notice  in  connection  with  registration  has 
arisen  from  the  adoption  of  this  theory,  and  the  attempt 
to  make  it  of  universal  application.^  The  important  dif- 
ferences which  exist  in  the  various  American  statutes  have 
already  been  pointed  out.''  In  those  states  whose  legis- 
latures have  employed  substantially  the  same  language 
which  is  found  in  the  English  registry  acts,  the  courts, 
while  adopting  the  rule  concerning  the  effect  of  notice 
laid  down  by  Lord  Hardwicke  in  Le  Neve  v.  Le  Neve, 
have  also  adopted  the  reasons  which  he  there  gave  for  it, 
and  have  found  in  the  fraud  imputed  to  the  subsequent 
purchaser  its  sufficient  foundation.  In  several  of  the 
states,  the  precedence  over  a  prior  unregistered  convey- 
ance obtained  by  recording  a  subsequent  instrument  ia 
given  in  express  terms  only  to  "purchasers  in  good  faith"; 
in  others  it  is  given  only  to  purchasers  "  without  notice," 
or  "  without  actual  notice."  ^  Wherever  such  language 
has  been  employed,  the  rule  under  consideration  is,  of 
course,  a  necessary  and  direct  consequence  of  the  legisla- 
tive enactment,  and  is  not  merely  a  judicial  interpretation 
demanded  by  the  general  principles  of  equity.*  It  should 
be  observed,  in  concluding  this  topic,  that  a  legislature 
may  declare  that  no  notice,  either  actual  or  constructive, 

the   second   encumbrance   to  deprive  righteously  to  attempt  to  deprive  him 

him   of  priority  thereby  gained  over  of  the  benefit  of  that  security  by  tak- 

the  first  encumbrance.     In  all  these  ing  advantage  of  the  registration  act." 

cases,  down  to  Wyatt  v.  Barwell,   19  See  also  a  passage  from  the  opinion  of 

Ves.  435,  the  expression  is,  that  there  Bramwell,  L.  J. ,  in  Greaves  v.  Tofield, 

must   be  actual  notice  amounting  to  L.  E..  14  Ch.  Div.  56.S,  quoted  in  voL 

fraud.     It   has   been   very   well   put,  1,  in  note  3,  under  §  431. 

that  it  must   be  actual  notice  which  ^  See  post,  §§  662-664. 

renders   it   fraudulent  to  attempt   to  '  See  ante,   §  646,  and  abstracts  of 

obtain  priority,  or  to  advance  money  statutes  in  note  thereunder, 

•when   knowing   that    another   person  *  See  ante,  in  note  under  §  646. 

has  already  advanced  money  upon  the  *  See  cases  cited  aniCf  in  note  under 

same    security,   and    afterwards    ua-  §  659. 


919  CONCERNING   NOTICE.  §§  661,  662 

shall  supply  the  want  of  a  registration;  that  a  subsequent 
purchaser  shall  acquire  absolute  precedence  by  recording 
his  own  instrument,  even  though  he  had  full  notice  of  a 
prior  unregistered  conveyance;  and  this  effect  may  be 
stated  in  express  terms,  or  it  may  be  a  necessary  infer- 
ence from  the  whole  scope  of  the  statute.* 

§  661.  (7)  What  Kind  of  Notice  is  Sufficient  to  Produce 
this  Effect.  —  The  doctrine,  being  thus  established  in  Eng- 
land and  throughout  this  country,  that  some  notice  of  a 
prior  unregistered  conveyance  may  supply  the  want  of  a 
registration,  the  inquiry  finally  remains,  What  species  or 
amount  of  notice  will  avail  to  produce  this  effect?  Or,  to 
put  the  question  in  its  most  practical  form,  whether  an 
actual  notice  is  requisite,  or  whether  a  constructive  notice 
may  also  be  sufficient.  It  is  plain,  if  the  theory  is  ac- 
cepted in  its  full  and  literal  sense,  that  the  positive  fraud 
of  the  subsequent  purchaser  in  endeavoring  to  obtain  a 
precedence  by  registering  his  own  instrument  while  he 
has  notice  of  the  prior  conveyance  is  the  sole  foundation 
of  the  doctrine,  that  it  is  difficult  to  escape  from  the 
conclusion  that  the  notice  which  shall  thus  render  his 
conduct  fraudulent,  and  destroy  the  efficacy  of  his  regis- 
tration, must  be  an  actual  one.  It  is  not  in  accordance 
with  general  principles  to  pronounce  a  person  guilty  of 
fraud  by  reason  of  knowledge  constructively  imputed  to 
him,  —  knowledge  which  he  may  in  fact  never  have  ac- 
quired, but  which  he  is,  from  considerations  of  policy ^^ 
presumed  to  have  acquired,  treated  as  having  acquired. 

§  662.  English  Rule.  —  The  earlier  English  decisions,, 
adopting  the  theory  of  the  second  purchaser's  fraud  in  all 
its  features,  accepted  without  hesitation  the  logical  re* 
suits  of  this  theory  with  reference  to  the  kind  of  notice. 
They  not  only  held  affirmatively  that  the  notice  must  be 

*  Such,  in   fact,   appears  to  be  the  St.  45;  Holliday  v.  Franklin  Bank,  16 

Construction  given  to  the  peculiar  Ian-  Ohio,    533;    Stansell    v.    Roberts,    13 

guage  of   one  or  two  state  statutes:  Ohio,  148;  42  Am.    Dec.  193;  Jacksoa 

See  White  v.  Denman,  1  Ohio  St.  110;  v.    Luce,    14   Ohio,   514;   May  ham   v. 

16  Ohio,  59;  Bloom  v.  Noggle,  4  Ohio  Coombs,  14  Ohio,  428. 


§  663  EQUITY   JURISPRUDENCE.  920 

actual,  and  proved  by  clear,  positive,  and  direct  evidence, 
but  negatively  that  a  constructive  notice  was  not  suffi- 
cient. The  same  rule  has  even  been  repeated  by  way  of 
a  dictum  in  one  or  two  of  the  very  latest  decisions.'  In 
the  modern  English  cases,  the  judges,  while  still  insisting 
upon  fraud  as  the  sole  basis  of  the  doctrine,  hold  that  the 
same  effect  may  be  produced  by  a  constructive  notice  as 
by  an  actual  one  upon  a  subsequent  purchaser  who  has 
registered  his  conveyance.  The  inquiry  no  longer  seems 
to  be,  whether  the  notice  was  actual  or  constructive,  but 
whether  the  evidence  was  sufficiently  definite,  and  the 
circumstances  were  sufficient  to  affect  the  conscience  of 
the  purchaser  as  a  fact,  and  not  merely  as  a  possible  in- 
ference.'' 

§  663.  American  Rules.  —  The  same  diversity  and 
fluctuation  of  opinion  appear  among  the  decisions  made 
by  the  courts  of  the  various  states,  and  in  some  instances 
between  the  earlier  and  later  decisions  of  the  same  court. 
In  one  class  of  cases,  an  actual  notice  rendering  the  sec- 
ond purchaser's  conduct  positively  fraudulent  is  held  to 
be  essential.  In  another  class,  no  distinction,  in  respect 
to  the  operation  of  notice,  is  recognized  between  the 
subsequent  purchaser  under  the  recording  acts  and  any 
other  subsequent  purchaser;  the  rights  of  both  are  treated 

*  Hine  v.  Dodd,  2  Atk.  275;  Jolland  ance  was  registered  has  been  charged 

V,  Stainbridge,  3  Ves.  478;  Wyatt  v.  with  notice  of  a  prior  equitable  mort- 

Barwell,    19   Ves.    435;   Chadwick    v.  gage  arising  from  the  non-production 

Turner,  L.  R.  1  Ch,  310,  319.  of  title  deeds,  and  his  failure  to  in- 

»  In  Rolland  v.  Hart,  L.  R.  6  Ch.  quire  for  them:  Wormald  v.  Mait- 
678,  681-683,  a  second  mortgagee  was  land,  35  L.  J.  Ch.,  N.  S.,  69;  In  re 
held  to  be  affected  with  notice  of  a  Allen,  1  I.  R.  Eq.  455;  and  see  White- 
prior  unregistered  mortgage,  by  means  head  v.  Jordan,  I  Younge  &  C.  303. 
of  information  or  knowledge  obtained  When  a  subsequent  purchaser  or  en- 
by  his  attorney  in  the  transaction,  al-  cumbrancer  for  a  valuable  considera- 
though  it  appeared  very  clearly  that  tion  has  paid  or  parted  with  the  con- 
'the  knowledge  had  not  in  fact  been  sideration  without  any  notice  of  a 
communicated  by  the  attorney  to  his  prior  unregistered  deed  or  mortgage, 
client.  It  is  true,  the  court  called  the  and  then  registers  his  own  instrument 
notice  "  actual,  "  but  to  treat  such  no-  after  obtaining  such  notice,  the  notice 
tice  imputed  to  a  principal  on  account  does  not  defeat  the  precedence  ac- 
of  information  acquired  by  an  agent  as  quired  under  the  statute  by  his  regis- 
actual  is  to  disregard  the  essential  dis-  tration:  Elsey  v.  Lutyena,  8  Hare, 
tinction  between  the  two  species.  A  159;  Essex  v.  Baugh,  1  Younge  &  0. 
subsequent  purchaser  whose  convey-  Ch.  620. 


921  CONCERNING    NOTICE.  §  GG4 

as  being  equally  aflfected  by  a  constructive  notice."*  Two 
causes  have  operated  to  produce  this  conflict.  It  has 
resulted  in  part  from  the  different  terms  which  the  legis- 
latures of  various  states  have  employed  in  the  most  im- 
portant clauses  of  the  recording  acts.^  It  has  resulted  in 
greater  part,  I  think,  from  a  lack  of  unanimity  in  the 
meanings  given  by  the  courts  to  "actual"  and  to  "con- 
structive "  notice  respectively;  from  a  confusion  and 
misconception  with  respect  to  the  essential  distinctions 
which  exist  between  the  two  species.  The  conflict  is 
therefore  more  apparent  than  real. 

§  664.  Actual  or  Constructive  Notice.  —  As  this  ques- 
tion is  one  which  depends,  in  great  measure,  upon  the 
local  law,  either  local  statutes  or  decisions,  I  have  placed 
in  the  foot-note  cases  selected  from  all  the  states,  and 
representing  both  types  of  legislation  and  of  judicial  in- 
terpretation,—  one  class  embracing  those  in  which  an 
actual  notice  is  required;  the  other,  those  in  which  a  con- 
structive notice  is  sufficient.'     While  the  rule  is  settled 

'  See  Day  v.  Dunham,  2  Johns.  Ch.  '  As  has  been  shown  in  a  former 
182,  190;  Dunham  v.  Day,  15  Johns,  paragraph  (§  646),"  there  are  several 
555;  8  Am.  Dec.  282;  Jackson  v.  Van  distinct  types  of  the  statute.  These 
Valkenburg,  8  Cow.  260;  Tuttle  v.  changes  in  the  language  of  the  statutes 
Jackson,  6  Wend.  213;  21  Am.  Dec.  have  naturally  affected  their  judicial 
.')06;  Grimstone  V.  Carter,  3  Paige,  421;  interpretation:  See  Williamson  v. 
24  Am.  Dec.  230;  Williamson  v.  Brown,  Brown,  15  N.  Y.  354. 
15  N.  Y.  354;  Norcross  v.  Widgery,  2  *  For  classification  and  abstract  of 
Mass.  505;  McMechan  v.  Griffing,  3  the  state  statutes,  and  some  further 
Pick.  149;  15  Am.  Dec.  198;  U.  S.  Ins.  decisions  under  them,  see  note  ante, 
Co.  V.  Shriver,  3  Md.  Ch.  381;  Gen-  §  646.  I  have,  in  the  present  note, 
eral  Life  Ins.  Co.  v.  U.  S.  Ins.  Co.,  10  selected  and  arranged  well-considered 
Md.  517,  525;  69  Am.  Dec.  174;  Flem-  and  authoritative  cases  from  nearly 
ing  V.  Burgin,  2  Ired.  Eq.  584;  Noyes  every  state.  It  would  be  impossible, 
V.  Hall,  97  U.  S.  34,  38;  Cabeen  v.  within  any  reasonable  limits,  to  make 
Breekenridge,  48  111.  91;  Truesdale  v.  a  strict  classification  of  decisions 
Ford,  37  111.  210;  Brinkman  v.  Jones,  which  require  actual  notice,  properly 
44  VVis.  498,  519;  White  v.  Foster,  102  so  called,  and  those  wliich  permit  con- 
Mass.  375;  Lamb  v.  Pierce,  113  Mass.  structive  notice.  There  is  a  great 
72;  Crassen  v.  Swoveland,  22  Ind.  427,  confusion  or  uncertainty  as  to  what 
434;  Wilson  v.  Hunter,  30  Ind.  466,  particular  kinds  are  emljraced  within 
472;  Lawton  v.  Gordon,  37  Cal.  202,  these  genera.  In  nearly  all  the  states 
205;  Maupin  v.  Emmons,  47  Mo.  304,  whose  statutes  in  terms  demand  an 
306;  Brown  v.  Volkening,  64  N.  Y.  76,  "  actual "  notice,  the  courts  admit  the 
82.  These  cases,  taken  from  a  large  operation  of  those  species  which  are 
number  of  similar  ones,  sufficiently  uniformly  regarded  as  belonging  to 
Bhow  the  diversity  and  fluctuation  of  the  genus  constructive,  viz.,  notice 
opinion  among  the  American  decisions  arising  from  lis  pendens,  recitals  ia 
epoken  of  in  the  text.  title  papers,   between  principal    and 


§664 


EQUITY   JURISPRUDENCB. 


922 


in  all  the  states  composing  the  first  class,  that  in  order 
to    postpone  a  subsequent   purchaser   or  encumbrancer 


agent,  and  even  possession.  The 
courts  of  the  same  states  hold  that  the 
"actual"  notice  of  the  statute  does 
not  mean  knowledge,  and  may  be 
shown  by  any  kind  of  circumstances 
which  would  put  a  reasonable  man 
upon  an  inquiry.  Practically,  it 
seems  very  difficult  to  distinguish 
"  actual  "  notice  so  defined  from  con- 
structive notice.  See,  npon  this  sub- 
ject, the  able  opinion  of  Taylor,  J.,  in 
Brinkman  v.  Jones,  44  Wis.  498,  519; 
and  Maupin  v.  Emmons,  47  Mo.  304, 
306.  The  courts  of  a  few  states  have 
interpreted  their  statutes  more  liter- 
ally, and  have  estal)lished  a  more 
stringent  rule  requiring  an  actual  no- 
tice proved  by  direct  evidence.  Of 
this  class  are  Massachusetts,  Maine, 
Missouri,  and  perhaps  Maryland  and 
Indiana.  I  have  arranged  the  cases 
by  states,  and  have  placed  together 
those  in  each  state  which  treat  of  no- 
tice by  possession.  From  the  decisions 
here  collected,  taken  in  connection 
with  the  abstract  of  statutes  and 
further  cases  in  the  note  under  § 
645,  I  hope  that  the  reader  will  be 
able  to  form  an  accurate  notion  of  the 
law  on  this  confused  subject  as  it  is 
settled  in  each  commonwealth.  [See 
also  cases  cited  ante,  §§  625-631.] 

Alabama. — Lambert  v.  Newman, 
56  Ala.  623,  625;  Corbett  v.  Clenny, 
52  Ala.  480,  483;  Dudley  v.  Witter, 
46  Ala.  664,  694;  Campbell  v.  Roach, 
45  Ala.  667;  Ponder  v.  Scott,  44  Ala. 
241,  244;  Newsome  v.  Collins,  43  Ala. 
656,  663;  Burch  v.  Carter,  44  Ala.  115, 
117;  Witter  v.  Dudley,  42  Ala.  616, 
621;  Wyatt  v.  Stewart,  34  Ala.  716; 
Boyd  V.  Beck,  29  Ala.  703;  Johnson  v. 
Thweatt,  18  Ala.  741;  Dearing  v.  Wat- 
kins,  16  Ala.  20;  Walter  v.  Rhea,  10 
Ala.  451;  12  Ala.  646;  Boyd  v.  Beck, 
29  Ala.  703;  De  Vandal  v.  Malone's 
Ex'rs,  25  Ala.  272;  Center  v.  P.  &  M. 
Bank,  22  Ala.  743;  Hoole  v.  Atfy- 
Gen.,  22  Ala.  190;  Smith's  Heirs  v. 
Branch  Bank,  21  Ala.  125;  [Chadwick 
V.  Carson,  78  Ala.  116.]  Possession: 
Chapman  v.  Holding,  60  Ala.  522; 
Bernstein  v.  Humes,  60  Ala.  582;  31 
Am.  Rep.  52;  Lindsey  v.  Veasy,  62 
Ala.  421. 

Arkansas.  —  Stidham  v.  Mathews, 
29  Ark.  650,  659;  Holman  v.  Patter- 


son's  Heirs,  29  Ark.  357;  Haskell  v. 
State,  31  Ark.  91;  [Ford  v.  Burks,  37 
Ark.  91;  Doddv.  Parker.  40  Ark.  540; 
Martin'v.  Ogden,  41  Ark.  191.]  Pos- 
session: Byers  v.  Engles,  16  Ark.  543. 
California. —  Lawton  v.  Gordon,  37 
Cal.  202;  Galland  v.  Jackman,  26  Cal. 
79,  87;  85  Am.  Dec.  172;  [Donald  v. 
Beals,  57  Cal.  399.]  Possession:  Jones 
v.  Marks,  47  Cal.  242,  248;  Fair  v. 
Stevenot,  29  Cal.  486;  O'Rourke  v. 
O'Connor,  39  Cal.  442;  Smith  v.  Yule, 

31  Cal.  180;  89  Am.  Dec.  167;  Thomp-  , 
son  v.  Pioche,  44  Cal.  508,  516;  Moss  ' 
V.  Atkinson,  44  Cal.  3,  17;  [McNeil  v.  ' 
Polk,  57  Cal.  323.] 

Connecticut.  —  Blatchley  v.  Osborn, 
33  Conn.  226,  233;  Clark  v.  Fuller,  39 
Conn.  238;  Bank  of  New  Milford  v. 
New  Milford,  36  Conn.  94;  Sigourney 
V.  Munn,  7  Conn.  324;  Hamilton  v. 
Nutt,  34  Conn.  501;  Bush  v.  Golden, 
17  Conn.  594;  Wheaton  v.  Dyer,  15 
Conn.  307. 

Florida. — Possession:  Doe  v.  Roe, 
13  Fla.  602. 

Georgia.  —  Virgin  v.  Wingfield,  54 
Ga.  451,  454;  Bryant  v.  Booze,  55  Ga. 
438;  Poulet  v.  Johnson,  25  Ga.  403; 
Downs  v.  Yonge,  17  Ga.  295;  Sea- 
brook  V.  Brady,  47  Ga.  650;  Brown  v. 
Wells,  44  Ga.  573,  575;  Williams  v. 
Adams,  43  Ga.  407;  Allen  v.  Holden, 

32  Ga.  418;  Allen  v.  Holding,  29  Ga. 
485;  Lee  v.  Cato,  27  Ga.  637;  73  Am. 
Dec.  748;  Doe  v.  Roe,  25  Ga.  55. 
Possession:  Helms  r.  May,  29  Ga.  121; 
Wyatt  V.  Elam,  19  Ga.  335. 

Illinois.— Fry e  v.  Partridge,  82  111. 
267,  270;  Chicago  etc.  R.  R.  v.  Ken- 
nedy, 70  111.  350,  361;  Redden  v. 
Miller,  95  111.  336;  Shepardson  v. 
Stevens,  71  HI.  646;  Erickson  v.  Raf- 
ferty,  79  111.  209,  212;  Chicago  v. 
Witt,  75  111.  211;  Morris  v.  Hoale,  37 
111.  150;  87  Am.  Dec.  243;  Dunlap  v. 
Wilson,  32  111.  517;  Ogden  v.  Haven, 
24  111.  57;  [Warder  v.  Cornell,  105  111. 
169;  Pry  v.  Pry,  109  111.  466.J  Pos- 
session: Noyes  v.  Hall,  97  U.  S.  34, 
38;  Tunison  v.  Chamblin,  88  111.  378, 
390;  Illinois  Central  R.  R.  v.  McCul- 
lough,  59  111.  166;  Warren  v.  Rich- 
mond, 53  111.  52;  Bayles  v.  Young,  51 
111.  127;  Bogue  v.  Williams,  48  111. 
371;  Cabeen  v.  Breckenridge,  48  111, 
91;  Truesdale   v.   Ford,   37   HI.   210; 


923 


CONCERNING    NOTICE. 


§  6G4 


who  has  obtained  the  first  record,  he  must  have  received 
an  actual  notice  of  a  prior  unrecorded  instrument,  it  is 


McVey  y.  McQuality,  97  111.  93;  Par- 
tridge  v.  Chapman,  SI  111.  137;  Lum- 
bard  v.  Abbey,  73  111.  177;  [Haworth 
V.  Taylor,  lOS  111.  275.] 

Indiana. — Crassen  v.  Swoveland, 
22  lad.  427,  432;  VVisemau  v.  Hutch- 
inson, 20  Ind.  40;  donkey  v.  Chap- 
man, 26  Ind.  333;  Wilson  v.  Hunter, 
30  Ind.  4G6,  472;  Paul  v.  Counersville, 
etc.  R.  R.,  51  Ind.  527,  530;  Kirkpat- 
rick  V.  Caldwell's  Adm'rs,  32  Ind.  299; 
Brose  v.  Doe,  2  Ind.  666;  Ricks  v. 
Doe,  2  Blackf.  346.  Possession:  Clouse 
V.  Elliott,  71  Blackf.  302;  Campbell  v. 
Brackenridge,  8  Blackf.  471. 

Iowa.  —  Smith  v.  Denton,  42  Iowa, 
48;  Watson  v.  Phelps,  40  Iowa,  482; 
Blanchard  v.  Ware,  43  Iowa,  530;  37 
Iowa,  305;  Jones  v.Bamford,  21  Iowa, 
217;  Mitchell  v.  Peters,  18  Iowa,  119; 
Wilson  V.  Miller,  16  Iowa,  111;  Hop- 
ping V.  Burnam,  2  Iowa,  39.  Posses- 
sion: Rogers  v.  Hussey,  36  Iowa,  664; 
Phillips  V.  Blair,  38  Iowa,  649;  Hub- 
bard V.  Long,  20  Iowa,  149;  Baldwin 
V.  Thompson,  15  Iowa,  504;  Moore  v. 
Pierson,  6  Iowa,  279;  71  Am.  Dec. 
409. 

Kansas.  — ^.  Jones  v.  Lapham,  15 
Kan.  540,  545;  Setter  v.  Alvey,  15 
Kan.  157;  Kirk  wood  v.  Koester,  11 
Kan.  471.  Possession:  Jolmson  v. 
Clark,  18  Kan.  157,  164;  School  Dist. 
V.  Taylor,  19  Kan.  287;  Greer  v.  Hig- 
gins,  20  Kan.  420;  Lyons  v.  Boden- 
hamer,  7  Kan.  455. 

Kentucky.  —  Mueller  v.  Engeln,  12 
Bush,  441,  444;  Hardin  v.  Harring- 
ton, 11  Bush,  367;  Hopkins  v.  Garrard, 
7  B.  Mon.  312;  Forepaugh  v.  Appold, 
17  B.  Mon.  631;  Vanmeter  v.  McFad- 
din,  8  B.  Mon.  442;  Honore  v.  Bake- 
well,  6  B.  Mon.  67;  43  Am.  Dec.  147; 
Thornton  v.  Knox,  6  B.  Mon.  74; 
Johnston  v.  Gwathmey,  4  Litt.  317;  14 
Am.  Dec.  135;  [Ward  v.  Thomas,  81 
Ky.  452.]  Possession:  Russell  v.  Moore, 
3  Met.  437;  Hack  with  v.  Damron,  1 
T.  B.  Mon.  235. 

Louisiana.  —  Moore  v.  Jourdan,  14 
La.  Ann.  414;  Smith  v.  Lambeth,  15 
La.  Ann.  566;  Swan  v.  Moore,  14  La. 
Ann.  833;  Bell  v.  Haw,  8  Martin,  N.  S., 
243.  Possession:  Winston  v.  Prevost, 
6  La.  Ann.  164;  Splanev.  Mitcheltree, 
2  La.  Ann.  265. 

Maine.  — Hull    v.    Noble,    40  Me. 


459,  480;  Goodwin  v.  Cloudman,  43 
Me.  577;  Rich  v.  Roberts,  48  Me.  548; 
Porter  v.  Sevey,  43  Me.  519;  Merrill 
V.  Ireland,  40  Me.  569;  Hanley  v. 
Morse,  32  Me.  287;  SpofiFord  v.  Wes- 
ton, 29  Me.  140;  Butler  v.  Stevens, 
26  Me.  484;  Kent  v.  Plummer,  7  Me. 
464;  Webster  v.  Maddox,  6  Me.  256. 

Maryland.  —  Green  v.  Early,  39 
Md.  2-23,  229;  Matter  of  Leiman, 
32  Md.  225;  3  Am.  Rep.  132;  Gen. 
Life  Ins.  Co.  v.  U.  S.  Ins.  Co.,  10  Md. 
517,  526;  69  Am.  Dec.  174;  Mayor 
etc.  V.  Williams,  6  Md.  235;  Johns  v. 
Scott,  5  Md.  81;  Winchester  v.  Bait, 
etc.  R.  R.,  4  Md.  231;  Price  v.  Mc- 
Donald, 1  Md.  403;  54  Am.  Dec.  657; 
Baynard  v.  Norris,  5  Gill,  483;  U.  S. 
Ins.  Co.  V.  Shriver,  3  Md.  Ch.  3S5. 

Massachusetts. — liamb  v.  Pierce, 
113  Mass.  72;  Connihan  v.  Thompson, 
111  Mass.  270;  White  v.  Foster,  102 
Mass.  375;  Sibley  v.  Leffingwell,  8 
Allen,  584;  George  v.  Kent,  7  Allen, 
16;  Dooley  v.  Wolcott,  4  Allen,  406; 
Parker  v.  Osgood,  3  Allen,  487;  But- 
trick  V.  Holden,  13  Met.  355,  357; 
Curtis  V.  Mundy,  3  Met.  405;  Law- 
rence V.  Stratton,  6  Cush.  163,  166; 
Hennessey  v.  Andrews,  6  Cush.  170; 
Mara  v.  Pierce,  9  Gray,  306;  Pingree 
V.  Coffin,  12  Gray,  288. 

Michigan.  —  Reynolds  v.  Ruckman, 
35  Mich.  80;  Munroe  v.  Eastman,  31 
Mich.  283;  Shotwell  v.  Harrison,  30 
Mich.  179;  Barnard  v.  Campau,  29 
Mich.  162;  Baker  v.  Mather,  25  Mich. 
51;  Case  v.  Erwin,  18  Mich.  434;  Fitz- 
hugh  V.  Barnard,  12  Mich.  105;  Wal- 
do V.  Richmond,  40  Mich.  380;  Stetson 
V.  Cook,  39  Mich.  750;  Hosley  v. 
Holmes,  27  Mich.  416.  Possession: 
Russell  V.  Sweezey,  22  Mich.  235,  239; 
Hommel  v.  Devinney,  39  Mich.  522; 
[Balen  v.  Mercier,  75  Mich.  42.] 

Minnesota. — Coy  v.  Coy,  15  Minn. 
119,  126;  Roberts  v.  Grace,  16  Minn. 
126;  Ross  v.  Worthington,  11  Minn. 
438;  88  Am.  Dec.  95;  Doughaday  v. 
Paine,  6  Minn.  443.  Possession: 
Smith  V.  Gibson,  15  Minn.  89,  99; 
Morrison  v.  March,  4  Minn.  422;  Sea- 
gar  V.  Burns,  4  Minn.  141;  Minor  v. 
Willoughby,  3  Minn.  225. 

Mis^ssippi.  —  Allen  v.  Poole,  54 
Miss.  323;  Wasson  v.  Connor,  54  Miss. 
351;  Deason  v.  Taylor,  53  Miss.  697, 


§  664 


EQUITY    JURISPRUDENCE. 


924 


equally  well  settled  that  this  notice  need  not  be  estab- 
lished by  direct  and  positive  evidence:  it  may  be  shown 


701;  Loughridge  v.  Bowland,  52  Misa, 
54G,  553;  Buck  v.  Faine,  50  Miss.  G48, 
655;  Avent  v.  McCorkle,  45  Miss.  221; 
Parker  v.  Foy,  .13  Miss.  260;  55  Am. 
Rep.  484;  McLeod  v.  First  Nat.  Bank, 
42  Miss.  99,  112;  [Plant  v.  Shryock, 
t)2  Miss.  821.]  Possession:  Strickland 
V.  Kirk,  51  Miss.  795,  797;  Perkins  v. 
Swank,  43  Miss.  349,  3G1. 

Missouri.  —  Maupin  v.  Emmons,  47 
Mo.  304,  306;  Real  Estate  Sav.  Inst. 
V.  Collouious,  63  Mo.  290,  294;  Ridg- 
way  V.  Holliday,  59  Mo.  444;  Eck  v. 
Hatcher,  58  Mo.  235;  Fellows  v.  Wise, 
55  Mo.  413,  415;  Major  v.  Bukley,  51 
Mo.  227,  231;  Digman  v.  McUollum, 
47  Mo.  372,  375;  Speck  v.  Riggin,  40 
Mo.  405;  Muldrow  v.  Robison,  58  Mo. 
331;  Rhodes  v.  Outcait,  48  Mo.  367; 
Roberts  v.  Moseley,  64  Mo.  507;  Mas- 
tersoQ  V.  West  End  etc.  R.  R.,  5 
Mo.  App.  64.  Possession:  Shumate  v. 
Reavis,  49  Mo.  333;  Beatie  v.  Butler, 
21  Mo.  313;  64  Am.  Dec.  234. 

Nebi-ask  '.  —  Possession:  Uhl  v.  May, 
6  Neb.  157. 

Nevada.  —  Grellett  v.  Heilshorn,  4 
Nev.  526;  Gilson  v.  Boston,  11  Nev. 
413;  Hardy  v.  Harbin,  4  Saw.  536; 
Norton  V.  Meader,  8  Saw.  603. 

New  Hampshire.  — W^arner  v.  Swett, 
31  N.  H.  332;  Rogers  v.  Jones,  8 
N.  H.  264;  Colby  v.  Kenniston,  4 
N.  H.  262;  Patten  v.  Moore,  32  N.  H. 
382,  384;  Hoit  v.  Russell,  56  N.  H.  559; 
Bell  V.  Twilight,  22  N.  H.  500;  Brown 
V.  Manter,  22  N.  H.  468.  Possession: 
Bulk  of  Newberry  v.  Eastman,  44 
N.  H.  431;  Hadduck  v.  Wilmarth,  5 
N.  H.  181;  20  Am.  Dec.  570. 

New  Jersey.  — Van  Keuren  v.  Cent. 
P..  R.,  38  N.  J.  L.  165,  167  (posses- 
fiion);  Raritan  Water  Co.  v.  Veghte, 
21  N.  J.  Eq.  463,  478;  19  N.  J.  Eq. 
142;  Hoy  v.  Bramhall,  19  N.  J.  Eq. 
5G3;  97  Am.  Dec.  687;  Holmes  v. 
Stout,  10  N.  J.  Eq.  419;  4  N.  J.  Eq. 
492;  Van  Doren  v.  Robinson,  16  N.  J. 
Eq.  256;  Smith  v.  Vreelaud,  16  N.  J. 
Eq.  199;  Smallwood  v.  Lewin,  15  N. 
J.  Eq.  60.  Possession:  Losey  v.  Simp- 
son, 11  N.  J.  Eq.  246;  Coleman  v.  Bark- 
lew,  27  N.  J.  L.  357. 

New  York.  —  Griffith  v.  Griffith,  1 
Hoff.  Ch.  153;  WUliamson  v.  Brown, 
15  N.  Y.  354;  Cambridge  Valley  Bank 
V.  Delano,    48  N.  Y.  326,    336,    339; 


Acer  V.  Westcott,  46  N.  Y.  384;  7 
Am.  Rep.  355;  Gibert  v.  Peteler,  38 
N.  Y.  165;  97  Am.  Dec.  785;  Howard 
Ins.  Co.  V.  Halsey,  8  N.  Y.  271;  49 
Am.  Dec.  478;  Page  v.  Waring,  76 
N.  Y.  463;  Acer  v.  Westcott,  1  Lans. 
193,  197.  Possession:  Brown  v.  Vol- 
kening,  64  N.  Y.  76,  82;  Westbrook  v. 
Gleasou,  79  N.  Y.  23. 

[North  Carolina.  —  Killebrew  v. 
Hines,  104  N.  C.  182;  17  Am.  St. 
Rep.  672;  Hinton  v.  Leigh,  102  N.  C. 
28;  Duke  v.  Markham,  105  N.  C.  131; 
18  Am.  St.  Rep.  889;  Davis  v.  Ins- 
coe,  84  N.  C.  396.] 

Ohio.  —  Morris  v.  Daniels,  35  Ohio 
St.  406;  McKinzie  v.  Perrill,  15  Ohio 
St.  162. 

Oregon.  —  Carter  v.  City  of  Port- 
land, 4  Or.  339,  350;  Stannis  v.  Nich- 
olson, 2  Or.  332.  Possession:  Bohlman 
V.  Coffin,  4  Or.  313. 

Pennsyhania.  — Butcher  v.  Yocum, 
61  Pa,  St.  168,  171;  100  Am.  Dec.  625; 
Lahr's  Appeal,  90  Pa.  St.  507;  Parke 
V.  Neeley,  90  Pa.  St.  52;  Maul  v. 
Rider,  59  Pa.  St.  167,  171;  Nice's  Ap- 
peal, 54  Pa.  St.  200;  York  Bank's 
Appeal,  36  Pa.  St.  458;  Smith's  Ap- 
peal, 47  Pa.  St.  128;  Britton's  Appeal, 
45  Pa.  St.  172;  Speer  v.  Evans,  47  Pa, 
St.  141;  Ripple  v.  Ripple,  1  Rawle, 
386.  Possession:  Krider  v.  Lafferty, 
I  Whart.  303;  Randall  v.  Silverthorn, 
4  Pa.  St.  173;  Meehan  v.  Williams, 
48  Pa.  St.  238;  Sailor  v.  Hertzog,  4 
Whart.  259;  Lightner  v.  Mooney,  10 
Watts,  407. 

Rhode  Island.  —  Tillinghast  v. 
Champlin,  4  R.  I.  173,  215;  67  Am. 
Dec.  510;  Harris  v.  Arnold,  1  R.  1. 125. 

South  Carolina.  —  Wallace  v.  Craps, 
3  Strob.  266;  Martin  v.  Sale,  1  Bail.  Eq. 
1,  24;  City  Council  v.  Page,  1  Speers 
Eq.  159,  212;  Cabiness  v.  Mahon,  2 
McCord,  273;  [Wingo  v.  Parker,  19 
S.  C.  9.] 

Tennessee.  —  Murrell  v.  Watson,  I 
Tenn.  Ch.  342;  Tharpe  v.  Dunlap,  4 
Heisk.  674,  686. 

Texas.  —  Littleton  v.  Giddings,  47 
Tex.  109;  Willis  v.  Gay,  48  Tex.  463; 
26  Am.  Rep.  328;  Allen  v.  Root,  .39 
Tex.  589;  Rodgers  v.  Burchard,  34 
Tex.  441;  7  Am.  Rep.  283.  Possession: 
Watkins  v.  Edwards,  23  Tex.  443; 
Pontou  V,  Ballard,  24  Tex.  619;  Mul- 


925  CONCERNING   NOTICE.  §  664 

by  indirect  evidence, —  by  proof  of  circumstances  sufficient 
to  put  any  reasonably  prudent  man  upon  an  inquiry. 
Indeed,  in  some  of  the  states  where  an  actual  notice  is 
expressly  demanded  by  statute,  it  has  been  decided  that 
open  and  notorious  possession  under  a  prior  unrecorded 
conveyance  constitutes  a  sufficient  notice.  In  the  states 
composing  the  second  class  the  rule  admitting  the  suffi- 
ciency of  a  constructive  notice  is  well  established.  To  con- 
stitute such  a  notice  under  the  recording  acts,  it  must  be 
shown  by  evidence  clear  and  reliable  that  the  party  has 
received  information  of  facts  and  circumstances  which 
are  sufficient,  in  contemplation  of  law,  to  put  any  reason- 
ably prudent  man  upon  an  inquiry,  so  that  the  inquiry, 
if  prosecuted  with  due  diligence,  would  lead  to  a  discov- 
ery of  the  truth.  A  constructive  notice,  under  this  sys- 
tem, can  never  be  a  matter  of  mere  possible  inference; 
there  must  be  enough  brought  home  to  the  knowledge  of 
the  party  to  impose  a  duty  upon  his  conscience  accord- 
ing to  the  theory  of  equity  jurisprudence.  Subject  to 
this  general  limitation,  the  constructive  notice,  under  the 
recording  statutes,  may  arise  in  any  of  the  modes  recog- 
nized by  the  settled  doctrines  of  equity, —  from  extraneous 
facts  putting  one  upon  an  inquiry,  from  possession,  from 
lis  pendens,  from  recitals  in  title  papers,  from  information 
communicated  to  an  agent. 

Una  V,  Wimberly,  50  Tex.    457,   464;  Newman   v.   Chapman,   2  Rand.   93; 

Hawley  v.  Bullock,  29  Tex.  216;  Main-  [Dobyns  v.  Waring,  82  Va.  159.] 

■warring  v.  Templeman,  51  Tex.  205.  West   Virginia.  — Cox  v.  Cox,  5  W. 

Vejvnont. — Blaisdell  v.  Stevens,  16  Va.  335.     Posse-^sion:  Western  etc.  Co. 

Vt.    179;    Stafford   v.  Ballon,    17  Vt.  v.  Peytona  C.  Coal  Co.,  8  W.  Va.  406. 

329;    Corliss   v.    Corliss,  8    Vt.    373;  TFwcon.sm.  —  Brinkman  v,  Jones,  44 

Brackett  v.  Wait,  6  Vt.  411.     Posses-  Wis.  498,  519;  Helms  v.  Chadbourne, 

eion:  Griswold  v.  Smith,  10  Vt.  452;  45  Wis.  60,  71,  73;  Pringle  v.  Dunn, 

Shaw  V.  Beebe,  35  Vt.  205;  Finney  v.  37  Wis.  449,  460;  19    Am,   Rep.  772; 

Fellows,  15  Vt.  525.  Hoppin  v.  Doty,    25   Wis.    573,    591; 

Virginia. —  Wood    v,     Krebbs,     30  Gilbert  v.  Jess,  31    Wis.    110;  Ely  v. 

Gratt.  708;  Burwell's  Ex'rs  v.  Fauber,  Wilcox,  20  Wis.  523;  91  Am.  Dec.  436; 

21  Gratt.  446;  Long  v.  Waller's  Ex'rs,  Fallass  v.  Pierce,  30  Wis.  443;  Hoxie 

29   Gratt.  347;    Cordova  v.  Hood,  17  v.    Price,    31     Wis.    82.      Possession: 

Wall.  1;  Brush  V.  Ware,  15  Pet.  93,  Wickes  v.  Lake,  25  Wis.  71;  Fery  v. 

114;    Vest  v.   Michie,  31   Gratt.   149;  Pfeiffer,  18  Wis.  510,     It  will  be  re- 

31  Am.  Rep.  722;  Mundy  v.  Vawter,  membered   that   in   Ohio   and    North 

3  Gratt.    518;   McClure  v.  Thistle,  2  Carolina,  under  the  construction  given 

Gratt.    182;    Doswell    v.    Buchanan's  to  tlie   recording   acts,  no   notice  can 

Ex'rs,  3  Leigh,  365;  23  Am.  Dec.  280;  take  the  place  of  a  record. 


§  G65  EQUITY    JURISPRUDENCE.  926 

§  665.  Rationale  of  Notice  in  Place  of  a  Record.  —  I 
shall  conclude  this  subject  by  an  attempt  to  ascertain  the 
true  rationale  of  the  rule  concerning  notice  as  a  substitute 
for  an  actual  registration.  If  the  fraud  of  the  second 
purchaser  is  adopted  as  the  only  explanation,  it  seems 
impossible  to  hold  with  consistency  that  anything  less 
than  actual  notice,  or  even  actual  knowledge,  of  the  prior 
conveyance  acquired  by  him,  should  avail  in  place  of  the 
record.  "We  have  seen,  however,  that  the  vast  majority 
of  the  decisions,  even  while  nominally  requiring  an  ac- 
tual notice,  do  not  demand  actual  knowledge,  but  are 
satisfied  with  a  notice  proved  by  indirect  evidence  and 
inferred  from  circumstances.  Is  fraud,  then,  a  necessary 
or  even  proper  foundation  upon  which  to  base  the  rule 
in  all  its  applications?  I  submit  that  it  is  not,  and  think 
that  there  is  one  other  rationale  which  fully  explains  the 
doctrine  in  all  of  its  phases,  and  which  produces  a  real 
harmony  among  all  the  decisions.  It  should  be  remem- 
bered —  and  the  fact  is  very  important  in  its  bearing  upon 
this  discussion  —  that  the  English  statutes  do  not  speak  of 
the  registry  as  constituting  any  notice,  nor  has  the  rule 
which  makes  it  a  constructive  notice  ever  been  adopted 
in  England.  The  statutory  language  was  peremptory, 
that  every  unregistered  conveyance  should  be  deemed 
fraudulent  and  void  as  against  a  subsequent  purchaser 
who  had  complied  with  the  statute.  The  English  judges, 
in  the  earliest  decisions,  were  required  to  find  some  rea- 
son or  excuse,  in  the  settled  principles  of  equity,  for 
evading  and  disregarding  this  mandatory  language. 
This  reason  and  excuse  they  found  in  the  theory  of  fraud 
imputed  to  the  second  purchaser  who  attempted  to  gain  a 
preference  by  registering,  although  he  had  notice  of  the 
prior  right.  But  in  the  very  case  of  Le  Neve  v.  Le  Neve,» 
where  Lord  Hardwicke  first  formulated  this  theory  of 
imputed  fraud,  the  purchaser  was  charged  with  notice 
simply  because  his  agent  in  the  transaction  had  received 

» Amb.  436. 


927  CONCERNING    NOTICE.  §  665 

information  which  was  not   in  fact  communicated   to  the 
principal.     Tlie  purchaser's  conduct  was  thus  pronounced 
fraudulent,  although  he  had  personally  no  knowledge  of 
the  prior  conveyance,  and  had  acted  in  perfect  good  faith, 
and  the  notice  to  him  was  in  every  respect  constructive. 
It  seems,  therefore,  to  be  using  an  inconsistent  or  else 
unmeaning  formula  to  speak  of  fraud  as  the  essential 
foundation  of  the  rule,  and  at  the  same  time  to  hold  pur- 
chasers chargeable  with  notice  of  a  prior  right  when  they 
have  not  received  the  slightest  information  of  its  exist- 
ence, —  as,  for  example,  when  they  have   been   affected 
with  notice  by  a  lis  pendens,  by  a  recital  in  a  title  deed, 
which  perhaps  they  never  saw  or  heard  of,  or  even  by 
the  possession  of  a  stranger.      Throughout  the  United 
States  the  doctrine  is  settled  that  the  registration  of  an 
instrument  in  pursuance  of  the  recording  acts  operates 
as  a  constructive  notice  to  all   subsequent   purchasers. 
Whatever  be  the  language  of  any  state  statute,  this  result 
of  a  registration  —  that  it  should  be  a  constructive  notice 
—  is  uniformly  regarded  as  the  most  important  object  of 
the   entire  legislation — the  final  purpose  for  which  the 
whole    system  of    recording   was   established.      By   this 
American  dectrine,  the  constructive  notice  given  by  a 
registration    stands    on   exactly  the   same   footing,  pro- 
duces the  same  effects,  and  is  of  the  same  nature  as  any 
other  species  of  absolute  constructive  notice  recognized 
by  equity, —  as,  for  example,  that  arising  from  a  lis  pen- 
dens or  from  a  recital,  or  that  operating  upon  a  principal 
through  his  agent.     In  all  these  instances  the  notice  is  a 
conclusive  presumption  of  the  law,  and  it  is  immaterial 
w^hether  or  not  any  information  of  the   prior  right  was 
actually  brought  home  to  the  consciousness  of  the  party 
affected  thereby.     As,  therefore,  the  one  important  and 
necessary  effect  of  a  registration,  in  pursuance  of  the 
American  statutes,  is  to  create  and  impose  upon  subse- 
quent purchasers   a   constructive   notice   of    a  recorded 
instrument,  it  seems  to  be  the  natural  and  inevitable  con- 


§  666  EQUITY   JURISPRUDENCE.  928 

sequence  of  this  view,  that  any  other  species  of  notice, 
either  constructive  or  actual,  should,  in  the  absence  of  a 
record,  produce  the  same  effect  upon  the  rights  of  a  sub- 
sequent purchaser.  The  registration  of  an  instrument  is 
a  constructive  notice;  and  this  result  was  the  main  de- 
sign of  the  legislation.  It  is  therefore  natural,  just,  and 
equitable  that  if  a  subsequent  purchaser  has  received 
any  other  kind  of  notice,  actual  or  constructive,  the  same 
effect  upon  his  rights  should  be  produced  as  would  have 
followed  from  the  single  species  of  constructive  notice 
occasioned  by  the  statute.  In  this  manner,  all  kinds  of 
constructive  notice  are,  with  respect  to  their  effects  upon 
the  rights  of  subsequent  purchasers,  harmonized  and 
placed  upon  the  same  footing.  In  my  opinion,  this  view 
furnishes  a  complete,  adequate,  and  true  rationale  of  the 
doctrine  under  discussion.  It  dispenses  with  the  notion 
of  fraud  as  a  necessary  element,  which  in  very  many 
admitted  instances  of  notice  must  be  a  mere  figment  of 
judicial  logic;  it  avoids  all  the  inconsistencies  which  are 
incidents  of  that  notion;  and  finally,  it  accords  with  the 
intent  and  purpose  of  the  recording  acts  as  recognized  by 
the  vast  majority  of  American  decisions. 

§  666.  7.  That  between  Principal  and  Agent  —  Gen- 
eral Rule.  —  The  general  rule  is  fully  established,  that 
notice  to  an  agent  in  the  business  or  employment  which 
he  is  carrying  on  for  his  principal  is  a  constructive 
notice  to  the  principal  himself,  so  far  as  the  latter's 
rights  and  liabilities  are  involved  in  or  affected  by  the 
transaction.  This  rule  alike  includes  and  applies  to  the 
positive  information  or  knowledge  obtained  or  possessed 
by  the  agent  in  the  transaction,  and  to  actual  or  con- 
structive  notice   communicated  to   him   therein.^     The 

'  Le  Neve  v.  Le  Neve,  Amb.  436;  Rickarda   v.  Gledstanes,  3  Giff.  298; 

2  Lead.  Cas.  Eq.,  4th  Am.  ed.,   109,  Drydea  v.   Frost,  3  Mylne  &  C.  670; 

133;  SafiFron  etc.  Soc.  v,  Rayner,  L.  R.  Kennedy  v.    Green,    3    Mylne   &   K. 

14  Ch.  Div.  406;    Ex  parte  Larking,  699;  Tunstall  v.  Trappes,  3  Sim.  301, 

L.  R.  4  Ch.  Div.  566;  Boursot  v.  Sav-  305;   Sheldon   v.    Cox,    2   Eden,   224; 

age,  L.  R.  2  Eq.  134,  142;  Atterbury  Newstead  v.  Searles,  1  Atk.  '265;  Al- 

V.   Wallis,  8   De   Gex,  M.  &  G.  454;  lea   v.  Poole,    54   Miss.  323;   Suit  v. 


929 


CONCERNING   NOTICE. 


§66G 


rationale  of  the  rule  lias  been  difFerently  stated  by  differ- 
eut  judges;  by  some  it  has  been  rested  entirely  upon  the 


Woodball,  113  Mass.  391;  Owens  v. 
Roberts,  36  Wis.  258;  Distilled  Spir- 
its, 11  Wall.  356;  Astor  v.  Wells,  4 
Wheat.  466;  Griffith  v.  Griffith,  9 
Paige,  315;  1  Hoff.  Ch.  153;  Wester- 
velt  V.  HafF,  2  Sand.  Ch.  98;  Jackson 
V.  Leek,  19  Wend.  339;  Hovey  v. 
Blanchard,  13  N.  H.  145;  Jones  v. 
Bamford,  21  Iowa,  217;  Myers  v.  Ross, 
3  Head,  59;  Holden  v.  New  York  and 
Erie  Bank,  72  N.  Y.  286;  Ames  v. 
New  York  Union  Ins.  Co.,  14  N.  Y. 
253;  Bierce  v.  Red  Blnff  Hotel  Co., 
31  Cal.  160;  Russell  v.  Sweezey,  22 
Mich.  235;  National  Security  Bank  v. 
Cushman,  121  Mass.  490;  Smith  v. 
Denton,  42  Iowa,  48;  First  National 
Bnnk  of  Milford  v.  Town  of  Milford, 
36  Conn,  93;  Tagg  v.  Tennessee  Na- 
tional Bank,  9  Heisk.  479;  Farrington 
V.  Woodward,  82  Pa.  St.  259;  Ward 
V.  Warren,  82  N.  Y.  265.  [See,  in 
further  illustration  of  the  rule,  the  fol- 
lowing recent  cases:  Lakin  v.  Sierra 
B.  G.  M.  Co.,  25  Fed.  Rep.  337;  Ket- 
tlewell  V.  Watson,  L.  R.  21  Ch.  Div. 
705;  Wilson  v.  ^Minnesota  etc.  Ins. 
Ass'n,  36  Minn.  112;  1  Am.  St.  Rep. 
659;  Kauffinan  v.  Robey,  60  Tex.  308; 
48  Am.  Rep.  264;  Morgaa  v.  Micliigan 
A.  L.  R.  Co.,  57  ISIich.  430;  Robinson 
V.  Pebworth,  71  Ala.  240;  Goodbar  v. 
Daniel,  88  Ala.  583;  16  Am.  St.  Rep. 
76;  Smith  v.  Ayer,  101  U.  S.  320; 
Chew  V.  H.  M.  &  S.  C,  2  Fed.  Rep.  5; 
Satterfield  v.  Malone,  35  Fed.  Rep. 
445;  Cragie  v.  Hadley,  99  N.  Y.  131; 
52  Am.  Rep.  9;  Sattery  v.  Schwan- 
necke,  118  N.  Y.  548;  Watson  v. 
Sutro,  86  Cal.  500;  Donald  v.  Beals, 
57  Cal.  399;  Taylor  v.  Young,  56 
Mich.  285;  Sayre  v.  Elyton  Land  Co., 
73  Ala.  85.]  The  very  recent  case  of 
Saffron  etc.  Soc.  v.  Rayner,  L.  R.  14 
Ch.  Div.  406,  ia  a  very  important  de- 
cision, showing  the  tendency  of  the 
courts  not  to  extend  the  species  of 
constructive  notice,  and  especially  how 
far  the  rule  applies  to  solicitors  or  at- 
torneys at  law  employed  by  a  client 
in  purely  professional  legal  business. 
The  decision  is  so  important  that  I 
shall  quote  passages  from  the  opin- 
ions. The  plaintiff  had  taken  a  mort- 
gage from  the  devisees  (the  cestuis  que 
tntstent  ultimately  entitled)  of  a  cer- 
tain interest  in  a  testator's  estate,  and 
2  Eq.  Jub.— 69 


gave  notice  of  the  mortgage  to  a  firm 
of  solicitors  who  were  acting  as  attor- 
neys for  the  executors  and  trustees 
under  the  will  in  a  chancery  suit  to 
which  the  testator  hail  been  a  party, 
and  who  were  employed  generally  by 
such  trustees  in  all  matters  relating  to 
the  testator's  estate  in  which  profes- 
sional assistance  was  necessary.  The 
notice  to  these  attorneys  was  very 
clear  and  complete,  and  was  clearly 
proved.  Tlie  only  question  was, 
whether  it  operated  as  constructive 
notice  to  the  principals,  — that  is,  the 
trustees  and  executors,  —  so  as  to  bind 
them.  The  court  of  appeal  held  that 
it  did  not,  reversing  the  decision  of 
the  court  below,  which  is  reported  in 
L.  R.  10  Ch.  Div.  696.  James,  L.  J., 
after  stating  the  substance  of  the  de- 
cision appealed  from,  —  namely,  that 
the  notice  given  by  the  plaintiff  to  the 
solicitors  who  were  acting  as  attor- 
neys for  the  trustees  and  executors, 
was  in  itself  a  sufficient  notice  to 
make  the  trustees  liable  to  the  same 
extent  as  if  it  had  been  given  to  them 
personally, — proceeds  (p.  409):  "That 
appears  to  me  a  startling  proposition. 
I  cannot  see  any  principle  leading  to 
such  a  conclusion.  I  have  had  occa- 
sion several  times  to  express  my  opin- 
ion about  the  fallacy  of  supposing 
that  there  is  such  a  thing  as  the  office 
of  solicitor, — that  is  to  say,  that  a 
man  has  got  a  solicitor,  not  as  a  person 
whom  he  is  employing  to  do  some  par- 
ticular business  for  him,  either  con- 
veyancing, or  conducting  an  action,, 
but  as  an  official  solicitor,  —  and  that, 
because  the  solicitor  has  been  in  the 
habit  of  acting  for  him,  or  been  em- 
ployed to  do  something  for  him,  such, 
solicitor  is  his  agent  to  bind  him  by 
anything  he  says,  or  to  bind  him, 
by  receiving  notices  or  information. 
There  is  no  such  officer  known  to  the- 
law.  A  man  has  no  more  a  solicitor 
in  that  sense  than  he  has  an  account- 
ant, or  a  baker,  or  butcher.  A  per- 
son is  a  man's  accountant,  or  baker,  or 
butcher,  when  the  man  chooses  to  em- 
ploy him  or  deal  with  him,  and  in  the 
matter  in  which  he  is  so  employed.  Be- 
yond that  the  solicitorship  does  not 
extenil I  am  prepared,  there- 
fore, to  say  that  before  a  notice  of 


§667 


EQUITY   JURISPRUDENCE, 


930 


presumption  of  an  actual  communication  between  the 
agent  and  his  principal;  by  others,  upon  the  legal  con- 
ception that  for  many  purposes  the  agent  and  principal 
are  regarded  as  one.  Whatever  explanation  be  adopted 
as  the  true  one,  the  rule  itself  is  both  unquestionable 
and  necessary;  the  ordinary  business  affairs  of  life  could 
not  be  safely  conducted  without  it. 

§  667.  Scope  and  Applications.  —  This  general  rule  is 
of  wide  application.  It  embraces  in  its  operation  not  only 
ordinary  agents  and  attorneys,  but  all  persons  who  act  for 
or  represent  others  in  business  relations  and  transactions. 
Thus  it  applies  to  directors,  managers,  presidents,  cash- 
iers, and  other  officers,  while  engaged  in  the  business 
affairs  of  their  corporations;^  to  trustees  acting  on  behalf 
of  their  beneficiaries;'  to  an  agent  acting  on  behalf  of  a 


this  kind  can  have  the  slightest  valid- 
ity, it  must  be  given,  if  given  to  a 
solicitor,  to  a  solicitor  who  is  actually, 
either  expressly  or  hnpUedly,  authorized 
as  agent  to  receive  such  notices."  Bram- 
well,  L.  J.,  added  (p.  415):  "As  Lord 
Justice  James  has  said,  there  is  no 
such  thing  as  a  standing  relation  of 
solicitor  to  a  man.  A  man  is  solicitor 
for  another  only  when  that  other  has 
occasion  to  employ  him.  That  em- 
ployment may  be  either  to  conduct  a 
suit  or  to  advise  him  about  some  mat- 
ter in  which  legal  advice  is  required; 
but  there  is  no  such  general  relation- 
ship as  that  of  solicitor  and  client  of 
a  standing  and  permanent  character 
upon  all  occasions  and  for  all  pur- 
poses. " 

^  See  Lord  Brougham's  remarks  in 
the  often-quoted  case  of  Kennedy  v. 
Green,  3  Mylue  &  K.  699.  In  the 
case  of  Boursot  v.  Savage,  L.  R.  2 
Eq.  134,  142,  Kindersley,  V.  C,  said: 
"It  is  a  moot  question  upon  what 
principle  this  doctrine  rests.  It  has 
been  held  by  some  that  it  rests  on 
this:  that  the  probability  is  so  strong 
that  the  solicitor  would  tell  his  cli- 
ent what  he  knows  himself,  that  it 
amounts  to  an  irresistible  presump- 
tion that  he  did  tell  him;  and  so  you 
must  presume  actual  knowledge  on 
the  part  of  the  client.  I  confess  my 
own  impression  is,  that  the  principle 


on  which  the  doctrine  rests  is  this: 
that  my  solicitor  is  alter  ego;  he  is 
myself;  I  stand  in  precisely  the  same 
position  as  he  does  in  the  transaction, 
and  therefore  his  knowledge  is  my 
knowledge;  and  it  would  be  a  mon- 
strous injustice  that  I  should  have  the 
advantage  of  what  he  knows,  without 
the  disadvantage.  But  whatever  be 
the  principle  upon  which  the  doctrine 
rests,  the  doctrine  itself  is  unques- 
tionable." If  in  this  extract  "agent" 
and  "principal"  are  substituted  for 
"solicitor"  and  "client,"  we  shall 
have  a  statement  of  the  rationale  in 
its  most  general  form. 

'  Ex  parte  Larking,  L.  R.  4  Ch. 
Div.  566;  Smith  v.  Water  Comm'rs,  38 
Conn.  208;  Tagg  v.  Tenn.  Nat.  Bank, 
9  Heisk.  479;  Fulton  Bank  v.  Canal 
Co.,  4  Paige,  127;  Bank  of  United 
States  V,  Davis,  2  Hill,  451;  New 
Hope  Bridge  Co.  v.  Phoenix  Bank,  3 
N.  Y.  156;  Washington  Bank  v. 
Lewis,  22  Pick.  24;  Branch  Bank  v. 
Steele,  10  Ala.  915;  Holden  v.  New 
York  and  Erie  Bank,  72  N.  Y.  286; 
North  River  Bank  v.  Aymar,  3  Hill, 
262;  National  Security  Bank  v.  Cush- 
man,  121  Mass.  490;  First  Nat.  Bank 
etc.  V.  Town  of  Milford,  36  Conn.  93; 
[Ottaquechee  Savings  Bank  v.  Holt, 
58  Vt.  166.] 

»  WiUes  V.  Greenhill,  4  De  Gex,  F.  & 
J.  147,  150;  Myers  V.  Ross,  3  Head,  59. 


931 


CONCERNING    NOTICE. 


§  668 


married  woman;*  to  one  of  two  or  more  Joint  agents;'  and 
to  all  actual  agents,  whether  the  agency  be  express  or 
implied.'  The  general  rule  also  applies  where  the  same 
agent  or  attorney  in  reality  acts  on  behalf  of  both  parties 
to  the  transaction;  for  both  the  grantor  and  the  grantee, 
the  vendor  and  the  vendee,  the  mortgagor  and  the  mort- 
gagee.* This  special  application  of  the  rule  is  carefully 
guarded  by  the  courts,  so  that  it  shall  not  work  injustice, 
and  is  not,  therefore,  enforced  unless  the  same  agent  is  in 
fact  acting  for  both  parties.' 

§  668.  Limitations — Within  the  Scope  of  the  Agent's 
Authority.  —  There  are,  on  the  other  hand,  certain  im- 
portant limitations  upon  the  operation  of  the  general  rule. 


'  As  where  the  agent  is  her  husband: 
Willes  V,  Greenhill,  4  De  Gex,  F.  &  J. 
147,  150;  Clark  v.  Fuller,  39  Conn. 
238;  Duke  v.  Balme,  16  Minn.  306; 
see  Pringle  v.  Dunn,  37  Wis.  449; 
19  Am.  Rep.  772;  [Satterfield  v.  Ma- 
lone,  35  Fed.  Rep.  445;  Chew  v.  H. 
M.  &  S.  Co.,  2  Fed.  Rep.  5;  Goodbar 
V.  Daniel,  88  Ala.  583;  16  Am.  St. 
Rep.  76;  Robinson  v.  Pebworth,  71 
Ala.  240.] 

»  Willes  V.  Greenhill,  4  De  Gex,  F. 
&  J.  147,  150;  as  where  the  notice  is 
to  one  of  several  directors  of  a  bank: 
Bank  of  United  States  v.  Davis,  2 
Hill,  451,  464. 

5  Watson  V.  Wells,  5  Conn.  468; 
Farrington  v.  Woodward,  82  Pa.  St. 
259.  The  mere  fact,  however,  that  a 
purchase  is  made  by  two  persons 
jointly  does  not  constitute  thera 
agents  for  each  other,  so  that  notice 
to  one  is  therefore  a  notice  to  the 
other:  Snyder  v.  Sponable,  1  Hill, 
567;  7  Hill,  427;  Flagg  v.  Mann,  2 
Sum.  486,  534. 

*  In  fact,  the  most  striking  illustra- 
tions of  the  rule  have  arisen  under 
these  circumstances:  Le  Neve  v.  Le 
Neve,  Amb.  436;  2  Lead.  Cas.  Eq., 
4th  Am.  ed.,  109;  Kennedy  v.  Green, 
3  Mylne  &  K.  699;  Dryden  v.  Frost,  3 
Mylne  &  C.  670.  673;  Sheldon  v.  Cox, 
2  Eden,  224;  Tweedale  v.  Tweedale, 
23  Beav.  341;  Fuller  v.  Bennett,  2 
Hare,  394,  402;  Holden  v.  New  York 
etc.  Bank,  72  N.  Y.  286;  First  Nat. 
Bank  etc.  v.  Town  of  Milford,  36  Conn. 


93;  Losey  v.  Simpson,  11  N.  J.  Eq. 
246.  Also  where  the  grantor  or  vendor 
himself  acts  on  behalf  or  as  attorney 
for  the  grantee  or  vendee:  Robinson  v. 
Briggs,  1  Smale  &  G.  138;  Spencer  v. 
Topham,  2  Jur.,  N.  S.,  865;  Majori- 
banka  v.  Hovenden,  Dru.  11;  6  I.  R. 
Eq.  238;  Atkyns  v.  Delmege,  12  I.  R. 
Eq.  1;  Twy cross  v.  Moore,  13  I.  R. 
Eq.  250;  Tucker  v.  Henzill,  4  Ir.  Ch. 
613;  In  re  Rorke,  13  Ir.  Ch.  273;  14  Jr. 
Ch.  442. 

*  Thus  the  mere  fact  that  only  one 
attorney  is  employed  or  engaged  in  a 
transaction,  a  sale  or  purchase,  or  a 
mortgaging,  does  not  necessarily  make 
him  the  attorney  for  both  parties,  so 
that  one  party  shall  thereby  be  charged 
with  constructive  notice  of  facta 
known  by  the  other:  Espin  v.  Pem- 
berton,  3  De  Gex  &  J.  547,  554,  555; 
Wythes  v.  Labouchere,  3  De  Gex  &  J. 
593;  Perry  v.  Holl,  2  De  Gex,  F.  &  J. 
38,  53,  per  Campbell,  L.  C:  "It  doea 
not  follow  that  if  there  is  not  an  attor- 
ney on  each  side,  the  attorney  who 
does  act  is  the  attorney  of  both." 
Also  the  mere  fact  that  two  corpora- 
tions have  the  same  attorney,  or  the 
same  directors,  does  not  render  each 
chargeable  with  notice  of  whatever  is 
known  or  done  by  the  other:  Banco  da 
Lima  v.  Anglo-Peruvian  Bank,  L.  R. 
8  Ch.  Div.  160,  175;  In  re  Marseilles 
etc.  Co.,  L.  R.  7  Ch.  161;  In  re  Euro- 
pean Bank,  L.  R.  5  Ch.  358;  Fulton 
Bank  v.  New  York  etc.  Canal  Co.,  4 
Paige,  127. 


§  669  EQUITY   JURISPRUDENCEv  932 

The  employment  of  an  agent  or  attorney  to  do  a  merely 
ministerial  act  for  his  principal  does  not  constitute  him 
such  an  agent  that  the  rule  as  to  constructive  notice  will 
apply.*  Also,  in  pursuance  of  the  fundamental  doctrine 
of  agency  concerning  the  powers  of  agents,  the  notice 
given  to  or  information  acquired  by  the  agent,  in  order 
to  be  operative  upon  the  principal,  must  be  within  the 
scope  of  the  agent's  authority,  to  bind  the  principal.  If 
an  agent  cannot  bind  his  principal  by  acts  beyond  the 
limits  of  his  authority,  a  notice  beyond  those  limits  is 
equally  nugatory.'  Finally,  in  order  that  the  rule  may 
apply,  the  agent  must  be  an  attorney  in  fact,  rather  than 
a  mere  attorney  at  law.  Wherever  a  solicitor  or  attorney 
at  law  is  brought  within  the  operation  of  the  rule,  he 
must  be  emploj^ed  in  some  other  capacity  than  as  a  mere 
professional  and  legal  adviser;  he  must  be  employed  to 
represent  his  client  in  a  transaction  whereby  the  principal 
is  to  acquire  some  rights  or  is  to  be  subjected  to  some  lia- 
bilities.' 

§  669.  Notice  to  Agent,  Actual  or  Constructive. — If 
the  agency  exists,  and  the  foregoing  requisites  are  com- 
plied with  so  as  to  admit  the  application  of  the  general 
rule,  then  it  will  operate  with  equal  force  and  effect, 
whether  the  notice  to  the  agent  be  actual  or  constructive. 
Actual  knowledge  may  be  brought  home  to  the  agent  by 
the  most  direct  evidence,  or  he  may  be  chargeable  with 

*  A8  where  he  is  employed  simply  •  All  the  decisions  implicitly,  at 
to  procure  the  execution  of  a  deed:  least,  sustain  this  conclusion.  VVher- 
Wyllie  V.  Pollen,  3  De  Gex,  J.  &  S.  ever  the  agent  has  been  a  solicitor  or 
596,  601.  Or  to  record  a  mortgage:  attorney  at  law,  it  will  be  seen  that 
Anketel  v.  Converse,  17  Ohio  St.  11;  he  has  been  employed  in  some  such 
91  Am.  Dec.  115;  Hoppock  v.  John-  transaction, — the  negotiation  of  a  lease 
son,  14  Wis.  303.  But  notice  to  an  and  giving  a  mortgage,  the  transfer  of 
officer  employed  to  execute  an  attach-  property,  and  the  like:  See  Saffron 
ment  is  notice  to  the  plaintiff  in  the  etc  Soc.  v.  Rayner,  L.  R.  14  Ch. 
suit:  Tucker  v.  Tilton,  55  N.  H.  223.  Div.  406,  409,  415,  and  the  quotation 

*  Spadono  v.  Manvel,  2  Daly,  263;  therefrom  ante,  under  §  666.  [If  a 
Weisser  v.  Denison,  10  N.  Y.  68;  61  husband  purchases  land  for  his  wife. 
Am.  Dec.  731 ;  Brown  v.  Bankers'  etc.  causing  a  conveyance  to  be  made  to- 
Tel.  Co.,  30  Md.  39;  Roach  v.  Karr,  her,  notice  to  him  is  notice  to  her; 
18  Kan.  529;  26  Am.  Rep.  788;  Wilson  Sayre  v.  Elyton  Land  Co.,  73  Ala^ 
T.  Conway  Fire  Ina.  Co.,  4  R.  L  141,  85.] 

152;  Grant  v.  Cole,  8  Ala.  619. 


933  CONCERNING   NOTICE.  §  670 

constrnctive  notice  by  a  lis  pendens,  by  a  registration,  by 
recitals  in  title  deeds,  by  possession  of  a  stranger,  or  by 
circumstances  sufficient  to  put  a  prudent  man  upon  an 
inquiry;  in  all  such  cases  the  effect  upon  the  principal  is 
the  same.^  The  notice  with  which  the  principal  is  charged 
is,  however,  constructive,  since  it  is  a  presumption,  and 
generally  a  conclusive  presumption,  of  the  law,  and  takes 
€flfect  even  when  the  principal  in  fact  received  no  com- 
munication of  information  from  his  agent.^ 

§  670.  Essential  Requisites  —  (1 )  When  the  Notice  mnst 
be  Received  by  the  Agent  —  During  his  Actual  Employ- 
ment. —  Having  thus  stated  the  general  rule,  I  shall  now 
proceed  to  describe  with  more  fullness  its  essential  ele- 
ments, —  the  requisites  which  must  exist  in  order  that  it 
may  operate.  In  the  first  place,  as  to  the  time  when  the 
information  constituting  notice  must  be  acquired  by  or 
given  to  the  agent.  In  order  that  the  principal  may  be 
affected  with  a  constructive  notice  under  this  rule,  the 
information  constituting  the  notice  must  be  obtained  by 
or  imparted  to  the  agent  while  he  is  in  fact  acting  as 
agent,  —  while  he  is  actually  engaged  in  doing  his  princi- 
pal's business,  in  pursuance  of  his  authority,  and  in  his 
character  as  agent.'     This  special  requisite  finds  a  fre- 

»  See  Kennedy  v.  Green,  3  Mylne  &  Karr,  18  Kan,  529;  26  Am.  Rep.  788; 

K.  699,  719,  per  Lord  Brougham;  Bank  Houseman  v.  Girard  etc.  Ass'n,  81  Pa. 

of  United  States  v.  Davis,  2  Hill,  451,  St.  256;  G.  W.  R'y  Co.  v.  Wheeler, 

461.  20   Mich.    419;   Pringle  v.    Dunn,   37 

*  There  can  be  no  greater  miscon-  Wis.  449;  19  Am.  Rep.  772;  Distilled 
ception  of  its  legal  meaning,  and  no  Spirits,  11  Wall.  356;  Bierce  v.  Red 
more  complete  confusion  of  the  dis-  Bluff  Hotel  Co.,  31  Cal.  160;  May  v. 
tinctions  between  the  two  kinds  of  Borel,  12  Cal.  91;  Russell  v.  Sweezey, 
notice,  than  to  call  the  notice  imputed  22  Mich.  235;  Hodgkins  v.  Montgom- 
to  a  principal  through  his  a^reat  an  ery  Co.  Ins.  Co.,  34  Barb.  213;  Weis- 
" actual"  notice:  See  Espin  V.  Pember-  ser  v.  Denison,  10  N.  Y.  68;  61  Am. 
ton,  3  De  Gex  &  J.  547,  554,  [That  the  Dec.  731 ;  Howard  Ins.  Co.  v.  Halsey, 
notice  to  the  agent  is  conclusive  and  8  N.  Y.  271;  59  Am.  Dec.  478;  Smith 
irrebuttable  on  the  principal  was  di-  v.  Denton,  42  Iowa,  48;  Jones  v. 
rectly  held  in  Watson  v.  Sutro,  86  Bamford,  21  Iowa,  217;  Clark  v.  Ful- 
Cal.  500.]  ler,  39  Conn.  238;  Spadone  v.  Man- 

*  Saffron  etc.  Soc.  v.  Rayner,  L.  R  vel,  2  Daly,  263;  N.  Y.  Cent,  Ins. 
14  Ch.  Div.  406;  In  re  Peruvian  R'y  Co.  v.  National  Protec.  Ins.  Co.,  20 
Co.,  L.  R.  2  Ch.  617,  626;  Dryden  v.  Barb.  468;  14  N.  Y.  85;  Fry  v,  Shehee, 
Frost,  3  Mylne  &  C.  670;  Wilde  v.  55  Ga.  208.  [See  also  Satterfield  v. 
Gibson,  1  H.  L.  Cas.  605,  624;  Pepper  Malone,  35  Fed.  Rep.  445;  Chew  v. 
V.   George,   51    Ala,    190;    Roach    v.  H.    M.    &   S.    Co.,   2   Fed.    Rep.   6.1 


§671 


EQUITY   JURISPRUDENCE. 


934 


quent  application  in  the  relations  subsisting  "between 
directors  and  officers  and  the  corporations  to  which  they 
belong.* 

§  671.  (2)  In  the  Same  Transaction. — In  the  second 
place,  in  order  that  a  principal  may  thus  be  charged  with 
constructive  notice,  not  only  must  the  person  first  receiv- 
ing it  be  in  fact  an  agent,  and  be  actually  engaged  in 
the  business  of  his  representative  employment,  but  the 
notice  must  be  given  to,  or  the  information  acquired  by, 
the  agent  or  attorney  in  the  course  of  the  same  transaction 
which  is  sought  to  be  affected  by  the  constructive  notice; 
that  is,  in  the  same  transaction  from  which  the  principal's 
rights  and  liabilities  arise,  which,  it  is  claimed,  depend 
upon  or  are  modified  by  the  constructive  notice  imputed 
to  him.  This  is,  in  general,  a  well-settled  requisite;  and 
the  grounds  for  it,  depending  upon  motives  of  expediency, 
were  thus  stated  by  Lord  Hardwicke  in  an  early  case.     A 


If,  then,  an  agent  has  obtained  infor- 
mation while  acting  for  himself,  or 
for  a  third  person,  or,  in  general,  pre- 
viously to  the  commencement  of  his 
agency,  the  principal  is  not  charged 
with  constructive  notice  thereof:  Mc- 
Cormick  v.  Wheeler,  36  111.  114;  85 
Am.  Dec.  388;  [Frenkel  v.  Hudson, 
82  Ala.  158;  60  Am.  Rep.  736.] 

'  It  has  been  held  in  numerous 
American  decisions  that  notice  given 
to,  or  information  acquired  by,  a  cor- 
poration director,  manager,  or  officer 
will  not  afifect  the  corporation  itself 
with  a  constructive  notice,  unless  he 
was  at  the  time  of  the  giving  or  ac- 
quiring acting  on  behalf  of  his  corpo- 
ration. It  is  not  enough  that  he  was, 
at  that  time,  clothed  with  the  official 
character;  he  must  also,  in  pursuance 
of  his  official  functions,  have  been  ac- 
tually engaged  in  transacting  the  busi- 
ness of  his  corporation.  There  are  two 
exceptions  or  limitations.  If  the  in- 
formation received  by  him  is  of  such  a 
nature  or  is  acquired  under  such  cir- 
cumstances that  it  is  a  part  of  his 
express  official  duty  to  communicate 
what  he  knows  or  has  learned  to  the 
managing  body  -  or  board,  then  the 
corporation  will  be  affected  with  a 
constructive  notice.  Also,  if  the  trans- 
action in  which  the  information  was 


obtained  was  so  recent,  or  the  informa- 
tion itself  was  so  positive,  direct,  and 
strong,  that  it  must  be  regarded  aa 
certainly  remaining  present  in  the 
mind  or  memory  of  the  official,  then 
the  case  may  fall  under  the  operation 
of  a  rule  stated  in  a  subsequent  para- 
graph {post,  %  672),  and  a  constructive 
notice  to  the  corporation  may  follow: 
Fulton  Bank  v.  N.  Y.  &  Sharon  C. 
Co.,  4  Paige,  127;  Seneca  Co.  Bank  v. 
Neass,  5  Denio,  329,  337;  Miller  v.  111. 
Cent.  R.  R.,  24  Barb.  312;  North  River 
Bank  v.  Aymar,  3  Hill,  262;  Farmers' 
Bank  V.  Payne,  25  Conn.  444;  U.  S. 
Ins.  Co.  v.  Shriver,  3  Md.  Ch.  381; 
Gen.  Ins.  Co.  v.  U.  S.  Ins.  Co.,  10 
Md.  517;  69  Am.  Dec.  174;  Winches- 
ter V.  B.  &  S.  R.  R.,  4  Md.  231;  Browu 
V.  Bankers'  etc.  Tel.  Co.,  30  Md.  39; 
G.  W.  R'y  Co.  V.  Wheeler,  20  Mich. 
419;  President  etc.  v.  Cornen,  37 
N.  Y.  320;  Bank  of  U.  S.  v.  Davis,  2 
Hill,  451;  National  Bank  v.  Norton, 
1  Hill,  572;  Atlantic  etc.  Bank  v. 
Savery,  82  N.  Y.  291,  307;  La  Farge 
Fire  Ins.  Co.  v.  Bell,  22  Barb.  54,  61. 
[See  also  Baltimore  and  Ohio  R.  R,  Co. 
V.  Canton  Co.,  70  Md.  405;  Fairfield 
Sav.  Bank  v.  Chase,  72  Me.  226;  39 
Am.  Rep.  319;  Reid  v.  Bank  of  Mo- 
bile, 70  Ala.  199j  Lothiau  v.  Wood.  65 
Cal.  159.] 


935  CONCERNING    NOTICE.  §  672 

different  rule,  he  said,  "  would  make  purchasers*  and 
mortgagees'  titles  depend  altogether  on  the  memory  of 
their  counselors  and  agents,  and  oblige  them  to  apply  to 
persons  of  less  eminence  as  counsel,  as  not  being  so  likely 
to  have  notice  of  former  transactions."  ' 

§  672.  Limitation  —  Prior  Transaction.  —  The  forego- 
ing requisite,  general  as  it  is  in  its  application,  is  subject 
to  an  important  and  well-settled  limitation,  equally  de- 
pending upon  motives  of  expediency.  Where  the  transac- 
tion in  question  closely  follows  and  is  intimately  connected 
with  a  prior  transaction  in  which  the  agent  was  also  en- 
gaged, and  in  which  he  acquired  material  information, 
or  where  it  is  clear  from  the  evidence  that  the  informa- 
tion obtained  by  the  agent  in  a  former  transaction  was  so 
precise  and  definite  that  it  is  or  must  be  present  to  his 
mind  and  memory  while  engaged  in  the  second  transac- 
tion, then  the  foregoing  requisite  becomes  inapplicable; 
the  notice  given  to  or  information  acquired  by  the  agent  in 
the  former  transaction  operates  as  constructive  notice  to 

*  Banco  de  Lima  v.  Anglo-Peruvian  114;  85  Am.  Dec.  388;  Bracken  v,  Mil- 
Bank,  L.  R.  8  Ch.  Div.  160,  175;  ler,  4  Watts  &  S.  102;  Hood  v.  Fahne- 
Wyllie  V.  Pollen,  3  De  Gex,  J.  &  S.  stock,  8  Watts,  489;  Lawrence  v. 
596,  601 ;  Lloyd  v.  Attwood,  3  De  Gex  Tucker,  7  Greenl.  195;  but  see,  per 
&  J.  614,  657;  Finch  v.  Shaw,  19Beav.  contra.  Hart  v.  Farmers'  etc.  Bank,  33 
.500;  5  H.  L.  Gas.  905;  Tylee  v.  Webb,  Vt.  252;  Abell  v.  Howe,  43  Vt.  403. 
6  Beav.  552;  14  Beav.  14;  Fuller  v.  [See  also  Chew  v.  H.  M.  &  S.  Co.,  2 
Bennett,  2  Hare,  394;  Warrick  v.  Fed.  Rep.  5;  Satterfield  v.  Malone,  35 
Warrick,  3  Atk.  294;  Worsley  v.  Earl  Fed.  Rep.  445;  Goodbar  v.  Daniel,  88 
of  Scarborough,  3  Atk.  392;  Hine  v.  Ala.  583;  16  Am.  St.  Rep.  76;  Con- 
Dodd,  2  Atk.  275;  Lowther  V.  Carlton,  stant  v.  University  of  Rochester,  111 

2  Atk.  242;  Ashley  v.  Baillie,  2  Ves.  N.Y.  604;  7  Am.  St.Rep.  769;  Spielman 
Sr.  368;  Wilde  v.  Gibson,  1  H.  L.  Cas.  v.Kliest,  36  N.  J.  Eq.  199;  Kauffman  v. 
605,  6-24;  Houseman  v.  Girard  etc.  Robey,  60  Tex.  308;  48  Am.  Rep.  264.] 
Ass'n,  81  Pa.  St.  256,  261;  Holden  v.  The  same  requisite  applies,  as  has  been 
New  York  and  Erie  Bank,  72  N.  Y.  shown  in  a  previous  paragraph,  when 
286;  Howard  Ins.  Co.  v.  Halsey,  8  the  notice  is  sought  to  be  charged  upon 
N.  Y.  271;  59  Am.  Dec.  478;  Weisser  a  party  personally,  and  not  through 
v.  Denison,  10  N.  Y.  68;  61  Am.  Dec.  an  aeent:  See  Hamilton  v.  Royse,  2 
731 ;  Bierce  v.  Red  Blufif  Hotel  Co.,  31  Shoales  &  L.  315,  327,  per  Lord  Redes- 
Cal.  160;  North  River  Bank  V.  Aymar,  dale.     [Thus  a  person  taking  a  mort- 

3  Hill,  202;  Russell  v.  Sweezey,  22  gage  is  not  charged  with  notice  of  a 
Mich.  235;  Smith  v.  Denton,  42  Iowa,  prior  unrecorded  mortgage  on  the  same 
48;  Blumenthal  v.  Brainerd,  38  Vt.  property  which,  as  attorney,  he  had 
402,  410;  91  Am.  Dec.  349;  Roach  v.  drawn  up  nine  years  before  in  the  reg- 
Karr,  18  Kan.  529;  26  Am.  Rep.  788;  \ilar  course  of  his  business,  and  there 
Allen  V.  Poole,  54  Miss.  323;  Pritigle  is  no  pre=;umption  thathehad  theprior 
V.  Dunn,  37  Wis.  449;  19  Am.  Rep.  mortgage  in  mind:  Goodwin  v.  Dean, 
772;  McCormick  T.  Wheeler,   36  111.  60  Conn.  517.] 


§672 


EQUITY    JURISPRUDENCE. 


936 


the  principal  in  the  second  transaction,  although  that 
principal  was  a  complete  stranger  to  and  wholly  uncon- 
nected with  the  prior  proceeding  or  business.*     The  ex- 


'  Several  of  the  ablest  English 
jndges  have,  in  recent  cases,  expressed 
a  decided  opinion  against  the  rule  it- 
self, and  while  considering  themselves 
bound  by  it,  so  far  as  it  is  settled, 
have  wished  that  it  should  be  abro- 
gated by  the  legislature:  Fuller  v. 
Bennett,  2  Hare,  394;  Atterbury  v. 
Wallis,  8  De  Gex,  M.  &  G.  454;  Har- 
greaves  v,  Rothwell,  1  Keen,  154, 
159;  Mountford  v.  Scott,  Turn.  &  R. 
274;  Nixon  v.  Hamilton,  2  Dru.  &  War. 
364;  Winter  v.  Lord  Anson,  3  Russ. 
488,  493;  Perkins  v.  Bradley,  1  Hare, 
219;  Lenehan  v.  McCabe,  2  Ir. 
Eq.  342;  Majoribanks  v,  Hovenden,  6 
Ir.  Eq.  238;  The  Distilled  Spirits,  11 
Wall.  356;  Patten  v.  Ins.  Co.,  40 
N.  H.  375;  Hovey  v,  Blanchard,  13 
N.  H.  145;  Dunlap  v.  Wilson,  32  111. 
517;  Williams  v.  Tatiiall,  29  111.  553; 
Pritchett  v.  Sessions,  10  Rich.  L.  293; 
Wiley  V.  Knight,  27  Ala.  33G;  Abell 
V.  Howe,  43  Vt.  403;  Hart  v.  Farmers' 
&  M.  Bank,  33  Vt.  252;  Murray  v. 
Ballou,  1  Johns.  Ch.  566,  574;  Ames 
V.  K.  Y.  Union  Ins.  Co.,  14  N.  Y. 
253;  Holden  v.  N.  Y.  &  Erie  Bank,  72 
N.  Y.  286,  292;  Tagg  v.  Tenn.  Nat. 
Bank,  9  Heisk.  479.  [See  also  Wilson 
V.  Minnesota  etc.  Ins.  Co.,  36  Minn. 
112;  1  Am.  St.  Rep.  659;  Spielman  v. 
Kliest,  36  N.  J.  Eq.  199;  Cragie  v. 
Hadley,  99  N.  Y.  131;  52  Am.  Rep.  9; 
Slattery  v.  Schwannecke,  118  N.  Y. 
548;  Constant  v.  Universitv  of  Roches- 
ter, 111  N.  Y.  604;  7  Am.  St.  Rep.  769; 
Lebanon  Savings  Bank  v.  HoUenbeck, 
29  Minn.  322.]  In  Fuller  v.  Bennett, 
2  Hare,  394,  Wigram,  V.  C,  gives  a 
very  full  and  instructive  discussion 
of  this  special  rule,  explaining  its 
grounds,  and  exhibiting  its  necessary 
limitations.  In  the  case  of  Distilled 
Spirits,  11  Wall.  356,  the  rule  is  ap- 
proved and  adopted  by  the  supreme 
court  of  the  United  States,  and  it  is 
stated  by  Bradley,  J.,  in  the  following 
summary:  "  In  England,  the  doctrine 
seems  now  to  be  established,  that  if 
the  agent,  at  the  time  of  eflfecting  a 
purchase,  has  hnoivledge  of  any  prior 
lien,  trust,  or  fraud  aifecting  the 
property,  no  matter  when  he  acquired 
such  knowledge,  his  principal  is  af- 
fected thereby.       If  he  acquire  the 


knowledge  when  he  effects  the  pur- 
chase, no  question  can  arise  as  to  his 
having  it  at  the  time;  if  he  acquired 
previous  to  the  purchase,  the  presump- 
tion that  he  still  retains  it,  and  has  it 
present  to  his  mind,  will  depend  on  the 
lapse  of  time  and  other  circumstances. 
Knowledge  communicated  to  the  prin- 
cipal himself  he  is  bound  to  recollect; 
but  he  is  not  bound  by  knowledge 
communicated  to  his  agent,  unless  it 
is  present  to  the  agent's  mind  at  the 
time  of  effecting  the  purchase.  Clear 
and  satisfactory  proof  that  it  was  so 
present  seems  to  be  the  only  restric- 
tion required  by  the  English  rule  as 
now  understood.  With  the  qualifica- 
tion that  the  agent  is  at  liberty  to 
communicate  his  knowledge  to  his 
principal,  it  appears  to  us  to  be  a 
sound  view  of  the  subject.  The  gen- 
eral rule  that  the  principal  is  bound 
by  the  agent's  knowledge  is  based  on 
the  principle  of  law  that  it  is  the 
agent's  duty  to  communicate  to  his 
principal  the  knowledge  which  he 
has  respecting  the  subject-matter  of 
negotiation,  and  the  presumption  that 
he  will  perform  tliat  duty.  When  it 
is  not  the  agent's  duty  to  communi- 
cate such  knowledge,  but  it  would  be 
unlawful  for  him  to  do  so,  —  as,  for  ex- 
ample, when  it  has  been  acquired  con- 
fidentially, as  attorney  for  a  former 
client,  in  a  prior  transaction, — the 
reason  of  the  rule  ceases;  and  in  such 
a  case  an  agent  would  not  be  expected 
to  do  that  which  would  involve  the 
betrayal  of  professional  confidence, 
and  his  principal  ought  not  to  be 
bound  by  the  agent's  secret  and  con- 
fidential information."  A  very  im- 
portant modification  or  addition  to 
the  rule,  which  has  a  special  applica- 
tions to  agents  of  corporations.was  laid 
down  by  Folger,  J.,  in  Holden  v.  New 
York  and  Erie  Bank,  72  N.  Y.  286, 
292.  The  view  which  he  takes  can- 
not be  better  exi)lained  than  by  quot- 
ing his  own  language:  "Notice  must 
have  come  to  the  agent,  it  is  said,  in 
the  course  of  the  very  transaction,  or 
so  near  before  it  that  the  agent  must 
be  presumed  to  recollect  it.  This 
limitation,  however,  applies  more  par- 
ticularly to  the  case  of  an  agent  whose 


937 


CONCERNING   NOTICE. 


§672 


planation  of  this  special  rule  is  plainly  to  be  found  in  the 
notion  that  the  information  obtained  by  the  agent  in  his 
former  employment  was  of  such  a  nature,  so  definite  and 
certain,  that  it  amounted  to  actual  knowledge;  and  as 
knowledge  it  is  retained  by  him  and  carried  with  him 
into  the  subsequent  business  which  he  transacts  on  be- 
half of  his  new  principal.  While  this  particular  rule  is 
settled  by  a  strong  array  of  authorities,  the  courts  show 
a  plain  determination  not  to  extend  it,  but  to  keep  it 
confined  within  narrow  and  necessary  limits.  The  two 
essential  requisites  of  the  general  rule,  together  with  the 
foregoing  limitation,  are  the  results  or  phases  of  one  legal 
conception.  In  order  that  the  information  obtained  by 
an  agent  may  be  a  constructive  notice  to  his  principal 
in  any  given  transaction,  it  must  be  present  to  the  agent's 


employment  is  short-lived,  so  that  the 
principal  shall  not  be  affected  by 
knowledge  that  came  to  the  agent  be- 
fore his  employment  began,  nor  after 
it  was  terminated.  But  where  the 
agency  is  continuous,  and  concerned 
with  a  business  made  up  of  a  long 
series  of  transactions  of  a  like  nature, 
of  the  same  general  character,  it  will 
be  held  that  knowledge  acquired  as 
agent  in  that  business,  in  any  one  or 
more  of  the  transactions  making  up 
from  time  to  time  the  whole  business 
of  the  principal,  is  notice  to  the  agent 
and  to  the  principal,  which  will  affect 
the  latter  in  any  other  of  those  transac- 
tions in  which  that  agent  is  engaged, 
in  which  that  knowledge  is  material. 
If  the  principal  in  this  case,  the  New 
York  and  Erie  Bank,  had  been  insol- 
vent, say  on  the  first  day  of  January 
in  a  given  year,  and  that  fact  had 
then  been  known  to  its  president, 
Ganson,  and  the  fact  and  knowledge 
of  it  were  material  in  a  transaction  of 
the  bank,  taking  place  through  him 
on  the  first  day  of  the  succeeding 
April,  the  knowledge  acquired  by 
Mm  on  the  first-named  day  was 
knowledge  with  which  the  bank  was 
chargeable  on  the  last-named  day; 
and  so  it  would  have  been  with  knowl- 
edge of  any  fact  not  so  intimately 
connected  with  the  condition  of  the 
bank, —  the  principal, —  but  relating  to 
the  character  and  position  of  dealers 


with  it:  Porter  v.  Bank  of  Rutland, 
19  Vt.  410.  Wo  doubt  not  that  the 
knowledge  of  its  president,  Ganson, 
was  chargeable  to  the  bank,  so  far  as 
that  knowledge  was  material  in  the 
transaction  now  under  consideration. 
It  mattered  not  when,  during  the 
course  of  his  prior  official  management 
of  the  affairs  of  the  bank,  he  acquired 
the  knowledge;  it  was  knowledge  ac- 
quired in  its  business,  and  applicable 
to    any    subsequent     transaction     in 

which    it    was    material In 

Bank  of  United  States  v.  Davis,  2 
Hill,  451,  the  director  of  the  plaintiff 
carried  into  the  meeting  of  the  board 
of  directors  knowledge  which  he  had 
before  acquired  as  an  individual,  yet 
the  bank  was  charged  with  that  knowl- 
edge. So  in  Fulton  Bank  v.  New  York 
and  Sharon  C.  Co.,  4  Paige,  127, 
though  it  was  held  that  the  plaintiff 
was  not  chargeable  with  notice  of  facts 
which  came  to  the  knowledge  of  its 
president  while  not  acting  as  its  agent, 
yet  it  was  also  said  that  if  after- 
wards it  became  his  duty  to  act  upon 
that  knowledge  in  the  business  of  the 
bank,  his  principal  would  be  charge- 
able with  notice  of  the  facts  of  which 
he  had  acquired  the  knowledge  while 
acting  in  another  capacity  than  as 
aqent  of  the  bank."  The  decision  in 
Tagg  V.  Tenn.  Nat.  Bank,  9  Heisk. 
479,  is  to  the  same  effect. 


§  673  EQUITY    JURISPRUDENCE.  938 

mind  and  memory  while  he  is  engaged  in  the  transaction 
which  is  sought  to  be  affected.  This  is  universally  true. 
If  the  agent  acquired  the  information  while  acting  for 
his  principal,  and  ivhile  engaged  in  that  very  same  trans- 
action, then  it  is  conclusively  presumed  that  he  retains 
the  information  present  to  his  mind  and  in  his  memory; 
a  failure  of  memory  on  his  part  cannot  be  shown,  and 
the  principal  is  charged  with  the  constructive  notice.* 
If  the  agent  acquired  the  information  in  a  former  and 
independent  transaction,  then  it  is  prima  facie  presumed 
that  he  does  not  retain  it  present  to  his  mind  and 
memory  while  engaged  in  the  subsequent  transaction  in 
behalf  of  a  principal  whom  it  is  sought  to  charge  with 
notice;  but  this  presumption  may  be  overcome  by  evi- 
dence. If,  therefore,  it  be  clearly  shown  by  the  evidence 
that  the  agent  did  in  fact  retain  the  previously  acquired 
information  present  to  his  mind  and  memory  while 
engaged  in  the  subsequent  transaction  on  behalf  of  his 
principal,  then  all  the  essential  elements  of  the  general 
rule  are  existing,  and  the  principal  is  thereby  charged 
with  constructive  notice.  This  is,  as  it  seems  to  me,  the 
true  rationale  of  the  doctrine  in  all  its  phases  and  appli- 
cations, and  is  fairly  deducible  from  the  decided  cases. 

§  673.  (3)  The  Information  Material,  and  Such  as  the 
Agent  is  Bound  to  Communicate.  —  A  third  requisite  is, 
that  the  information  acquired  by  the  agent  must  be  ma- 
terial to  the  transaction  in  which  the  principal's  rights 
are  to  be  affected  by  a  notice,  and  it  must  be  something 
which  it  is  the  duty  of  the  agent,  by  virtue  of  his  fidu- 
ciary and  representative  relation,  to  communicate  to  his 
principal.'     It  is  not  essential,  however,  that  the  agent 

'  fWatson  V.  Sutro,  86  Cal.  500.]  Cal.  91;   Fry  v.  Shehee,  55  Ga,  208. 

»  Wyllie  V.  Pollen,  3  De  Gex,  J.  &  In  Wyllie  v.  Pollen,  3  De  Gex,  J.  & 
S.  596,  601;  Rolland  v.  Hart,  L.  R.  6  S.  596,  Lord  Westbury  said:  "The 
Ch.  6/8,  681,  682;  The  Distilled  Spir-  agent's  knowledge  must  have  been 
its,  11  Wall,  356,  per  Bradley,  J.;  of  something  material  to  the  par- 
Roach  V.  Karr,  18  Kan.  529;  26  Ain.  ticular  transaction,  and  something 
Rep.  788;  Pringle  v.  Dunn,  37  Wis.  which  it  was  the  agent's  duty  to  com- 
449;  19  Am.  Rep.  772;  Jones  v.  Bam-  municate  to  his  principal;  the  whole 
ford,  21  Iowa,  217;  May  v.  Borel,  12  doctrine  of  constructive  notice  resting 


939 


CONCERNINQ   NOTICE. 


§674 


should  in  fact  have  communicated  the  information  to 
his  principal;  on  the  contrary,  the  general  rule  of  con- 
structive notice  between  agent  and  principal  depends 
upon  a  legal  presumption  —  absolutely  conclusive  except 
in  two  special  instances — that  the  information  received 
by  the  agent  was  communicated  to  his  principal.  The 
powerful  motives  of  policy  inhere  in  this  very  presump- 
tion.* Even  when  an  agent's  failure  to  communicate  is 
fraudulent,  provided  the  fraud  consists  merely  in  such 
concealment  and  failure,  the  conclusive  presumption  still 
arises,  as  will  be  more  fully  shown  in  the  following  para- 
graphs. 

§  674.  Exceptions — Presumption,  when  not  Conclusive. 
—  There  are,  however,  two  special  exceptions  to  the  fore- 
going doctrine,  two  special  conditions  in  which  the  pre- 
sumption may  be  rebutted,  in  which  it  may  be  shown 


on  the  ground  of  the  existence  of  such 
a  duty  on  the  part  of  the  agent."  In 
Holland  v.  Hart,  L.  R.  6  Ch.  678, 
Lord  Hatherley  tersely  sums  up  both 
branches  of  the  doctrine  stated  in  the 
text:  "It  has  been  held  over  and  over 
again  that  notice  to  a  solicitor  of  a 
transaction,  and  about  a  matter  as  to 
which  it  is  part  of  his  duty  to  inform 

himself,  is  notice  to  his  client 

It  cannot  be  left  to  the  possibility  or 
impossibility  of  the  man  who  seeks  to 
affect  you  with  notice  being  able  to 
prove  that  your  solicitor  did  his  duty 
in  communicating  to  you  that  which, 
according  to  the  terms  of  your  em- 
ployment of  him,  was  the  very  thing 
which  you  employed  him  to  ascer- 
tain." The  duty  of  the  agent  to  com- 
municate the  information  to  *  his 
principal  is  a  most  essential  element 
of  the  doctrine.  If  the  information  of 
the  agent  was  acquired  in  a  previous 
employment  as  attorney  for  another 
person,  and  was  private  and  confiden- 
tial in  its  nature,  a  moral  and  legal 
obligation  would  rest  upon  him  not  to 
disclose  it;  he  would  be  under  no  duty 
to  communicate  the  knowledge  to  a 
subsequent  client,  and  consequently 
such  client  could  not  be  charged  with 
constructive  notice.  See  the  remarks 
of  Bradley,  J.,  in  The  Distilled  Spir- 


its, 11  Wall.  356,  quoted  in  the  note 
under  the  last  preceding  paragraph. 

»  Bradley  v.  Riches,  L.  R.  9  Ch. 
Div.  189,  196;  Rolland  v.  Hart,  L.  R. 
6  Ch.  678,  6S1,  682;  Boursot  v.  Sav- 
age,  L.  R.  2  Eq.  134,  142;  Hewitt 
V.  Loosemore,  9  Hare,  449,  455; 
Williamson  v.  Brown,  15  N.  Y.  354; 
Suit  v.  Woodhall,  113  Mass.  391; 
Owens  V.  Roberts,  36  Wis.  'J5S.  In 
the  recent  case  of  Bradley  v.  Riches, 
L.  R.  9  Ch.  Div.  189,  the  rule  is 
stated  in  the  following  clear  and  de- 
cided language:  "The  solicitor  must 
be  assumed  to  have  communicated  the 
facts  [i.  e.,  facts  of  which  he  had  re- 
ceived information"!  to  his  client,  and 
the  knowledge  of  the  agent  is,  to  use 
the  language  of  Lord  Chelmsford  ia 
Espin  V.  Pemberton,  3  De  Gex  &  J. 
547,  the  imputed  knowledge  of  the 
client.  It  appears  to  me  to  be  clear 
that  that  presumption  or  imputation 
is  a  thing  which  the  client  cannot  be 
allowed  to  rebut.  If  it  could  be  re- 
butted, it  was  amply  rebutted  in  Le 
Neve  V.  Le  Neve,  Amb.  436;  2  Lead. 
Cas.  Eq.,  4th  Am.  ed.,  109.  If  it 
could  be  rebutted,  the  language  of 
Lord  Hatherley  in  Rolland  v.  Hart, 
L.  R.  6  Ch.  678,  could  not  be  upheld." 
(See  this  language  quoted  in  last  l}re> 
ceding  note.) 


§  675  EQUITY   JURISPRUDENOB,  940 

that  the  information  was  not  communicated  by  the  agent 
to  his  principal,  and  in  which,  as  a  consequence,  the 
principal  is  not  charged  with  a  constructive  notice. 
Both  of  these  exceptions  rest  upon  a  foundation  of  fraud. 
In  the  first  place,  when  an  attorney  or  agent  acting  for 
both  the  parties  to  a  transaction,  A  and  B,  —  for  both 
the  vendor  and  vendee,  mortgagor  and  mortgagee, —  has 
or  receives  information  of  any  material  fact,  such  as  the 
existence  of  a  document,  and  with  the  consent  of  one  party, 
A,  conceals  his  knowledge  from  the  other  party,  B,  then 
B  will  not  be  charged  with  constructive  notice  of  such 
fact.  The  conduct  of  A  in  consenting  to  the  agent's  con- 
cealment is  clearly  a  fraud  upon  B;  he  is  estopped  from 
afterwards  insisting  that  B  received  notice,  and  thereby 
taking  advantage  of  his  own  wrong.* 

§  675.  Agent's  Fraud.  —  The  second  exception  is  much 
more  important  and  of  far  wider  application.  It  is  now 
settled  by  a  series  of  decisions  possessing  the  highest 
authority,  that  when  an  agent  or  attorney  has,  in  the 
course  of  his  employment,  been  guilty  of  an  actual  fraud 
contrived  and  carried  out  for  his  own  benefit,  by  which 
he  intended  to  defraud  and  did  defraud  his  own  princi- 
pal or  client,  as  well  as  perhaps  the  other  party,  and  the 
very  perpetration  of  such  fraud  involved  the  necessity  of 
his  concealing  the  facts  from  his  own  client,  then,  under 
such  circumstances,  the  principal  is  not  charged  with  con- 
structive notice  of  facts  known  by  the  attorney  and  thus 
fraudulently  concealed.  In  other  words,  if  in  the  course 
of  the  same  transaction  in  which  he  is  employed  the 
agent  commits  an  independent  fraud  for  his  own  benefit, 
and  designedly  against  his  principal,  and  it  is  essential 
to  the  very  existence  or  possibility  of  such  fraud  that  he 
should  conceal  the  real  facts  from  his  principal,  then  the 
ordinary  presumption  of  a  communication  from  the  agent 
to  his  principal    fails;    on  the  contrary,  a    presumption 

'  Sharpe  v.  Fov.  L.  R.  4  Ch.  35,  40,  41;  Hewitt  v.  Looseuiore,  9  Hare,  449. 
455,  per  Turner,  "V.  C. 


941 


OONOERNINa   NOTICE. 


§675 


arises  that  no  communication  was  made,  and  consequently 
the  principal  is  not  aflfected  with  constructive  notice.^ 
The  courts  have  carefully  confined  the  operation  of  this 
exception  to  the  condition  described  where  a  presumption 
necessarily  arises  that  the  agent  did  not  disclose  the  real 
facts  to  his  principal,  because  he  was  committing  such  an 
independent  fraud  that  concealment  was  essential  to  its 
perpetration;   it  has  never  been  extended  beyond  these 


'  Cave  V.  Cave,  L.  R.  15  Ch.  Div, 
639,  643;  In  re  European  Bank,  L.  R. 
5  Ch.  358,  361,  362;  Rolland  v.  Hart, 
L.  R.  6  Ch.  678,  682;  Waldy  v.  Gray, 
L.  R.  20  Eq.  238,  251;  Thompson  v. 
Cartwright,  2  De  Gex,  J.  &  S.  10;  33 
Beav.  178;  Frail  v.  Ellis,  16  Beav.  350; 
Hiorns  V.  Holtom,  16  Beav.  259:Green- 
slade  V.  Dare,  20  Beav,  284,  291; 
Neesom  v.  Clarkson,  2  Hare,  163; 
Hewitt  V.  Loosemore,  9  Hare,  449, 
455;  Ogilvie  v.  Jeaffreson,  2  Giff.  35S; 
Robinson  v.  Briggs,  1  Smale  &  G.  188; 
Spencer  v.  Topham,  2  Jur.,  N.  S.,  865; 
Jones  V.  Smith,  1  Phill.  Ch.  244,  256; 
Kennedy  v.  Green,  3  Mvlne  &  K. 
699;  Fulton  Bank  v.  N.  Y.  &  Sharon 
C.  Co.,  4  Paige,  127;  Barnes  v.  Tren- 
ton  Gas  Co.;  27  N.  J.  Eq.  33;  McCor- 
mick  V.  Wheeler,  36  111.  114;  85  Am. 
Dec.  388;  Winchester  v.  Susquehanna 
R.  R.,  4  Md.  231;  Hope  Fire  Ins. 
Co.  V.  Cambreling,  1  Hun,  493;  [Allen 
V.  South  Boston  R.  R.  Co.,  150  Mass. 
209;  15  Am.  St.  Rep.  185.]  In  several  of 
these  cases  the  attorney  was  employed 
for  both  parties  to  the  transaction,  but 
this  fact  does  not  seem  to  be  essential. 
Kennedy  v.  Green,  3  Mylne  &  K.  699, 
is  the  leading  case  in  which  this  doc- 
trine was  first  regularly  formulated, 
by  Lord  Brougham.  In  Rolland  v. 
Hart,  L.  R.  6  Ch.  678,  Lord  Hath- 
erley  said:  "It  must  be  made  out 
that  distinct  fraud  was  intended  in 
the  very  transaction,  so  as  to  make  it 
necessary  for  the  solicitor  to  conceal 
the  facts  from  his  client,  in  order  to 
defraud  him."  In  the  very  recent  case 
of  Cave  v.  Cave,  L.  R.  15  Ch.  Div. 
639,  the  court,  having  all  the  decis- 
ions before  it,  thus  snms  np  the  doc- 
trine: "There  is  undoubtedly  an 
exception  to  the  construction  or  im- 
putation of  notice  from  the  agent  to 
the  principal,  that  exception  arising 
in  the  case  of  such  conduct   by  the 


agent  as  raises  a  conclusive  presump- 
tion that  he  would  not  communicata 
the  fact  in  controversy.  This  excep- 
tion has  been  put  in  two  M'ays.  la 
the  very  well  known  case  of  Rolland 
V.  Hart,  L.  R.  6  Ch.  678.  Lord  Hath- 
erley  put  it  substantially  this  way: 
that  you  must  look  at  the  circum- 
stances of  the  case,  and  inquire 
whether  the  court  can  see  that  tho 
solicitor  intended  a  fraud,  which 
would  require  the  suppres^sion  of  the 
knowledge  of  the  encumbrance  from 
the  person  upon  whom  he  was  com- 
mitting the  fraud.  In  Tliompsou  v. 
Cartwright,  33  Beav.  178,  the  late  mas- 
ter of  rolls  put  it  rather  differently, 
and  it  would  appear  that,  in  his  view, 
you  must  inquire  whether  there  are 
such  circumstances"  in  the  case,  inde- 
pendently of  the  fact  under  inquiry, 
as  to  raise  an  inevitable  conclusion 
that  the  notice  had  not  been  commu- 
nicated. In  the  one  view  notice  is 
not  imputed,  because  the  circum- 
stances are  such  as  not  to  raise  the 
conclusion  of  law,  which  does  ordi- 
narily arise  from  the  mere  existence  of 
notice  to  the  agent;  in  the  other  view 
—  that  of  Lord  Hatherley  —  the  act 
done  by  the  agent  is  such  as  cannot  be 
said  to  be  done  by  him  in  his  character 
of  agent,  but  is  done  by  him  in  the  char- 
acter of  a  party  to  an  independent 
fraud  on  his  principal,  and  that  is  not 
to  be  imputed  to  the  principal  as  an  act 
done  by  his  agent." 

Whether  this  exception  can  apply  to 
directors,  presidents,  and  other  such 
managing  officers  of  a  corporation, 
through  whom  alone  the  corporation 
can  act,  may,  I  think,  be  doubted: 
See  Holden  v.  N.  Y.  &  Erie  Bank,  72 
N.  Y.  286,  and  First  Nat.  Bank  etc. 
v.  Town  of  New  Milford,  36  Conn.  93; 
but  see  Barnes  v.  Trenton  Gas  Co..  27 
N.  J.  Eq.  33. 


675 


EQUITY   JURISPRUDENCE. 


942 


circumstances.  It  follows,  therefore,  that  every  fraud  of 
an  agent  in  the  course  of  his  employment,  and  in  the 
very  same  transaction,  does  not  fall  within  this  exception; 
and,  most  emphatically,  it  does  not  apply  when  the  agent's 
fraud  consists  merely  in  his  concealment  of  material  facts 
within  his  own  knowledge  from  his  principal.^ 


*  It  is  sometimes  very  difficult  to 
determine  whether  a  case  does  or  does 
not  fall  under  this  exception.  Many 
of  the  decisions  confessedly  rest  upon 
very  narrow  distinctions:  RoUand  v. 
Hart,  L.  R.  6  Ch.  (578,  682;  Boursotv. 
Savage,  L.  R.  2  Eq.  134,  142;  Atter- 
bury  V.  Wallis,  8  De  Gex,  M.  &  G. 
454,  466;  Davis  v.  Bank  of  United 
States,  2  Hill,  451;  Holden  v.  New 
York  and  Erie  Bank,  72  N.  Y.  286; 
Bank  of  New  Milford  v.  Town  of  New 
Milford,  36  Conn.  93;  Tagg  v.  Tenn. 
Nat.  Bank,  9  Heisk.  479.  In  Bour- 
sot  v.  Savage.  L.  R.  2  Eq.  134, 
the  attorney  committed  a  fraudulent 
breach  of  a  trust  existing  in  reference 
to  the  property  which  was  the  subject 
of  negotiation.  Kiudersley,  V.  C,  said 
(p.  142):  "It  is  insisted  that  the 
doctrine  of  constructive  notice  cannot 
apply,  because  the  agent.  Holmes,  was 
committing  a  fraud,  and  the  client 
is  not  to  be  affected  with  constructive 
notice  of  a  fraud  committed  by  his 
solicitor.  But  if  the  client  would  be 
affected  with  constructive  notice  of  a 
trust,  the  existence  of  which  is  known 
to  his  solicitor,  in  the  case  where 
there  is  fraud,  the  fact  that  the  solici- 
tor is  committing  a  fraud  in  relation 
to  that  trust  cannot  afford  any  rea- 
son why  the  client  should  not  be  af- 
fected with  constructive  notice  of  the 
existence  of  the  trust.  It  is  the  ex- 
istence of  the  trust,  and  not  the  fraud, 
of  which  he  is  held  to  have  construct- 
ive notice;  and  the  constructive  no- 
tice of  the  existence  of  the  trust  must 
be  imputed  to  him,  whether  there  is 
a  fraud  relating  to  it  or  not."  In  Rol- 
land  V.  Hart,  L.  R.  6  Ch.  678.  Lord 
Hatherley,  in  meeting  the  defense 
based  upon  the  case  of  Kennedy  v. 
Oreen,  3  Mylne  &  K.  699,  said  (p. 
682):  "I  think  with  Turner,  L.  J., 
that  the  question  how  far  you  are 
justified  in  assuming  that  the  agent 
does  not  communicate  to  his  client  in- 
formation which  he  has  received,  and 
ought  to  have  communicated,  may  be 


affected  by  very  delicate  shades  of 
difference.  It  might  be  said  that  the 
very  fact  of  the  solicitor  not  having 
communicated  an  important  circum- 
stance is  of  itself  evidence  of  the 
fraud.  But  Turner,  L.  J.,  in  the  case 
of  Atterbury  v.  Wallis,  8  De  Gex,  M. 
&  G.  454,  exactly  meets  that  diffi- 
culty, and  says  that  such  a  rule  cannot 
prevail Robinson  [the  attor- 
ney] was  not  raising  money  for  him- 
self, but  for  Hall;  and  though  he  griev- 
ously neglected  his  duty,  he  does  not 
appear  to  have  been  concerned  in  any 
fraud  which  tootild  render  concealment 
necesscn-y,  so  as  to  bring  the  case  within 
Kennedy  v.  Green,  3  Mylne  &  K.  699." 
In  the  well-considered  case  of  Atter- 
bury  V.  Wallis,  8  De  Gex,  M.  &  G.  454, 
Turner,  L.  J.,  said  (p.  466):  "The  case 
of  Kennedy  v.  Green,  3  Mylne  &  K. 
699,  was  much  relied  upon  by  the  de- 
fendant; but  I  thought,  in  Hewitt  v. 
Loosemore,  9  Hare,  449,  and  I  continue 
to  think,  that  that  case  does  not  gov- 
ern cases  like  the  present.  In  that  case 
there  was  fraud,  independently  of  the 
question  whether  the  act  which  had 
been  done  was  made  known  or  not.  In 
such  cases  as  the  present  the  question 
of  fraud  wholly  depends  upon  whether 
the  act  which  has  been  done  has  been 
made  known  or  not."  The  decision  in 
Holden  v..  New  York  and  Erie  Bank, 
72  N.  Y.  286,  was  the  same,  in  principle, 
as  Boursot  v.  Savage,  L.  R.  2  Eq.  134. 
The  same  person  was  trustee  under  a 
will  for  certain  minors,  and  president 
and  chief  managing  officer  of  the  bank. 
He  had  seventeen  thousand  dollars  of 
trust  money  in  his  hands,  which  were 
deposited  in  the  bank  to  his  credit  as 
such  trustee.  He  was  at  the  same 
time  personally  indebted  to  the  bank 
to  a  very  large  amount,  and  his  private 
account  was  heavily  overdrawn.  The 
bank  was  utterly  insolvent,  and  this 
fact  was  known  to  him,  although  not 
yet  published  to  the  world.  In  this 
condition  he  committed  a  fraudulent 
breach  of  his  trust  by  transferring  the 


943  CONCERNING    NOTICE.  §  676 

§  676.  True  Rationale  of  the  Rule  —  Based  Wholly  upon 
Policy  and  Expediency,  —  The  rule  of  constructive  notice 
through  agent  to  principal,  like  the  doctrine  of  construct- 
ive notice  in  general,  must  find  its  ultimate  foundation 
and  only  support  in  motives  of  policy  and  expediency. 
It  will  not  aid  us  in  the  least  to  inquire  whether  it  should 
be  derived  from  the  notion  that  the  agent  is  identical 
with  his  principal,  —  is  the  principal's  aZ^er  e^o,  —  or  from 
the  notion  that  the  principal  cannot  be  allowed  to  acquire 
and  retain  a  benefit  through  means  of  an  act  or  proceed- 
ing which  his  agent  knew  to  be  wrong.  The  true  rationale 
is,  as  I  have  already  shown,  that  the  agent's  knowledge  of 
material  facts,  —  not  necessarily  of  the  ultimate  facts,  —  or 
what  the  law  assumes  to  be  his  knowledge,  must  always, 
from  considerations  of  expediency,  be  regarded  and  treated 
as  the  principal's  knowledge;  otherwise  the  business  af- 
fairs of  society  could  not  be  safely  transacted.  Whenever 
the  knowledge  of  the  agent  is  actual,  —  that  is,  whenever 
he  has  obtained  actual  information  of  certain  facts,  and  has 
therefore. received  actual  notice,  —  this  imputation  of  his 
knowledge  to  the  principal  is  evident  and  reasonable. 
Whenever  the  agent's  knowledge  of  certain  facts  exists 
only  in  contemplation  of  law,  —  that  is,  when  he  has  re- 
ceived a  constructive  notice,  —  the  imputation  thereof  to 
the  principal  is  no  less  reasonable  and  clear.     If,  under 

•aid  trust  moneys  to  the  bank  in  part  an  attorney  is  not  notice  to  his  client, 

payment  of  his  private  indebtedness,  when  the  attorney  himself  is  the  bor- 

Tliis  was  done  in  reality  for  the  bene-  rower.    This  would  seem  to  fall  under 

fit  of   the   bank,   and  the   fraud  was  the  same  reason,  viz.,  that  it  is  pre- 

against  the  beneficiaries  entitled  under  sumed  the  information  would  not  be 

the  trust.     The  court  of  appeals  held  communicated:    See   Hope   Fire   Ins. 

that  the  bank  had  constructive  notice  Co.  v.  Cambreling,  1  Hun,  493;  Win- 

of  all  these  facts  which  were  known  cheater  v.  Susquehanna  R.  R.,  4  Md. 

to  its  president,  viz.,  that  the  money  231;    McCormick  v.  Wheeler,  36  111. 

transferred  was  subject  to  the  trust,  114;  85  Am.  Dec.  388.     [And  for  the 

and  that  the  transfer  was  a  fraud  upon  same  reason,  when  the  agent  is  acting 

the  cestuis  que  trustent,  and  a  violation  in   his  own   interest,  and  against  the 

of  the  trustees'  fiduciary  duties.     The  interest  of  the  principal,  as  where  an 

case,  therefore,  came  under  the  general  officer  or  agent  of  a  private  corporation 

rule,    and   not   under   the   exception,  sells  and  conveys  land  to  it,  his  knowl- 

First  Nat.  Bank  of  Milford  v.  Town  of  edge   of   an   outstanding   equity  does 

Milford,  36  Conn.  93,  is  similar  in  its  es-  not  charge  the  corporation  with  no- 

Bential  features.    It  has  also  been  said  tice:  Frenkel  v.  Hadson,  82  Ala.  158: 

that  information  given  to  or  known  by  60  Am.  Pvcp.  736.] 


§  676  EQUITY    JURISPRUDENCE.  944 

any  circumstances,  a  party,  while  dealing  for  himself, 
must  be  treated,  in  contemplation  of  law,  as  one  who  has 
acquired  certain  information,  and  must  be  charged  with 
constructive  notice  thereby,  the  same  result  must  follow 
when,  under  like  circumstances,  the  party  is  dealing  by 
means  of  an  agent.  If  that  assumed  information  called 
constructive  notice  should  affect  a  party  acting  for  him- 
self, it  should  equally  affect  him  acting  through  an  attor- 
ney. As  the  doctrine  is  thus  based  entirely  on  motives 
of  policy,  it  should  never  in  its  application  transcend  the 
scope  and  limits  of  those  motives.  Whenever  its  opera- 
tion in  a  given  state  of  facts  would  produce  manifest  in- 
justice, the  courts  should,  if  not  absolutely  compelled  by 
express  authority,  withhold  such  operation.  A  tendency 
to  restrict  the  doctrine  —  to  confine  it  within  the  limits 
already  established  —  is  clearly  exhibited  by  many  of  the 
recent  decisions.  Some  of  the  ablest  judges  now  on  the 
English  bench  have  even  expressed  a  strong  dissent  from 
the  doctrine  itself,  in  some  of  its  phases  and  applications, 
especially  where  a  principal  is  charged  with  notice  of  in- 
formation acquired  by  his  agent  in  a  former  transaction, 
and  which  such  agent  is  assumed  to  have  remembered. 
The  English  cases  in  which  this  branch  of  the  rule  com- 
monly arises  are  more  frequent,  involve  a  different  con- 
dition of  circumstances,  and  are  consequently  much  more 
harsh  in  their  effects,  than  the  analogous  class  of  cases 
which  come  before  the  American  courts. 


945 


CONCERNING   PRIORITIES, 


§G77 


SECTION  VI. 

CONCERNING  PRIORITIES. 

ANALYSIS. 
8  677.     Questions  stated. 
§§  678-692.     First.     The  fundamental  principles. 
§§  679-681.     I.  Estates  and  interests  to  which  the  doctrine  appliea. 

§  682.     II.  Equitable  doctrine  of  priority,  in  general. 
§§  683-092.     III.  Superior  and  equal  equities. 

§  683.     TVhen  equities  are  equal. 
§§  684-692.     Superior  equities  defined  and  described. 

§  685.     I.  From  their  intrinsic  nature. 
§§  686,  687.     2.  From  the  effects  of  fraud  and  negligence. 
§§  688-692.     3.  From  the  effects  of  notice. 
§  688.     General  rules  and  illustrationa. 
§  689.     Notice  of  a  prior  covenant. 
§§  690-G92.     Time  of  giving  notice,  and  of  what  it  consists. 
§§  693-734.     Second.     Applications  of  these  principles. 
§§  693-715.     Assignments  of  things  in  action. 

§  693.     Dearie  v.  Hall. 
§§  694-696.     I.  Notice  by  the  assignee. 

§  694.     Notice  to  debtor  not  necessary  as  between  assignor  and  assignee. 
§§  695-697.     English  rule,  notice  to  debtor  necessary  to  determine  the  priority 

among  successive  assignees. 
§§  698-702.     II.  Diligence  of  the  assignee. 

§  698.     General  rules:  Judson  v.  Corcoran. 
§§  699-701.     Assignment  of  stock  as  between  assignee  and  assignor  and  the 
company,  judgment  creditors  of  assignor,  and  subsequent  pur- 
chasers. 
§  702.     Notice  to  the  debtor  necessary  to  prevent  his  subsequent  acta. 
§§  703-715.     III.  Assignments  of  things  in  action  subject  to  equities. 
§§  704-706.     1.  Equities  in  favor  of  the  debtor. 

§  704.     General  rule:  assignments  of  mortgages;  kinds  of  defenses. 
§§  705,  706.     Provisions  in  codes  of  procedure. 
§§  707-713.     2.   Equities  between  successive  assignors  and  assignees. 

§  707.     Conflicting  decisions;  mode  of  reconciling. 
§§708,709.     General  rule:  assignment  subject  to  latent  equities;  illustrations. 
§§  710,  711.     When  the  rule  does  not  apply;  effect  of  estoppel;  true  limits  of 
the  estoppel  as  applied  to  such  assignments. 
§  712.     Subsequent  assignee  obtaining  the  leged  title  protected  as  a  hona 

fide  purchaser. 
§  713.     Successive  assignments  by  same  assignor  to  different  assignees. 
5§  714,  715.     3.  Equities  in  favor  of  third  persons. 

§  714.     General  rule:  assignments  subject  to  such  equities. 
§  715.     Contrary  rule:  assignments  free  from  all  latent  equities. 
|§  716-732.     Equitable  estates,  mortgages,  liens,  and  other  interests. 
2  Eq.  Jur.— 60 


§  677  EQUITY    JURISPRUDENCE.  946 

§  717.  Doctrine  of  priorities  modified  by  recording  acts. 

§§718,719.  I.  Priority  of  time  among  equal  equities. 

§  719.  IllustratioDs:  simultaneous  mortgages,  substituted  liens,  eto. 

S$  720-726.  II.    One  equity  intrinsically  the  superior. 

§  720.  Prior  general  and  subsequent  specific  lien. 

SS  721,  722.  Prior  unrecorded  mortgage  and  subsequent  docketed  judgment. 

§  723.  Same,  where  judgment  creditor  had  notice. 

§  724.  Prior  unrecorded  mortgage  and  purchase  at  execution  sale  under 
a  subsequent  judgment. 

I  725.  Purchase-money  mortgages. 

§  726.  Other  illustrations. 

§$  727-729.  in.   A  subsequent  equity  protected  by  obtaining  the  legal  title. 

§  728.  Legal  estate  obtained  from  a  trustee. 

§  729.  Legal  estate  obtained  after  notice  of  prior  equity. 

§  730.  rV.   Notice  of  existing  equities. 

§8  731,  732.  V.   Effect  of  fraud  or  negligence  upon  priorities. 

§§  733,  734.  Assignments  of  mortgages,  rights  of  priority  depending  upon 
them. 

§  677.  Questions  Stated — Divisions.  —  Having  thus 
ascertained,  in  the  preceding  section,  what  notice  is,  we 
are  naturally  led  to  inquire,  in  the  next  place,  what  are 
its  effects?  In  discussing  the  affirmative  aspect  of  this 
question,  —  what  effects  are  produced  by  the  presence  of 
notice?  —  it  is  almost  impossible  to  avoid  considering  also 
the  negative  aspect, — what  effects  are  produced  by  the 
absence  of  notice  ?  In  other  words,  a  full  treatment  of  the 
question.  What  are  the  effects  of  notice  ?  involves  the  en- 
tire subject  of  priorities,  including  the  particular  doctrine 
of  purchase  in  good  faith  for  a  valuable  consideration 
and  without  notice.  The  present  section  will  therefore  be 
devoted  to  a  discussion  of  the  rules  concerning  priorities, 
both  as  they  are  the  immediate  effects  of  notice,  and  as 
they  exist  in  the  absence  of  notice.  Since  the  doctrine 
of  bona  fide  purchase  for  a  valuable  consideration  and 
without  notice  is  so  important,  and  gives  rise  to  so  many 
particular  rules,  its  full  treatment  is  reserved  for  the  next 
succeeding  section.  The  whole  subject  of  priorities  in  all 
its  phases  is  the  development  of  two  simple  and  funda- 
mental equitable  principles.  I  have  thought  it  expedient, 
therefore,  to  present  the  doctrine,  in  the  present  section, 
in  its  entirety,  in  all  its  applications  to  various  depart- 


547  CONCERNING    PRIORITIES.  §  678 

ments  of  the  equity  jurisprudence,  and  not  to  treat  it  in 
a  partial  and  broken  manner,  under  the  separate  heads 
of  assignments,  estates,  mortgages,  liens,  and  the  like. 
The  doctrine  itself  is  one  of  great  practical  importance, 
and  is  distinctively  equitable;  it  has  no  connection  with 
or  existence  in  the  common  law,  except  as  certain  classes 
of  statutes  have  partially  introduced  it  into  that  legal 
system.  The  subject  will  be  considered  in  the  following 
order:  1.  A  statement  and  exposition  of  the  general  prin- 
ciples upon  which  the  doctrine  of  priorities  rests,  and 
from  which  it  has  been  developed;  2.  The  application  of 
these  principles  to  the  important  classes  of  cases  which 
are  governed  by  the  doctrine,  namely,  assignments  of 
things  in  action,  equitable  estates,  mortgages,  equitable 
liens,  charges  and  encumbrances,  and  "equities";  and 
3.  Purchase  in  good  faith  for  a  valuable  consideration 
and  without  notice. 

§  678.  First.  The  Fundamental  Principles  —  Equitable 
Maxims.  —  As  was  stated  in  a  former  chapter,  the  doc- 
trine of  priorities  in  equity  is  entirely  a  development  of 
two  maxims:  Where  there  are  equal  equities,  the  first 
in  order  of  time  shall  prevail,  and  Where  there  is  equal 
equity,  the  law  must  prevail.'  It  was  there  shown,  in 
the  language  of  an  eminent  judge,  that  the  first  of  these 
maxims  means:  "As  between  persons  having  only  equi- 
table interests,  if  their  interests  are  in  all  other  respects 
equal,  priority  in  time  gives  the  better  equity,  or  qui  prior 
est  tempore,  potior  est  jure."^  The  meaning  of  the  second 
maxim  is:  "If  two  persons  have  equal  equitable  claims 
upon  or  interests  in  the  same  subject-matter,  or  in 
other  words,  if  each  is  equally  entitled  to  the  protection 
and  aid  of  a  court  of  equity,  with  respect  of  his  equitable 
interest,  and  one  of  them,  in  addition  to  his  equity,  also 
obtains  the  legal  estate  in  the  subject-matter,  then  he 
who  thus  has  the  legal  estate  will  prevail.     This  prece- 

^  Ante,  ?§  413-417.  73;  seethe  paragraph  referred  to  for 

*  Ante,  §  414;  Rice  v.  Rice,  2  Drew,     the  eutire  quotation. 


§  679  EQUITY    JURISPRUDENCE.  948 

dence  of  the  legal  estate  might  be  worked  out  by  the 
court  of  equity  simply  refusing  to  interfere  at  all,  and 
thereby  leaving  the  parties  to  conduct  their  controversy 
in  a  court  of  law,  or  in  a  purely  legal  action,  where,  of 
course,  the  legal  estate  alone  would  be  recognized."  *  It 
follows  from  these  definitions  that  the  entire  discussion 
upon  which  we  are  entering  involves  the  three  following 
inquiries:  1.  To  what  estates  and  interests  does  the  equi- 
table doctrine  of  priorities  not  apply,  so  that  they  are  left 
completely  controlled  by  the  order  of  time  ?  2.  Under 
what  circumstances  are  equities  "  equal,"  so  that  they  are 
left  controlled  by  the  order  of  time  ?  and  under  what  cir- 
cumstances is  one  of  two  or  more  equities  superior  to  the 
others,  so  that  the  order  of  time  may  be  broken  in  upon, 
and  the  equitable  doctrine  of  priorities  may  control  ?  3. 
Under  what  circumstances,  two  or  more  equities  being 
otherwise  "  equal,"  can  the  holder  of  one  of  them  obtain, 
and  does  he  obtain,  the  legal  title,  so  that  the  order  of 
time  may  be  disregarded,  and  the  equitable  doctrine  of 
priorities  may  prevail?  The  full  answers  to  these  three 
questions,  in  their  combination  and  mutual  effects,  plainly 
constitute  the  entire  discussion  of  the  subject. 

§  679.  I.  Estates  and  Interests  to  Which  the  Equita- 
ble Doctrine  Applies.  1.  Not  to  Legal  Estates.  —  Among 
purely  legal  titles  to  the  same  subject-matter,  successive 
legal  conveyances  of  and  legal  estates  in  the  same  tract 
of  land,  the  equitable  doctrine  of  priorities  growing  out 
of  the  presence  or  absence  of  notice,  or  of  a  valuable 
consideration,  or  of  any  other  incident,  has  absolutely 
no  application  nor  effect;  such  legal  titles,  estates,  and  in- 
terests are,  in  the  absence  of  any  statutory  modification, 
completely  controlled,  with  respect  to  their  priority,  by 
the  order  of  time.'     Even  the  mere  want  of  a  valuable 

>  Ante,  §  417;  Thorndike  v.  Hunt,  3  »  Gaines  v.    New  Orleans,  6  Wall. 

DeGex  &  J.  563,  570,  571;  Caldwell  642,  716,  per  Davis,  J.;  Ruckman  v. 

V.  Ball,  1  Term  Rep.  205,  214;  Fitz-  Decker,  23  N.  J.  Eq.   283;  Van  Am- 

eimmons  v.  Ogden,  7  Cranch,   2,    18;  ringe  v.    Morton,   4    Whart.    382;   34 

Newton  v.  McLean,  41  Barb.  285.  Am.   Dec.  517;  Wade  v.  Withington, 


949 


CONCERNING    PRIORITIES. 


680 


consideration  in  the  earlier  conveyance  would  not,  at  the 
common  law,  affect  the  priority  of  legal  right  given  by 
the  priority  of  time.^ 

§  680.  Modifications  by  Statutes  concerning  Fraudu- 
lent Conveyances  and  Recording*.  —  This  rule,  otherwise 
universal,  that  among  successive  legal  estates  or  interests 
in  the  same  subject-matter  the  order  of  time  controls,  has 
been  broken  in  upon  by  two  classes  of  statutes,  which  are, 
within  the  scope  of  their  operation,  very  important.     The 


1  Allen,  561;  Waring  T.  Smyth,  2 
Barb.  Ch.  119,  133;  47  Am.  Dec.  299; 
Arrison  v.  Harmstead,  2  Pa.  St.  191, 
197;  Jones  v.  Jones,  8  Sim.  6.33.  The 
truth  of  this  proposition  is  clearly 
seen  from  a  consideration  of  the  legal 
conception  of  estates  at  law  and  of 
conveyances  and  charges  operating  at 
law;  and  it  will  plainly  appear  that 
between  two  claimants  of  legal  estates 
in  the  same  land,  the  second  one  in 
order  of  time  cannot,  in  the  absence  of 
the  statutes  concerning  registration, 
avail  himself  even  of  the  position  of 
bona  fide  purchaser  for  a  valuable  con- 
sideration and  without  notice.  If  A, 
being  owner  of  a  piece  of  land  in  fee, 
conveys  it  in  fee  to  B,  and  afterwards 
executes  a  deed  in  fee  of  the  same  land 
to  C,  at  law  C  can  acquire  nothing. 
In  contemplation  of  law,  the  entire 
estate  passed  by  the  deed  to  B,  and 
there  was  no  interest  left  which  could 
be  transferred  to  C,  and  it  could  make 
no  possible  difference  with  this  result 
whether  C  was  wholly  ignorant  of  the 
prior  conveyance  or  was  informed  of 
it.  Again,  if  A  has  no  estate  at  all, 
or  only  a  defective  one,  he  cannot  by 
a  deed  convey  any  more  or  better 
estate  than  he  holds  himself  to  B,  and 
it  can  make  no  difference  whether  the 
defect  is  open  or  hidden,  or  whether  B 
buys  with  knowledge  or  in  ignorance 
of  it:  Arrison  v.  Harmstead,  2  Pa.  St. 
191;  Ruckman  v.  Decker,  23  N. 
J.  Eq.  283.  These  propositions  are 
constantly  illustrated  in  ejectment 
suits,  where  the  parties  are  claiming 
under  conflicting  legal  titles,  and  both 
of  them  are  purchasers  for  value  and 
without  notice.  In  Arrison  v.  Harm- 
stead,  2  Pa.  St.  191,  Rogers,  J.,  said: 
"Where  the  vendor  has  nothing  to 
convey,  nothing   can  be  acquired   by 


the  vendee.  One  who  bought  from 
the  grantee  in  a  voidable  deed  might 
be  in  a  better  position  than  a  vendor. 
But  the  principle  did  not  apply  to  a 
sale  by  a  vendor  who  had  no  title,  or, 
what  came  to  the  same  thing,  who  had 
avoided  the  title  by  his  own  wrong. 
A  deed  acquired  surreptitiously  with- 
out delivery,  or  altered  after  delivery, 
was  invalid  even  in  the  hands  of  a 
bona  fide  purchaser."  Again,  in  an 
action  of  ejectment  between  one  who 
claims  under  deed  or  other  paper 
title,  and  one  who  claims  by  adverse 
possession,  the  latter's  notice  of  the 
outstanding  paper  title  would  not 
affect  his  right  injuriously;  the  titles 
being  legal,  the  controversy  would  be 
decided  upon  the  completeness  of  the 
adverse  possession,  or  the  validity  of 
the  paper  title. 

'  If  A,  owning  the  land,  should  con- 
vey it  as  a  mere  gift  to  B,  by  means 
of  a  conveyance  sufficient  in  kind  and 
form  to  transfer  the  legal  estate,  and 
80  that  no  trust  should  result  to  him- 
self, aud  should  afterwards  execute  a 
deed  in  fee  of  the  same  land  to  C, 
who  should  pay  a  valuable  considera- 
tion therefor,  C  would  obtain  no  in- 
terest whatever  at  the  common  law. 
The  prior  conveyance  to  B  would  ex- 
haust and  transfer  the  entire  fee,  as 
fully  as  though  a  money  price  had 
been  paid,  and  no  interest  would  be 
left  upon  which  C's  deed  could  oper- 
ate. The  fact  that  C  paid  value,  and 
was  ignorant  of  the  former  convey- 
ance, could  not  destroy  the  legal  effect 
of  the  prior  deed,  and  create  an  estate 
which  would  pass  to  C  by  his  convey- 
ance. It  is  entirely  the  result  of  stat- 
ute that  C's  conveyance  may  under 
such  circumstances  obtain  the  prece- 
dence at  law. 


§  681  EQUITY    JURISPRUDENCE.  950 

first  of  these  classes  includes  that  of  27  Eliz.,  c.  4,  by  which 
grants  of  lands  made  for  the  purpose  of  defrauding  sub- 
sequent purchasers  are  declared  to  be  void  as  against  such 
subsequent  purchasers  for  a  valuable  consideration,  and 
their  representatives;  and  the  statute  of  13  Eliz.,  c.  5,  by 
which  conveyances  of  lands  or  chattels  made  for  the  pur- 
pose of  delaying  or  defrauding  creditors  are  declared  to 
be  void  as  against  such  creditors  and  their  representa- 
tives; provided  that  the  act  shall  not  extend  to  any  convey- 
ance made  in  good  faith  and  for  a  valuable  consideration 
to  a  person  not  having  notice  of  the  fraud.'  The  second 
class  embraces  the  recording  acts  of  the  various  states, 
by  which  it  is  generally  provided  that  every  conveyance 
of  land  which  is  not  recorded  shall  be  deemed  void  as 
against  a  subsequent  conveyance  of  the  same  land,  made 
for  a  valuable  consideration,  which  shall  have  been  first 
put  on  record;^  and  also  the  similar  statutes  which  post- 
pone the  lien  of  a  prior  undocketed  judgment  to  that  of  a 
subsequent  one  which  has  been  duly  docketed, 

§  681.  2.  To  Equitable  Estates  and  Interests  Alone.  — 
The  equitable  doctrine  concerning  priorities  resulting 
from  the  presence  or  absence  of  notice,  or  of  a  valuable 
consideration  or  other  incident,  by  which  a  precedence 
may  be  given  contrary  to  the  mere  order  of  time,  applies 
to  conflicting  legal  and  equitable  estates  or  interests  in 

'  Similar  statutes  have  been  enacted  upon  the  fact  of  recording  or  not  re- 
in the  American  states.  For  the  force  cording,  upon  the  record  as  notice, 
and  effect  of  these  statutes,  both  Eng-  and  upon  the  effect  of  an  actual  or 
lish  and  American,  see  Twyne's  Case,  constructive  notice  of  a  prior  uure- 
3  Coke,  80;  1  Smith's  Lead.  Cas.,  7th  corded  deed  given  to  a  subsequent 
Am.  ed.,  33;  Sexton  v.  Wheaton,  8  grantee — belong  to  the  law,  and  do  not 
Wheat.  229;  1  Am.  Lead.  Cas.,  4th  constitute  any  part  of  equity  jurispru- 
Am.  ed.,  17;  Doe  v.  Manning,  9  East,  dence.  Tlie  estates  are  legal;  the 
19-  Pulvertoft  v.  Pulvertoft,  18  Ves.  conflicting  titles  based  upon  recorded 
84.  To  these  may  be  added  the  bank-  and  unrecorded  deeds,  or  involving  the 
ruptcy  and  insolvency  acts  in  some  of  presence  of  notice  in  place  of  a  record, 
the  states,  which  declare  certain  con-  are  constantly  settled  by  means  of  the 
veyances  and  transfers  of  the  bankrupt  legal  action  of  ejectment.  The  effect 
or  insolvent  to  be  void  as  against  his  of  the  recording  acts  upon  mortgages, 
assignee.  on  the  other  hand,  belongs  to  equity 

*  See   ante,  §  646,  and  note.     It  is  jurisprudence,  since,  in  any  theory  of 

evident  that  all  questions  concerning  the  mortgage,  it  creates  an  equitable 

legal   conveyances   arising   under  the  estate  or  interest, 
recording  icts  —  questions  depending 


951  CONCERNING    PRIORITIES.  §  682 

the  same  subject-matter,  and  to  successive  equitable  estates, 
equitable  interests  such  as  liens  and  charges,  and  mere 
"  equities,"  meaning  thereby  purely  remedial  rights,  such 
as  that  of  cancellation,  reformation,  and  the  like;  and  it 
applies  to  no  other  kind  of  estates,  interests,  or  rights.' 

§  682.  II.  Equitable  Doctrine  of  Priority.  —  Having 
thus  stated  the  kind  of  interests  to  which  alone  the  equi- 
table doctrine  applies,  we  shall  next  consider  the  nature, 
scope,  and  operation  of  the  doctrine  itself.  In  all  of  its 
phases,  in  all  the  instances  where  it  may  be  invoked,  the 
equitable  doctrine  concerning  priorities  is  embodied  in 
three  most  general  and  fundamental  rules:  1.  Among 
successive  equitable  estates  or  interests,  where  there  exists 
no  special  claim,  advantage,  or  superiority  in  any  one 
over  the  others,  the  order  of  time  controls.  Under  these 
circumstances,  the  maxim,  Among  equal  equities  the 
first  in  order  of  time  prevails,  furnishes  the  rule  of 
decision.'  2.  Between  a  legal  and  equitable  title  to  the 
same  subject-matter,  the  legal  title  in  general  prevails, 
in  pursuance  of  the  maxim,  Where  there  is  equal  equity 
the  law  must  prevail.'  3.  The  legal  title  being  out- 
standing, and  not  involved  in  the  controversy,  where 
there  are  successive  unequal  equities  in  the  same  subject- 
matter,  as  where  there  is  a  complete  or  perfect  equitable 
estate  and  an  incomplete  or  imperfect  one,  or  a  mere 
"  equity,"  or  where,  among  equitable  interests  of  alike  in- 
trinsic nature,  one  is  affected  by  some  incident  or  quality 

*  Basset    v.     Nosworthy,     Caa.     t.  Watson  v.  Le  Row,  6  Barb.  481,  485; 

Finch,  102;   2  Lead.  Cas.  Eq.   1,  31,  Berry  v.  Mutual  Ins.  Co.,  2  Johns.  Cb. 

46;  Le  Neve  v.  Le  Neve,  Amb.  436;  603,  608;  Lynch  v.  Utica  Ins.  Co.,  18. 

2  Lead.  Cas.  Eq.  109,  117;  Rice  v.  Wend.  236,  25.3;  Grosvenor  v.  Allen, 
Rice,  2  Drew,  73;  Thorndike  v.  Hunt,  9   Paige,    74,    76;    Downer   v.    Bank, 

3  De  Gex  &  J.  563;  Cory  v.  Eyre,  1  39  Vt.  25;  Bellas  v.  McCarty,  10' 
De  Gex,  J.  &  S.  149,  167;  Newton  v.  Watts,  13;  Kramer  v.  Arthurs,  T 
Newton,  L.  R.  6  Eq.  135.  Pa.  St.  16.5;  Sumner  v.  Waugb,  56  IlL 

»Ricev.  Rice,  2  Drew.  73;  Phillips  531;  Pensonnean  v.   Bleakley,  14  111. 

V.  Phillips,  4  De  Gex,  F.  &  J,  208,  215,  15. 

Eer  Lord  Westbury;  Cory  v.  Eyre,  1  »  Thorndike  v.  Hunt,  3  De  Gex  &  J. 

•e  Gex,  J.  &  S.  149,  167;  Newton  v.  563,  570,  571;  Fitzsimmons  v.  Ogden, 

Newton,  L.  R.  6  Eq.   135,  140;  4  Ch.  7  Cranch,  2,  18;  Newton  v.   McLean, 

143,   146;   Shirras  v.  Caig,  7  Cranch,  41  Barb.  285;  and  see  a«^  §  417,  cases 

34,  48;  Boone  v.  Chiles,  10  Pet.  177;  cited  in  note. 


§  683  EQUITY    JURISPRUDENCE.  952 

whicli  renders  it  inferior  to  another,  then  the  precedence 
resulting  from  order  of  time  is  defeated,  and  the  superior 
equitable  estate  or  interest  prevails  over  the  others,  as  is 
manifestly  implied  in  the  maxim,  Where  there  are  equal 
equities  the  first  in  order  of  time  must  prevail.^ 

§  683.  III.  Superior  and  Equal  Equities.  —  In  deter- 
mining the  scope  and  operation  of  the  foregoing  rules, 
the  discussion  must  largely  consist  in  ascertaining  when 
equities  are  equal,  and  when  one  is  superior  to  another. 
It  is  impossible  to  define  "  equal  equities  "  affirmatively 
by  any  exact  formula.  It  is  certainly  not  enough  that 
two  successive  equitable  interests  in  the  same  thing 
should  be  of  precisely  the  same  nature,  for  even  then  one 
might  be  accompanied  by  some  collateral  incident  which 
gave  it  a  precedence  over  the  other  without  reference  to 
their  order  of  time.  When  we  say  that  A  has  a  better 
equity  than  B,  this  means  that  according  to  those  princi- 
ples of  right  and  justice  which  a  court  of  equity  recog- 
nizes and  acts  upon,  it  will  prefer  A  to  B,  and  will 
interfere  to  enforce  the  rights  of  A  as  against  B;  and 
therefore  it  is  impossible  that  two  persons  should  have 
equal  equities,  except  in  a  case  in  which  a  court  of  equity 
would  altogether  refuse  to  lend  its  assistance  to  either 
party  as  against  the  other.^  Two  persons  have  equal 
equitable  interests  in  the  same  subject-matter,  when  each 
is  equally  entitled,  with  respect  of  his  equitable  interest, 
to  the  protection  and  aid  of  a  court  of  equity.  When 
the  court  is  dealing  with  such  successive  equitable  inter- 
ests in  the  same  subject-matter,  and  they  are  all  thus 
equal,  the  priority  in  time  determines  the  priority  in 
right;  and  the  fact  that  the  holder  of  the  subsequent 
interest,  under  these  circumstances,  acquired  it  without 
notice  of  the  prior  one  does  not,  in  general,  give  him 
any  right  to  be  preferred.'     The  foregoing  description  of 

'  Basset    v.    Nosworthy,    2    Lead.  •  See  ante,  §  414,  note  1,  quotation 

Cas,  Eq.  1;   Le  Neve  v.   Le  Neve,  2  from  the  opinion  of  Lord  Westbury  in 

Lead.  Cas.  Eq.  109,  117,  144.  Phillips  v.  Phillips,  4  De  Gex,  F.  &  J. 

*  See  Rice  v.  Rice,  2  Drew.  73.  208,  215,  which  states  this  rule  with 


953 


CONCERNING    PRIORITIES. 


§  6S3 


equal  equities  is  not  of  much   practical  value,  since  it 
states  the  effects  rather  than  the  nature  of  equality.     We 


great  force  and  clearness.  In  Corv  v. 
Eyre,  1  De  Gex,  J.  &  S.  149,  1G7,  tur- 
ner, L.  J.,  said:  "Questions  of  prior- 
ity between  equitable  encunibrancera 
are,  in  general,  governed  by  the  rule, 
Qui  prior  est  tevipore,  potior  est  jure; 
and  in  determining  cases  depending 
on  the  rule,  we  must,  of  course,  look 
at  the  principle  on  which  the  rule  is 
founded.  It  is  founded,  as  I  conceive, 
on  this  principle,  that  the  creation  or 
declaration  of  a  trust  vests  an  estate 
and  interest  in  the  subject-matter  of 
the  trust  in  the  person  in  whose  fa- 
vor the  trust  is  created  or  declared. 
Where,  therefore,  it  is  sought  to  post- 
pone an  equitable  title  created  by 
declaration  of  trust,  there  is  an  estate 
or  interest  to  be  displaced.  No  doubt 
there  may  be  cases  so  strong  as  to 
justify  this  being  done,  but  there  can 
be  as  little  doubt  that  a  strong  case 
must  be  required  to  justify  it.  A 
vested  estate  or  interest  ought  not  to 
be  disturbed  on  any  light  grounds." 
In  Newton  v.  Newton,  L.  R.  6  Eq. 
135,  140,  Lord  Romilly  said:  "These 
are  simply  equitable  interests,  and  in 
such  cases  the  prior  interest  must 
prevail  over  the  subsequent.  The 
fact  that  the  owner  of  the  subsequent 
equitable  interest  had  no  notice  of  the 
prior  interest  when  he  advanced  his 
money  and  took  his  security  does 
not  affect  the  question.  He  could  not 
take  from  the  person  who  gave  the 
charge  on  his  interest  more  than  his 
interest,  and  he  could  not  give  a 
charge  on  the  interest  of  another  per- 
son." This  judgment  was  reversed, 
on  the  evidence  only,  by  the  court  of 
appeal,  but  the  law  as  thus  laid  down 
by  the  master  of  rolls  was  expressly 
affirmed:  See  Cory  v.  Eyre,  L.  R. 
4  Ch.  14.3,  146.  In  Jones  v.  Jones,  8 
Sim.  633,  which  has  been  frequently 
cited  with  approval,  A  mortgaged  an 
estate,  first  to  B  (who  by  the  English 
law  of  course  acquired  the  legal  title 
and  received  possession  of  the  title 
deeds),  secondly  to  (J,  and  thirdly  to 
D.  C  had  no  notice  of  the  first  mort- 
gage. D  had  notice  of  the  first,  but 
not  of  the  second;  and  he  caused  no- 
tice of  his  mortgage  to  be  given  to.B, 
who  had  the  legal  estate  and  posses- 
sion of  the  title  deeds.     Held,  that  he 


did  not  thereby  acquire  priority  over 
C.  Shadwell,  V.  C,  stated  the  rule 
as  follows:  "At  law,  the  rule  clearly 
is,  that  different  conveyances  of  the 
same  tenement  take  effect  according 
to  their  priority  in  time.  The  effect 
of  different  conveyances  is  the  same 
as  if  different  successive  estates  were 
granted  by  the  same  conveyance,  first 
in  possession  and  then  in  remainder. 
Equity  follows  the  law;  and  where 
the  legal  estate  is  outstanding,  con- 
veyances of  the  equitable  interest  are 
construed  and  treated,  in  a  court  of 
equity,  in  the  same  manner  as  convey- 
ances of  the  legal  estate  are  construed 
and  treated  at  law.  In  Beckett  v. 
Cordley,  1  Brown  Ch.  353  (which 
Lord  Eldon  notices  in  Martinez  v. 
Cooper,  2  Russ.  214),  Lord  Thurlow 
twice  decided  that,  where  the  legal 
estate  was  outstanding  in  a  first  mort- 
gagee, of  two  subsequent  equitable 
encumbrancers,  he  who  is  prior  in 
time  must  be  prior  in  equity.  His 
words  are:  'The  second  equitable 
encumbrancer  had  the  security  he 
trusted  to.  He  knew  he  had  not  the 
legal  estate.  He  trusted  to  the  honor 
of  the  borrower!'"  These  decisions, 
and  the  reasoning  upon  which  they 
are  based,  show  that  one  who  pur- 
chases an  equitable  estate,  or  acquires 
an  equitable  interest,  obtains  only  the 
right  of  his  own  vendor;  the  facts  of 
his  paying  value  and  of  not  having 
notice  do  not  of  themselves  entitle 
him  to  take  precedence  over  a  prior 
venlee  or  encumbrancer;  some  quality 
imparting  to  his  estate  or  interest  an 
intrinsic  superiority  would  be  neces- 
sary to  give  him  a  preference:  See 
Boone  v.  Chiles,  10  Pet.  177;  Shirras 
V.  Caig,  7  Cranch,  34,  48;  Watson  v. 
Le  Row,  6  Barb.  481,  485;  Bellas  v. 
McCarty,  10  Watts,  13;  Kramer  v. 
Arthurs,  7  Pa.  St.  165;  Sumner  v. 
Waugh,  56  111.  531;  Pensonneau  v. 
Bleakley,  14  111.  15.  The  recording 
acts  may  modify  the  operation  of  the  * 
equitable  rule  in  this  country,  because 
they  give  to  a  recorded  mortgage  or 
other  equitable  encumbrance  the  very 
quality  which  imparts  to  it  an  intrin- 
sic superiority,  nnder  the  statute,  over 
one  which  is  not  recorded. 


§§  684,  685  EQUITY   JURISPRUDENCE.  954 

shall,  in  fact,  determine  when  equities  are  equal  by  ascer- 
taining when  they  are  unequal,  by  learning  what  quali- 
ties or  incidents  render  one  equity  superior  to  another 
equity  in  the  same  subject-matter. 

§  684.  Superior  Equities  Defined.  —  It  may  be  stated 
that,  so  far  as  their  intrinsic  nature  is  concerned,  a  court 
of  equity  recognizes  no  inequality,  based  upon  their  form 
and  mode  of  creation,  among  all  perfected  equitable  in- 
terests based  upon  a  valuable  consideration  and  arising 
in  any  manner  by  which,  in  contemplation  of  equity,  an 
interest  in  the  very  thing  itself  —  the  land,  the  chattels, 
or  the  fund  —  is  created.  If  there  is  a  valuable  consid- 
eration, and  an  equitable  interest  in  the  very  subject- 
matter  itself  has  been  perfected,  it  does  not  seem  to  affect 
their  equalities,  whether  such  interest  arose  from  a  decla- 
ration of  trust,  from  an  assignment,  from  a  contract  ex- 
press or  implied,  or  from  acts  such  as  the  deposit  of 
title  deeds.  A  valuable  consideration  is,  however,  a  most 
important  element.  The  whole  history  and  scope  of 
equity  jurisprudence  show  that  a  valuable  consideration 
is  always  regarded  as  a  most  essential  requisite  to  the 
existence  of  complete  equitable  estates  and  interests  of 
all  kinds.  Assuming  this  conclusion  as  generally,  if  not 
even  universally,  true,  the  various  causes  which  will  ren- 
der one  equity  superior  to  another  may  be  formulated  in 
three  general  rules.  It  will  be  seen  that  the  first  of  these 
rules  relates  to  the  intrinsic  nature  of  the  two  interests 
which  are  compared;  the  second  relates,  not  to  their 
nature,  but  to  a  quality  inseparably  connected  with  them, 
and  constituting  the  occasion  for  their  existence;  the 
third  relates  neither  to  their  nature  nor  qualities,  but 
to  a  mere  external  or  collateral  incident  afifecting  them 
at  their  origin.    These  three  rules  are  as  follows:  — 

§  685.  1.  Nature  of  the  Equities.  — The  equitable  inter- 
est created  by  a  trust,  or  by  a  contract  in  rem,  made  upon 
a  valuable  consideration,  is  superior  to  the  equity  arising 
from  a  mere  voluntary  transfer,  a  mere  gift,  or  from  a 


955  CONCERNING   PRIORITIES.  §  685 

mere  judgment  lien.  In  contemplation  of  equity,  the 
interest  created  by  a  trust,  or  by  a  valid  executory  con- 
tract of  sale,  or  by  a  valid  contract  giving  rise  to  a  lien, 
or  by  an  act  in  connection  with  such  a  contract  consti- 
tuting a  lien,  —  as,  for  example,  a  deposit  of  title  deeds,  — 
is  a  real,  beneficial  interest  in  the  specific  thing  itself, — 
an  interest  which  is  property,  or  analogous  to  property;  * 
and  although  such  interest  is  not  recognized  by  the  law, 
it  is  treated  by  courts  of  equity  as  actually  subsisting, 
and  as  binding  upon  the  conscience  of  the  original  party 
who  held  the  thing  and  who  created  the  interest.*  On 
the  other  hand,  while  the  interest  acquired  by  a  transfer 
without  consideration,  by  a  voluntary  gift,  may  be  pro- 
tected if  it  does  not  interfere  with  third  persons,  yet  the 
voluntary  transferee  or  donee  can  only  receive  whatever 
interest  the  donor  was  actually  entitled  in  conscience  and 
good  faith  to  bestow;  he  never  obtains,  even  as  against 
the  donor,  and  much  less  as  against  third  persons  deal- 
ing with  the  donor  in  respect  to  the  same  thing,  any 
paramount  right  of  his  own.  The  consideration  on  the 
one  side,  and  the  absence  of  it  on  the  other,  lie  at  the 
very  bottom  of  the  equitable  theory  concerning  actual 
rights.'  The  lien  of  a  judgment  is  analogous  to  the 
claim  of  a  donee;  it  is  general,  not  specific.  The  bene- 
ficiary under  a  trust,  the  vendee  under  an  agreement,  the 
holder  of  a  lien  created  by  a  contract  in  rem,  deals  con- 
cerning a  specific  thing;  he  parts  with  the  consideration 
upon  the  security  of  that  specific  thing;  he  obtains  an 
equitable  interest  in  that  specific  thing.  The  judgment 
creditor  has  not  dealt  with  that  specific  thing;  he  has  not 
parted  with  value  in  contemplation  of  it;  his  lien  is  gen- 
eral, and  not  confined  to  it.  It  is  just,  therefore,  that,  so 
far  as  their  intrinsic  natures  are   concerned,  his  claim 

*  This  is  the  fundamental  distinction  '  See  the   quotation   from  Cory  v. 

between  the  legal  and  the  equitable  Eyre,  1  De  Gex,  J.  &  S.  149,  167,  atUe, 

view  of  executory  contracts  concern-  under  §  683. 

iu^  some  specific  subject-matter:  See  *  Green  r.  Givan,  33  N.  Y.  SIS. 
ante,  §§  146-149,  161. 


§  686  EQUITY   JURISPRUDENCE.  956 

should  be  considered  as  inferior  to  the  interest  arising 
from  a  trust  or  from  a  contract  in  rem.  His  lien  only 
extends  to  what  his  debtor  really  has,  —  that  is,  to  the 
thing  subject  to  all  the  equities  in  it  exising  at  the  date 
of  the  judgment.* 

§  686.  2.  Effects  of  Fraud.  —  The  equity  acquired  by 
a  party  who  has  been  misled  is  superior  to  the  interest 
in  the  same  subject-matter  of  the  one  who  willfully  pro- 
cured or  suffered  him  to  be  thus  misled.  The  following 
example  illustrates  the  operation  of  this  rule,  and  the 
principle  underlying  it  may  be  generalized  and  applied 
to  all  analogous  cases.  A,  being  about  to  part  with  value 
to  B  upon  the  security  of  B's  estate,  informs  C  of  his  in- 
tention, and  asks  C  whether  he  has  any  encumbrance  on 
the  estate;  C  denies  that  he  has  any,  and  A,  relying  upon 
this  denial,  parts  with  money  or  other  value  to  B;  in  fact, 
C  had  at  the  time  a  mortgage  or  other  encumbrance  upon 
the  estate;  this  mortgage  or  lien,  although  prior  in  time, 
would,  by  reason  of  C's  fraud,  be  postponed  to  the  subse- 
quent interest  acquired  by  A.  The  basis  of  this  rule  is 
the  conduct  which  equity  regards  as  constituting  fraud, 
either  an  actual  intention  to  mislead,  or  that  gross  negli- 
gence which  produces  all  the  effects  and  merits  all  the 
blame   of  intentional   deception.''      It   is    not,  however, 

•  It  is  settled  in  England,  in  accord-  blanque's  Equity,  64:  "If  a  man,  by 
ance  with  this  rule,  that  the  interest  the  suppression  of  the  truth  which  he 
of  a  cestui  que  trust,  of  the  vendee  was  bound  to  communicate,  or  by  the 
nnder  an  executory  contract,  and  of  suggestion  of  a  falsehood,  be  the  cause 
an  equitable  mortgagee  by  contract  or  of  prejudice  to  another  who  had  a 
by  deposit  of  title  deeds,  is  superior  to  right  to  a  full  and  correct  representa- 
that  of  a  subsequent  judgment  against  tiou  of  the  fact,  it  is  certainly  agree- 
the  trustee,  vendor,  or  mortgagor,  able  to  the  dictates  of  good  conscience 
even  though  the  legal  estate  may  have  that  his  claim  should  be  postponed  to 
been  acquired  under  the  judgment  by  that  of  the  person  whose  confidence 
means  of  an  elegit:  Newlands  v.  Payn-  was  induced  by  his  representation  "  : 
ter,  4  Mylne  &  C.  408;  Lodge  v.  Lyse-  Berrisford  v.  Milward,  2  Atk.  49; 
ley,  4  Sim.  70;  Langton  v.  Horton,  1  Beckett  v.  Cordley,  1  Brown  Ch.  353, 
Hare,  549,  560:  Whitworth  v.  Gau-  357;  Pearson  v.  Morgan,  2  Brown  Ch. 
gain,  3  Hare,  416;  IPhill.Ch.  728.  This  384,  388;  Mocatta  v.  Murgatroyd,  1 
particular  rule  has  been  modified  or  P.  Wms.  393,  394;  Evans  v.  Bicknell, 
altered  by  statute  in  several  of  the  6  Ves.  174,  182,  183;  Plumb  v.  Fluitt, 
states.  See  post,  §§  721-724,  where  2  Anstr.  432;  Lee  v.  Munroe,  7 
this  subject  is  more  fully  examined.  Cranch,    366;  Wendell  v.   Van  Rena- 

*  The  rule  is  thus  stated  in   1  Fon-  selaer,  1  Johns,  Ch.  344,  354;  Storrs 


957 


CONCERNINQ    PRIORITIES, 


§  687 


necessary  that  the  party  having  an  interest  or  title,  under 
such  circumstances,  when  applied  to,  should  use  positive 
misrepresentations  or  expressly  deny  the  existence  of  his 
right;  it  is  sufficient  if  he  refrain  from  disclosing  his 
claim,  and  suffer  a  third  person  to  deal  with  the  property 
as  his  own,  or  to  acquire  an  interest  in  or  lien  upon  it; 
he  will  not  be  permitted  to  set  up  or  enforce  his  interest 
in  preference  to  that  obtained  by  the  person  whom  he 
has  suffered  to  be  misled  by  his  silence.* 

§  687.  And  of  Negligence.  —  The  rule  extends  to  gross 
negligence,  which  is  tantamount  in  its  effects  to  fraud. 
An  equity  otherwise  equal,  or  even  prior  in  point  of  time, 
may,  through  the  gross  laches  of  its  holder,  be  postponed 
to  a  subsequent  interest  which  another  person  was  en- 
abled to  acquire  by  means  of  such  negligence.^  To 
admit  the  operation  of  this  rule  in  either  of  its  phases, 


V.  Barker,  6  Johns.  Ch.  166,  168;  10 
Am.  Dec.  316;  Otis  v.  Sill,  8  Barb, 
102;  Lesley  v.  Johnson,  41  Barb.  359; 
Crocker  v.  Crocker,  31  N.  Y.  500;  Lee 
V.  Kirkpatrick,  14  N.  J.  Eq.  264; 
McKelvey  v.  Truby,  4  Watts  &  S. 
323;  Folk  v.  Beidelman,  6  Watts,  339; 
Schmitheimer  v.  Eiseman,  7  Bush, 
298;  Chapman  v.  Hamilton,  19  Ala. 
121.  [See  also  Wilson  v.  Hicks,  40  Ohio 
St.  419;  Brown  v.  Kuhn,  40  Ohio  St. 
468;  Heidenheimer  v.  Stewart,  65 
Tex.  321;  Frost  v.  Wolf,  77  Tex.  455; 
19  Am.  St.  Rep.  761.] 

*  Nicholson  v.  Hooper,  4  Mylne  &  C. 
179;  Wendell  v.  Van  Rensselaer,  1 
Johns.  Ch.  344,  354;  Storrs  v.  Barker, 
6  Johns.  Ch.  166,  168.  169-172;  10 
Am.  Dec.  316;  Bright  v.  Boyd,  1  Story, 
478.  The  same  rule  applies  when, 
under  like  circumstances,  a  party  hav- 
ing a  prior  claim  knowingly  permits 
another  person  to  expend  money  on 
an  estate  or  to  make  improvements 
upon  it,  without  disclosing  his  own 
interest:  Pilling  v.  Armitage,  12  Ves. 
78,  84,  85;  Cawdor  v.  Lewis,  1  Younge 
&C.  427;  Williams  v.  Earl  of  Jersey, 
Craig  &  P.  91;  Chautauque  Co.  Bank 
V.  White,  6  Barb.  589;  Bright  v.  Boyd, 
1  Story,  478;  Carr  v.  Wallace,  7 
Watts,  394,  400. 

'  For  example,  A,  a  mortgagee,  of  a 


leasehold  estate,  having  the  lease  in 
his  possession,  loaned  it  to  the  mort- 
gagor for  the  purpose  of  enabling  him 
to  obtain  a  further  loan  upon  its  secu- 
rity, but  told  the  mortgagor  to  inform 
the  person  of  whom  he  should  borrow 
the  money  that  he,  A,  had  a  prior 
lien.  The  mortgagor  borrowed  a  sum 
from  his  bankers  and  deposited  the 
lease  with  them  as  security,  without 
informing  them  of  A's  mortgage.  It 
was  held  that  as  A's  gross  negligence 
had  enabled  the  mortgagor  to  perpe- 
trate the  fraud,  his  mortgage  must  be 
postponed  to  the  lien  of  the  bankers: 
Briggs  V.  Jones,  L.  R.  10  Eq.  92; 
Perry  Herrick  v.  Attwood,  2  De  Gex 
&  J.  21;  Lloyd  v.  Attwood,  3  De  Gex 
&  J.  614;  Waldron  v.  Sloper,  1  Drew. 
193.  See  Fisher  v.  Knox,  13  Pa.  St. 
6-22;  53  Am.  Dec.  503;  Campbell's 
Appeal,  29  Pa.  St.  401;  Garland  v. 
Harrison,  17  Mo.  282.  [See  also 
Clarke  v.  Palmer,  L.  K  21  Ch.  Div. 
124;  Farrand  v.  Yorkshire  Bank.  Co., 
L.  R.  40  Ch.  Div.  182;  Northern  Co. 
etc.  Co.  V.  Whipp,  L.  K  26  Ch.  Div. 
482;  National  Bank  v.  Jackson,  L.  R. 
33  Ch.  Div.  1;  Manners  v.  Mew,  L.  R.  . 
29  Ch.  Div.  725;  Lloyd's  Bank  Co.  v. 
Jones,  L.  R.  29  Ch.  Div.  227;  Heyder 
V.  Excelsior  B.  &  L.  Ass'n,  42  N.  J. 
Eq.  403;  59  Am.  Rep.  49.] 


§  688  EQUITY   JURISPRUDENCE.  958 

and  to  displace  the  otherwise  natural  order  of  priority, 
there  must  be  intentional  deceit,  —  that  is,  intentional 
misrepresentation  or  suppression  of  the  truth,  —  or  else 
gross  negligence.  In  the  one  case,  the  party  possessing 
the  claim  which  it  is  sought  to  postpone  must  both  know 
of  his  own  right  and  also  of  the  other  person's  intention 
to  acquire,  or  of  his  acts  in  acquiring,  an  interest  in  the 
same  subject-matter.  In  the  other  case  there  must  be 
gross  laches,  for  mere  carelessness  or  ordinary  negligence 
will  not  suffice  according  to  the  weight  of  modern  author- 
ity.^ 

§  688.  3.  Effects  of  Notice  —  Illustrations.— The  third, 
and  in  its  practical  effects  by  far  the  most  important,  rule 
is,  that  a  party  taking  with  notice  of  an  equity  takes 
subject  to  that  equity.  The  full  meaning  of  this  most 
just  rule  is,  that  the  purchaser  of  an  estate  or  interest, 
legal  or  equitable,  even  for  a  valuable  consideration,  with 
notice  of  any  existing  equitable  estate,  interest,  claim,  or 
right,  in  or  to  the  same  subject-matter,  held  by  a  third 
person,  is  liable  in  equity  to  the  same  extent  and  in  the 
same  manner  as  the  person  from  whom  he  made  the 
purchase;  his  conscience  is  equally  bound  with  that  of 
his  vendor,  and  he  acquires  only  what  his  vendor  can 
honestly  transfer.^  The  applications  of  this  rule  are  as 
numerous  as  are  the  various  kinds  of  equitable  interests. 
The  following  are  some  of  the  most  important:  A  pur- 
chaser with  notice  of  a  trust,  either  express  or  implied, 
becomes  liimself  a  trustee  for  the  beneficiary  with  respect 
of  the  property,  and  is  bound  in  the  same  manner  as  the 

^  Hewitt  V.  Loosemore,  9  Hare,  negligence  amounting  to  fraud.  Nag- 
449,458;  Colj'er  v.  Finch,  5  H.  L.  Cas.  ligeace  such  as  omission  to  obtain 
905;  and  see  cases  on  the  subject  of  possession  of  or  to  make  inquiries  con- 
constructive  notice  from  a  ne^jlect  to  cerning  the  title  deeds  may  be  sufB- 
make  sufficient  inquiry,  ante,  §§  606,  cient.] 

612.     [In  Farrand  v.  Yorkshire  Bank-  ^  Le   Neve  v.  Le   Neve,    Amb.   436 

ing  Co.,  L.  R.  40  Ch.  Div.  182,  it  was  (see    extract   from    opinion   of    Lord 

held  that  in  order  to  postpone  an  equi-  Hardwicke,  ante,  §  591).     For  Ameri- 

table  mortgagee  to  another  equitable  can   cases,   see   preceding   section   oa 

mortgagee,  whose  security  is  of  a  later  notice.      [See     also    Widdicombe    v. 

date,  it  is  not  necessary  to  show  that  ChiMers,    84   Mo.    382;    Sensenderfer 

the  first  mortgagee  has  been  guilty  of  v.  Kemp,  83  Mo.  581.] 


959  CONCERNING    PRIORITIES.  §  689 

original  trustee  from  whom  he  purchased.*  A  purchaser 
or  mortgagee  with  notice  of  the  equitable  lien  of  a  ven- 
dor for  unpaid  purchase  price  takes  the  land  subject  to 
that  lien.'  A  purchaser  or  mortgagee  of  the  legal  estate, 
with  notice  of  an  equitable  lien  created  by  a  deposit  of 
title  deeds,  or  by  a  prior  defective  mortgage,  or  by  any 
other  means  from  which  an  equitable  lien  can  arise,  is 
bound  by  the  lien.'  A  purchaser  with  notice  of  a  prior 
contract  to  sell  or  to  lease  takes  subject  to  such  contract, 
and  is  bound  in  the  same  manner  as  his  vendor  to  carry 
it  into  execution.*  These  examples  are  of  ordinary  oc- 
currence. 

§  689.  Notice  of  a  Prior  Covenant.  —  On  the  same 
principle,  if  the  owner  of  land  enters  into  a  covenant 
concerning  the  land,  concerning  its  use,  subjecting  it  to 
easements  or  personal  servitudes,  and  the  like,  and  the 
land  is  afterwards  conveyed  or  sold  to  one  who  has  notice 
of  the  covenant,  the  grantee  or  purchaser  will  take  the 
premises  bound  by  the  covenant,  and  will  be  compelled 
in  equity  either  to  specifically  execute  it,  or  will  be  re- 
strained from  violating  it;  and  it  makes  no  difiference 
whatever,  with  respect  to  this  liability  in  equity,  whether 
the  covenant  is  or  is  not  one  which  in  law  "  runs  with 
the  land."*     Notice,  although  a  collateral   incident,  is 

^  Burgess  v.  Wheate,  1  Eden,  177,  iels  v.  Davison,  16  Ves.  249;  Crofton 

195;   Bovey  V.    Smith,   1   Vera.    144;  v.  Ormsby,  2  Schoales  4  L.  583;  Ken- 

Saunders    v.    Dehew,   2  Vern.    271;  nedy  v.  Daly,  1   Schoales  &   L.  355; 

Wigg  V.  Wigg,  1  Atk.  382;  Mead  v.  Field  v.  Boland,  1  Dru.  &  Walsh,  37; 

Lord  Orrery,  3  Atk.  235,  238;  Man-  Potter  v.  Sanders,  6  Hare,  1;  Greaves 

sell  V,  Mansell,  2  P.  Wms.  672,  681;  v.  Tofield,  L.  R.  14  Ch.  Div.  563,  577, 

Mackreth  v.  Symmons,   15  Ves.  329,  per  Bramwell,  L.  J. 
350;   Phayre  v.  Peree,    3   Dow,    116,         '  Whatman  v.  Gibson,  9  Sim.    196; 

129;  Adair  v.  Shaw,  1  Schoales  &  L.  Schreiber  v.  Creed,  10  Sim.  9;  Tulk  v. 

248,  262;    Dunbar  v.    Tredennick,    2  Moxhay,  11  Beav.  571;   2  Phill.  Ch. 

Ball  &  B.  304,  319;  Pindall  v.  Trevor,  774,  777,  per  Lord  Cottenham,  holding 

30  Ark.  249.  that  a  covenant  between  a  vendor  and 

^  Mackreth   v.    Symmons,   15   Ves.  purchaser  that  the  latter  and  his  as- 

329,  350;  Grant  v.  Mills,  2  Ves.  &  B.  signs  shall  use  or  abstain  from  using 

306;  fPoe  v.  Paxton,  26  W.  Va.  607.]  the  land  in  a  particular  way  will  be 

^  Birch  V,   EUames,   2   Anstr.  427;  enforced  in  equity  against  purchasers 

Jennings  v.  Moore,  2  Vern.  609;  [Dun-  with   notice,   without   regard   to   the 

man  v.  Coleman,  59  Tex.  199;  67  Tex.  question   whether    it  runs   with    the 

390;  Martin  v.  Nixon,  92  Mo.  26.]  land;   also  explaining   and  correcting 

*  Merry  v.  Abney,   1  Cas.   Ch.    38;  language  used  in  Keppell  v.  Bailey,  2 

Ferrars  v.  Cherry,  2  Vern.  383;  Dan-  Mylue  &  K.  517;  Duke  of  Bedford  ▼. 


§  GS9 


EQUITY    JURISPRUDENCE. 


900 


thus  perhaps  the  most  powerful  element  in  creating  a 
superiority,  and  in  disturbing  an  order  of  priority  which 
would  otherwise  have  existed.     It  may  destroy  the  prece- 


Trustees  etc.,  2  Mylne  &  K.  552; 
Coles  V.  Sims,  5  De  Gex,  M.  &  G.  1,  8 
(covenant  prohibiting  building  except 
in  a  specified  manner);  Moxhay  v.  In- 
derwick,  1  De  Gex  &  S.  708;  Western 
V.  McDermot,  L.  R.  1  Eq.  499;  2  Ch. 
72  (covenant  by  owners  of  adjoining 
houses  to  use  their  gardens  in  a  cer- 
tain manner);  Clements  v.  Welles, 
L.  R.  1  Eq.  200  (covenant  by  a  lessee 
not  to  carry  on  a  particular  trade  is 
binding  on  his  under-lessee  and  on  as- 
signee of  the  under-lessee);  Morland  v. 
Cook,  L.  R.  6  Eq.  252  (purchaser  bound 
by  constructive  notice  of  a  covenant  to 
keep  up  a  sea-wall  made  between  ven- 
dor and  adjoining  owners  of  lands  on 
the  sea-shore);  Davies  v.  Sear,  L.  R.  7 
Eq.  427  (purchaser  bound  by  con- 
structive notice  of  a  right  of  way  by 
implication);  Feilden  v.  Slater,  L.  R, 
7  Eq.  523  (a  conveyance  contained  a 
covenant  by  the  grantee  not  to  use  tlie 
premises  "as  an  inn,  public  house,  or 
for  the  sale  of  spirituous  liquors ";  a 
lessee  from  the  grantee  was  held 
bound  by  such  covenant);  Wilson  v. 
Hart,  2  Hem.  &  M.  551;  11  Jur.,  N. 
S.,  735;  L.  R.  1  Ch.  463  (a  grantee 
covenanted  that  "no  building  erected 
or  to  be  erected  on  the "  premises 
should  be  used  as  a  beer-shop,  etc., 
the  covenantor's  assignfi  not  being 
named:  this  covenant  held  binding  on 
an  assignee  of  the  grantee);  Keates  v. 
Lyon,  L.  R.  4  Ch.  218,  224  (expressly 
recognizes  all  these  decisions,  but 
holds  that  the  assignee  was  not  bound, 
because  the  covenant  was  personal, 
not  running  with  the  land,  and  he  had 
no  notice  of  it,  either  actual  or  con- 
structive); Cooke  V.  Chilcott,  L.  R.  3 
Ch.  Div.  694  (a  grantee  of  land,  on 
which  waa  a  spring,  covenanted  to 
erect  a  pump  and  reservoir  on  said 
land,  and  to  supply  water  to  houses  to 
be  erected  on  the  grantor's  adjoining 
land;  held,  that  whether  this  covenant 
ran  with  the  land  or  not,  a  purchaser 
from  the  grantee  with  notice  of  it  was 
bound  by  it,  and  his  violation  would  be 
restrained  by  a  mandatory  injunction); 
Richards  v.  Revitt,  L.  R.  7  Ch.  Div. 
224  (covenant  not  to  carry  on  certain 
trades);  Luker  v.  Denni.s,  L.  R.  7  Ch. 
Div.  227  (covenant  by  the  lessee  of  a 


public  house  that  he  would  buy  all  the 
beer  consumed  in  that  house,  and  also 
in  another  house  rented  from  a  dif- 
ferent person,  from  the  lessor,  who 
was  a  brewer;  held  binding  in  equity 
upon  the  assignee  of  the  second- 
named  public  house,  who  had  notice 
of  the  covenant);  Keppell  v.  Bailey,  2 
Mylne  &  K.  517  (declared  to  have 
been  repeatedly  overruled);  Parker  v. 
Nightingale,  6  Allen,  341,  344;  83  Am. 
Dec.  632;  Whitney  v.  Union  Railway, 
11  Gray,  359,  364;  71  Am.  Dec.  715, 
per  Bigelow,  J.:  "The  precise  form  or 
nature  of  the  covenant  or  agreement 
is  quite  immaterial.  It  is  not  essen- 
tial that  it  should  run  with  the  land. 
A  personal  covenant  or  agreement  will 
be  held  valid  and  binding  in  equity  on 
a  purchaser  taking  the  estate  with 
notice.  It  is  not  binding  on  him 
merely  because  he  stands  as  an  as- 
signee  of  the  party  who  made  the 
agreement,  but  because  he  has  taken 
the  estate  with  notice  of  a  valid  agree- 
ment concerning  it,  which  he  cannot 
equitably  refuse  to  perform  ":  Barrow 
V.  Richard,  8  Paige,  351 ;  35  Am.  Dec. 
713;  Hills  v.  Miller,  3  Paige,  254;  24 
Am.  Dec.  218;  Trustees  etc.  v. 
Cowen,  4  Paige,  510;  27  Am.  Dec.  80; 
Wolfe  V.  Frost,  4  Sand.  Ch.  72;  Brou- 
wer  V.  Jones,  23  Barb,  153;  Tall- 
madge  v.  East  River  Bank,  26  N.  Y. 
105;  Gibert  v.  Peteler,  38  N.  Y.  165; 
97  Am.  Dec.  785;  .^8  Barb.  488;  Phoe- 
nix Ins.  Co.  v.  Continental  Ins.  Co., 
14  Abb.  Pr.,  N.  S.,  266;  Trustees  etc. 
v.  Lynch,  70  N.  Y.  440,  449-452;  26 
Am.  Rep.  615  (in  this  case  the  ques- 
tion is  elaborately  discussed,  and 
many  of  the  authorities  are  examined 
by  Allen,  J.);  Lattimer  v.  Liver  more, 
72  N.  Y.  174;  Greene  v.  Creighton,  7 
R.  I.  1;  Kirkpatrick  v.  Peshine,  24 
N.  J.  Eq.  206;  Winfield  v.  Henning, 
21  N.  J.  Eq.  188;  St.  Andrew's 
Church's  Appeal,  67  Pa.  St.  512;  Nor- 
fleet  V.  Cromwell,  70  N.  C.  634;  16 
Am.  Rep.  787.  [See  also  Shields  v. 
Titus,  46  Ohio  St.  528;  Willoughby  v. 
Lawrence,  116  111.  11;  56  Am.  Rep. 
758;  Gilmer  v.  Mobile  etc.  R'y  Co., 
79  Ala.  569;  58  Am.  Rep.  623;  New- 
bold  V.  Peabody  Heights  Co.,  70  Md. 
493;  Halle  v.  Newbold,  69  Md.  265.] 


961  CONCERNING   PRIORITIES.  §§  690,  691 

dence  wLicli  a  legal  estate  ordinarily  has  over  an  equi- 
table one;  it  may  operate  as  well  between  legal  and 
equitable  estates  in  the  same  thing  as  between  successive 
estates  or  interests  which  are  purely  equitable. 

§  690.  1.  What  is  Notice. — In  the  further  discussion 
of  this  rule  in  its  general  form,  three  questions  are  to  be 
considered:  What  is  notice?  at  what  time  must  it  be 
received?  and  of  what  must  it  notify  the  party  receiving 
it?  The  first  of  these  questions.  What  is  notice?  has  been 
fully  examined  in  the  preceding  section.  It  is  important 
to  remember  that  actual  notice,  and  constructive  notice 
in  any  one  of  its  varieties,  produce  exactly  the  same 
effects  upon  the  equitable  rights  and  liabilities  of  the 
party  charged  thereby;  the  general  rule  under  considera- 
tion equally  includes  both  kinds  within  its  operation.* 

§  691.  2.  Time  of  the  Notice.  —  At  what  time  must 
notice  be  given  to  a  party  so  that  his  right  may  be  subor- 
dinate to  the  equity  of  which  he  is  actually  or  construct- 
ively informed?  In  answering  this  question,  the  two 
following  rules,  already  stated,  must  constantly  be  borne 
in  mind:  that  among  purely  equitable  interests  which 
are  equal,  the  order  of  time  controls,  so  that  the  absence 
of  notice  cannot  give  a  subsequent  equity  any  precedence 
over  a  prior  one  of  equal  standing;  and  that  a  trust  or 
equity  created  by  a  contract  in  rem  is  superior  to  the  in- 
terest acquired  under  a  voluntary  conveyance  or  transfer. 
It  is  plain,  then,  that  the  facts  of  the  subsequent  estate, 
being  legal  rather  than  equitable,  and  of  a  valuable  con- 
sideration having  been  actually  paid,  must  play  a  most 
important  part  in  determining  the  proper  time  of  giving^ 
the  notice.  In  the  first  place,  therefore,  the  decisions^ 
both  English  and  American,  are  all  agreed  that  the  notice 
received  before  the  party  has  actually  paid  the  money  or 
parted  with  the  other  valuable  consideration  is  a  valid 
and  binding  notice,  and  subjects  his  interest  to  the  prior 
equity  of  which  he  is  thereby  notified;  and  this  is  true 

»  See  ante,  sec.  v.,  §§  591-676. 
2  Eq.  Jub.  —  61 


§  691  EQUITY   JURISPRUDENCE.  962 

even  though  he  has  already  taken  a  conveyance  of  the 
legal  title  and  has  given  security  for  the  purchase  price 
even  by  an  instrument  under  seal.*  The  reason  is,  that 
the  conveyance  of  the  legal  estate  is,  under  such  circum- 
stances, a  voluntary  one,  because  the  agreement  to  pay 
the  price,  and  the  security  given  therefor,  are  in  reality 
mere  nullities.  Although,  originally,  the  party  might 
have  had  no  defense  at  law  against  a  recovery  of  the 
amount  agreed  to  be  paid,  he  always  had  ample  relief  in 
a  court  of  equity,  which  would  decree  the  surrender  and 
cancellation  of  the  security,  and  perpetually  enjoin  any 
action  at  law  for  the  price.  In  most  of  the  American 
states  the  defense  of  a  total  failure  of  the  consideration, 
under  such  circumstances,  would  now  be  available  at  law.^ 
The  rule  as  settled  in  England  goes  farther  than  this.  It 
makes  the  notice  binding  upon  the  party  if  he  receives  it 
prior  to  his  obtaining  the  title  by  conveyance,  although 
he  may  have  parted  with  a  valuable  consideration  before 
such  notice.  In  other  words,  in  order  to  be  free  from  the 
effects  of  the  notice,  the  party  must  have  both  paid  the 
consideration  and  obtained  the  estate,  before  it  was  com- 
municated.' In  the  United  States  a  different,  and  as  it 
seems  to  me  more  just,  rule  has  generally  been  established, 
that  where  the  estate  subsequently  purciiased  is  the  legal 
estate,  a  notice,  in  order  to  be  binding,  must  be  received 
before  the  purchaser  pays  the  price  or  parts  with  the 
other  valuable  consideration.     In  other  words,  if  he  actu- 

'  More  V.  Mahow,  1   Cas.  Ch.   34;  Dec.  212;  Patten  v.  Moore,  32  N,  H. 

Jones  V.  Stanley,  2  Eq.  Cas,  Abr.  685,  382;   Palmer   v.  Williams,    24   Mich, 

pi.  9;  Story  v.  Lord  Windsor,  2  Atk.  328,  333;  Blanchard  v.  Tyler.  12  Mich. 

630;  Tourville  v.    Naish,  3   P.  Wms.  339;     86   Am.    Dec.    67;     Wilson    v. 

306;  Collinsonv.  Lister,  7  De  Gex,  M.  Hunter,  30  Ind.  466;  Keys  v.  Test,  33 

&   G.    634;    20  Beav.    356;    Wigg   v.  111.  316;  Brown  v.  Welch,  18  111.  343; 

Wigg,  1  Atk.  382,  384;  Tildesley  v.  68  Am.  Dec.  549;  Bennett  v.  Tither- 

Lodge,  3  Sniale  &  G-.  543;  Rayne  v.  ington,  6  Bush,  192;  Wells  v.  Morrow, 

Baker,  1  Giff.  241;  Flagg  v.   Mann,  2  38  Ala.  125.     See  'post,  §§  750,  755. 

Sum.  486;  Murray  v.  Ballou,  1  Johns.  =■  Ibid. 

Oh.  566;  Penfield  v.  Dunbar,  64  Barb.  *  Wigg  v.  Wigg,  1  Atk.  382,  384; 

239;  Farmers'  Loan  Co.  v.  Maltby.  8  Sharpe  v.  Foy,  L.  R.  '4   Ch.  35,    40; 

Paige,  361;  Haughwout  v.  Muiphy,  21  Tildesley  v.  Lodge,  3  Smale  &  G.  543; 

N.  J.  Eq.   118;    Union   Canal   Co.  v.  Rayne  v.  Baker,  1  Giff.  241;  see  post. 

Young,  I   Whart,  410,  432.   30  Am.  §755. 


963  CONCERNING   PRIORITIES.  §  692 

ally  pays  the  valuable  consideration  without  any  notice^ 
a  notice  afterwards  given  does  not  preclude  him  from 
completing  the  transaction,  obtaining  a  conveyance  of  the 
legal  title,  and  thereby  securing  the  precedence  due  to  a 
bona  fide  purchaser  for  a  valuable  consideration  and  with- 
out notice.*  It  should  be  carefully  observed,  however, 
that,  notwithstanding  this  latter  rule,  upon  the  well-settled 
doctrines  of  equity,  independently  of  modifying  statutes, 
if  the  subsequent  purchase  is  of  an  equitable  interest 
merely,  without  the  legal  title,  a  payment  of  valuable  con- 
sideration without  notice  cannot  of  itself  give  the  pur- 
chaser the  precedence  over  a  prior  equity  of  an  equal 
standing;  the  parting  of  value  without  notice  does  not 
alone  constitute  a  superiority  among  successive  equities 
60  as  to  disturb  the  priority  determined  by  order  of  time. 
§  692.  3.  Of  What  the  Notice  must  Consist.  —  It  is 
not  true  that  a  notice  of  any  and  every  species  of  right  or 
claim  will  thus  afifect  and  subordinate  the  estate  of  the 
party  receiving  it.  The  notice  required  by  the  general 
rule  under  consideration  must  be  of  an  actual  equity,  of 
something  which  equity  regards  as  an.  interest  in  the 
subject-matter  itself,  although  such  may  not  be  its  nature 
in  contemplation  of  the  law.*  Furthermore,  this  interest 
must  be  of  such  a  character,  that  if  it  were  clothed,  in  the 
hands  of  its  holder,  with  a  legal  title,  it  would  be  inde- 
feasible. The  fact  that  an  interest  is  equitable  shall  not 
render  it  liable  to  be  defeated  by  a  party  with  notice  of  it, 
provided  it  would  be  indefeasible  if  legal.  On  the  other 
hand,  notice  of  a  legal  interest  which  is  defeasible,  or  of 
an  equitable  interest  which,  if  legal,  would  be  defeasible, 
does  not  bind  the  party  receiving  it,  nor  subordinate  the 
estate  in  his  hands.^  The  general  rule  as  to  the  effect 
of  notice  must  therefore  include  all  trust  estates  express 

'  See  post,  §§  750, 755,  and  cases  cited,  personal  right  or  liability.     This  dif- 

'  For   equity  in  many  cases   recog-  ference  of  conceptions  is  vital  through- 

nizes  a  real   interest   in   the   specific  out  the  whole  domain  of  equity  juris- 

snbject-matter, — land   or  chattels, —  prudence. 

where  the  law  only  admita  a  mere  '  See  Adams's  Equity,  152  (323). 


§  693  EQUITY   JURISPRUDENCE.  964 

or  implied,  the  equitable  estate  of  the  vendee  in  a  contract 
for  the  sale  of  land,  the  equitable  estate  arising  from  the 
doctrine  of  conversion,  equitable  mortgages,  liens,  and 
charges,  covenants  creating  equitable  easements  and  servi- 
tudes, and  the  like.  Notice,  however,  of  a  prior  convey- 
ance made  with  intent  to  defraud  subsequent  purchasers, 
and  declared  void  by  the  statute,  will  not  affect  the  rights 
of  a  subsequent  purchaser  for  value,*  nor  of  a  prior  con- 
tract which  the  purchaser  had  ab  initio  a  right  to  nullify.^ 
Prior  unrecorded  conveyances  and  mortgages  may  ap- 
pear to  be  exceptions  to  this  rule,  but  are  not  in  reality.' 
Having  thus  explained  the  fundamental  principles  upon 
which  the  equitable  doctrine  of  priorities  is  based,  I  shall 
now  describe  some  of  the  most  important  classes  of  cases 
in  which  these  principles  are  applied. 

§  693.  Second.  Applications  of  These  Principles  — 
Assignments  of  Things  in  Action.  —  Where  the  creditor 
party  in  a  thing  in  action  assigns  the  debt  to  successive 
assignees,  where  a  fund  being  held  under  a  trust  the 
cestui  que  trust  assigns  his  interest  therein  to  successive 
assignees,  and  where  a  person  entitled  thereto  makes 
successive  equitable  assignments  of  a  fund  to  different 
parties,  the  interests  acquired  by  the  assignees  in  each 
instance  are  equitable.*  It  might  therefore  appear,  at 
first  blush,  that,  as  the  legal  estate  is  outstanding,  and  as 

*  Pulvertoft  V.  Pulvertoft,  18  Ves.  ecribed  by  the  statute:  See  ante,  §§  659, 
84;    Buckle    v.    Mitchell,     18    Vea.     660,  665. 

100.  *  This  is  unquestionably  so  in  every 

'  Lufkin  V.  Nnnn,  11  Ves.  170.  case  of  an  assignment  by  a  caitui  que 

•  They  are  apparent  exceptions,  be-  trtist,  and  of  an  equitable  assignment 
cause  the  prior  unrecorded  convey-  of  a  fund.  It  was  also  true  of  all  as- 
ances  and  mortgages  are  declared  by  signments  of  ordinary  ckoses  in  action, 
the  statute  to  be  void  as  against  sub-  debts,  etc.,  until  recent  statutes  ia 
sequent  purchasers  whose  deeds  or  England  and  in  this  country  have  had 
mortgages  are  recorded,  and  the  es-  the  efifect  to  clothe  the  assignee  of 
tales  created  by  them  appear  therefore  debts,  money  demands,  and  other  ordi- 
to  be  defeasible.  They  are  not  real  nary  things  in  action  with  a  legal  right: 
exceptions,  because  by  the  judicial  See  vol.  1,  §  168.  This  legislation, 
interpretation,  which  has  even  been  however,  has  not  afiFected  the  doc- 
incorporated  into  most  of  the  modern  trines  discussed  in  the  text.  These 
American  statutes,  the  chief  object  of  doctrines  were  settled  while  the  inter- 
the  registry  is  to  give  a  constructive  ests  were  purely  equitable,  and  have 
notice,  and  a  notice  of  any  other  kind  not  been  abrogated  by  the  new  juris- 
merely  supplies  the  place  of  that  pre-  diction  at  law. 


965 


CONCERNING    PRIORITIES. 


693 


the  interests  of  all  the  successive  assignees  are  similar  in 
their  essential  nature,  the  general  rule,  where  there  are 
equal  equities  the  first  in  order  of  time  must  prevail, 
should  govern  them,  without  regard  to  any  notice  which 
might  or  might  not  have  been  given  to  subsequent  as- 
signees; in  other  words,  that,  under  these  circumstances, 
the  maxim,  Qui  prior  est  tempore,  potior  est  jure,  should  con- 
trol. There  are,  however,  certain  important  elements 
which  plainly  distinguish  these  assignments  from  other 
kinds  of  successive  equities,  and  remove  them  from  the 
operation  of  the  general  rule.  When  an  equitable  inter- 
est in  land  is  created,  the  holder  thereof  can  often  pro- 
tect himself  by  a  possession  of  the  title  deeds  in  England, 
or  by  a  registration  in  this  country.  When  chattels  are 
sold  and  transferred,  the  title  of  the  purchaser  is  secured 
against  all  the  world  by  a  delivery.  No  such  safeguards 
inhere  in  the  assignments  above  mentioned.*     The  legal 


'  The  peculiar  nature  of  such  as- 
signments, which  distinguishes  them 
from  other  equitable  interests,  was 
admirably  described  by  Sir  Thomas 
Plumer,  M.  R.,  in  the  leading  case  of 
Dearie  v.  Hall,  3  Russ.  1,  12:  "Where 
a  contract  respecting  property  in  the 
hands  of  other  persons  who  have  a 
legal  right  to  the  possession  is  made 
behind  the  back  of  those  in  whom  the 
legal  interest  is  thus  vested,  it  i'^ 
necessary,  if  the  security  is  intendeu. 
to  attach  on  the  thing  itself,  to  lay 
hold  of  that  thing  in  the  manner  in 
which  its  nature  permits  it  to  be  laid 
hold  of,  —  that  is,  by  giving  notice  of 
the  contract  to  those  in  whom  the 
legal  interest  is.  By  such  notice  the 
legal  holders  are  converted  into 
trustees  for  the  new  purchaser,  and  are 
charged  with  responsibility  towards 
him;  and  the  cestui  que  trust  is  deprived 
of  the  power  of  carrying  the  same 
security  repeatedly  into  the  market, 
and  of  inducing  third  persons  to  ad- 
vance money  upon  it,  under  the  erro- 
neous belief  that  it  continues  to  belong 
to  him  absolutely,  free  from  encum- 
brance, and  that  the  trustees  are  still 
trustees  for  him,  and  for  no  one  else. 
That  precaution  is  always  taken  by 
diligent  purcliasers  and  eucumbrancera; 


if  it  is  not  taken,  there  is  neglect.  The 
consequence  of  such  neglect  is,  that 
the  trustee  of  the  fund  remains  igno- 
rant of  any  alteration  having  taken 
place  in  the  equitable  rights  affecting 
it;  he  considers  himself  to  be  a  trustee 
for  the  same  individual  as  before,  and 
no  other  person  is  known  to  him  aa 
the  cestui  que  trust.  The  original 
cestxd  que  trust,  though  he  has  in  fact 
parted  with  his  interest,  appears  to 
the  world  to  be  the  complete  equitable 
owner,  and  remains  in  the  order, 
management,  and  disposition  of  the 
property  as  absolutely  as  ever,  so 
that  he  has  it  in  his  power  to  obtain, 
by  means  of  it,  a  false  and  delusive 
credit.  He  may  come  into  the  market 
to  dispose  of  that  which  he  has  pre- 
viously sold;  and  how  can  those  who 
may  chance  to  deal  with  him  protect 
themselves  from  his  fraud  ?  Wiiat- 
ever  diligence  may  be  used  by  a  sub- 
sequent encumbrancer  or  purchaser, 
—  whatever  inquiries  he  may  make  in 
order  to  investigate  the  title,  and  to 
ascertain  the  exact  state  of  the  original 
right  of  the  vendor,  and  his  continu- 
ing right,  — tlie  trustees,  who  are  the 
persons  to  whom  application  for  in- 
formation would  naturally  be  made, 
will   truly  aud   unhesitatingly  repre- 


§§  694,  695  EQUITY    JURISPRUDENCE.  966 

title  or  right  analogous  to  possession  remains  vested  in 
the  debtor,  trustee,  or  holder  of  the  fund.  The  assignor 
—  the  creditor  or  the  cestui  que  trust — continues  to  be 
clothed  with  all  the  apparent  right  and  power  to  deal 
with  the  claim,  and  to  dispose  of  it  to  third  persons, 
which  he  held  prior  to  the  assignment.  Courts  of  the 
highest  ability  have  therefore  regarded  such  assignments 
as  occupying  a  very  special  position,  and  have  applied  to 
them  a  special  rule  in  determining  their  order  of  priority. 

§  694.  I.  Notice  by  the  Assignee.  —  The  reasons 
which  prevail  between  the  assignee  and  the  debtor  or 
the  holder  of  the  fund  on  the  one  hand,  or  subsequent 
assignees  on  the  other,  do  not  prevail  between  him  and 
the  assignor.  It  is  therefore  settled  that,  to  render  the 
assignment  valid  and  perfect  as  against  the  assignor  him- 
self, —  that  is,  to  give  the  assignee  a  complete  claim  upon 
the  fund  and  right  of  action  as  against  the  assignor,  —  no 
notice  of  the  assignment  need  be  given  to  the  debtor, 
trustee,  or  other  holder  of  the  fund.*  The  same  is  true, 
according  to  many  decisions,  with  respect  to  those  who 
"stand  in  the  shoes  of"  the  assignor,  namely,  his  judg- 
ment creditors,  and  mere  volunteers  under  him.' 

§  695.  English  Rule  —  Priority  Determined  by  Notice 
to  the  Debtor  Party. — The  rule  is  firmly  established  in 
England  that,  as  against  subsequent  assignees  for  a  val- 
uable consideration,  a  notice  to  the  debtor,  trustee,  or 
holder  of  the  fund  is  necessary,  in  order  to  perfect  the 

Bent  to  all  who  put  questions  to  them  responsible,  in  some  respects,  for  the 

that  the  fund  remains  the  sole  abso-  easily  foreseen  consequences  of  their 

lute  property  of  the  proposed  vendor,  negligence." 

These   inconveniences    and    mischiefs         *  Rodick  v.  Gandell,  1  De  Gex,  M. 

are  the  natural  consequences  of  omit-  &  G.  763,  780,  per  Lord  Truro;  In  re 

ting  to   give  notice  to   trustees.     To  Way's  Trusts,  2  De  Gex,  J.  &  S.  365; 

give  notice  is  a  matter  of  no  difficulty;  Donaldson  v.  Donaldson,  Kay,  711. 
and  whenever  persons,  treating  for  a         *  Beavan  v.  Lord  Oxford,  6  De  Gex, 

chose  in  action,  do  not  give  notice  to  M.  &  G.  492;  Eyre  v.   McDowell,   9 

the   trustee   or   executor,  who  is  the  H.  L.  Cas.  619,  642,  652;  Kinderley  v. 

legal  holder  of  the  fund,  they  do  not  Jervis,    22    Beav.    1;    Scott    v.    Lord 

perfect  their  title;  they  do  not  do  all  Hastings,  4  Kay  &  J.  633;  Pickering 

that  is  necessary  in  order  to  make  the  v.    Ilfracombe  R'y,  L.   B.   3  Com.   P. 

thing  belong  to  them  in  preference  to  235;  Crow  v.  Robinson,  L.  R.  3  Com. 

all   other  persons;   and   they   become  P.  264. 


967 


CONCERNING    PIIIORITIES. 


§  695 


assignment  and  render  it  valid  and  effectual.'  Among 
successive  assignees  of  the  same  thing  in  action  who 
have  paid  a  valuable  consideration,  the  mere  order  of 


^  This  rule  and  the  reasons  for  it  were 
most  forcibly  stated  by  Sir  Thomas 
Plumer,  M.  R.,  in  the  leading  case  of 
Dearie  v.  Hall,  3  Russ.  1,  from  which 
a  quotation  has  already  been  made. 
He  said  (pp.  20-23):  "The  ground  of 
this  claim  is  priority  of  time.  They 
rely  upon  the  known  maxim,  which 
in  many  cases  regulates  equities,  Qui 
pinor  est  tempore,  potior  est  jure.  If 
by  the  first  contract  all  the  thing  is 
given,  there  remains  nothing  to  be  the 
subject  of  the  second  contract,  and 
priority  must  decide.  But  it  cannot 
be  contended  that  priority  in  time 
must  decide,  where  the  legal  estate  is 
outstanding.  For  the  maxim,  as  an 
equitable  rule,  admits  of  exception, 
and  gives  way  when  the  question 
does  not  lie  between  bare  and  equal 
equities.  If  there  appears  to  be,  in 
respect  of  any  circumstance  inde- 
pendent of  priority  of  time,  a  better 
title  in  the  subsequent  purchaser  to 
call  for  the  legal  estate,  than  in  the 
purchaser  who  precedes  him  in  date, 
the  case  ceases  to  be  a  balance  of 
equal  equities,  and  the  preference 
which  priority  of  date  might  other- 
wise have  given  is  done  away  with 
and  counteracted.  The  question  here 
is,  not  which  assignment  is  first  in 
date,  but  whether  there  is  not,  on  the 
part  of  Hall,  a  better  title  to  call  for 
the  legal  estate  than  Dearie  or  Sheer- 
ing can  set  up.  Or  rather,  the  ques- 
tion  is,  Shall  these  plaintiffs  now  have 
equitable  relief,  to  the  injury  of  Hall? " 
He  shows  that  the  failure  of  D.  or  S.  to 
give  notice  was  negligence;  from  this 
negligence  all  the  doubt  and  difiiculty 
have  arisen;  and  it  is  not  equitable 
that  they  should  take  advantage  of 
their  own  negligence,  —  should  obtain 
a  benefit  as  the  result  of  their  neglect. 
He  then  adds  (p.  22):  "They  say  that 
they  were  not  bound  to  give  notice  to 
the  trustees;  for  that  notice  does  not 
form  part  of  the  necessary  conveyance 
of  an  equitable  interest.  I  admit  that 
if  you  mean  to  rely  on  contract  with 
the  individual,  you  do  not  need  to 
give  notice;  from  the  moment  of  the 
contract  he  with  whom  you  are  deal- 
ing is  personally  bound.  But  if  you 
mean  to  go  further,  and  to  make  your 


right  attach  upon  the  thing  which  is 
the  subject  of  the  contract,  it  is  ne- 
cessary to  give  notice;  and  unless 
notice  is  given,  you  do  not  do  that 
which  is  essential  in  all  cases  of  trans- 
fer of  personal  property.  The  law  of 
England  has  always  been,  that  per- 
sonal property  passes  by  delivery  of 
possession;  and  it  is  possession  which 
determines  the  apparent  ownership. 
If  you,  having  the  right  of  possession, 
do  not  exercise  that  right,  but  leave 
another  in  actual  possession,  you  en- 
able tliat  person  to  gain  a  false  and 
delusive  credit,  and  put  it  in  his 
power  to  obtain  money  from  innocent 
parties  on  the  hypothesis  of  his  being 
the  owner  of  that  which  in  fact  be- 
longs to  you.  Possession  must  fol- 
low right;  and  if  you,  who  have  the 
right,  do  not  take  possession,  you  do 
not  follow  up  the  title,  and  are  re- 
sponsible for  the  consequences.  It  is 
true  that  a  chose  in  action  does  not 
admit  of  tangible,  actual  possession. 
But  in  Ryall  v.  Rowles,  1  Ves.  Sr. 
348,  1  Atk.  165,  the  judges  held  that 
in  the  case  of  a  chose  in  action  you 
must  do  everything  towards  having 
possession  which  the  subject  admits; 
you  must  do  that  which  is  tantamount 
to  obtaining  possession,  by  placing 
every  person  who  has  an  equitable  or 
legal  interest  in  the  matter  under  an 
obligation  to  treat  it  as  your  property. 
For  this  purpose  you  must  give  notice 
to  the  legal  holder  of  the  fund;  in  the 
case  of  a  debt,  for  instance,  notice  to 
the  debtor  is,  for  many  purposes,  tan- 
tamount to  possession.  If  you  omit 
to  give  that  notice,  you  are  guilty  of 
the  same  degree  and  species  of  neglect 
as  he  who  leaves  a  personal  chattel  to 
which  he  has  acquired  a  title  in  the 
actual  possession  and  under  the  abso- 
lute control  of  another  person."  This 
course  of  reasoning  is,  as  it  seems 
to  me,  completely  unanswerable;  the 
special  rule  concerning  notice  results 
from  it  as  an  irresistible  conclusion. 
No  other  rule  within  the  entire  range 
of  equity  jurisprudence  rests  upon  a 
more  solid  foundation  of  argument, 
or  is  more  intrinsically  just  and  rea* 
sonable. 


§695 


EQUITY   JURISPRUDENCE. 


968 


time  does  not  necessarily  determine  the  priority;  the  as- 
signee in  good  faith  and  for  value  who  first, gives  a  notice 
obtains  a  precedence  over  the  others,  even  though  they 
may  be  earlier  in  time.  The  equities  of  the  successive 
assignments  being  otherwise  equal,  the  priority  among 
them  is  determined  by  the  order  of  the  notices,  rather 
than  by  the  order  of  their  dates.  Giving  notice  is 
regarded  as  equivalent,  or  at  least  analogous,  to  the  act  of 
taking  possession.  The  rule  thus  formulated  is  applied 
to  assignments  of  ordinary  things  in  action  by  the  cred^ 
itor  party,  including  shares  of  stock  in  a  company,  insur- 
ance policies,  and  the  like,  to  assignments  of  a  fund  held 
under  a  trust  by  the  cestui  que  trust,  and  to  equitable 
assignments  of  a  fund  by  the  person  entitled  thereto, 
and  the  notice  should  be  given,  in  the  first  class  to  the 
debtor,  in  the  second  to  the  trustee,  and  in  the  third  to 
the  holder  of  the  fund.^     It  should  be  carefully  observed, 


'  Dearie  v.  Hall,  3  Ruas.  1;  Love- 
ridge  V.  Cooper,  3  Russ.  31;  affirmed 
on  appeal,  by  Lord  Lyndhurst,  3  Rusa. 
48-60;  Ryall  v.  Rowles,  1  Ves.  Sr, 
348;  1  Atk.  165;  2  Lead.  Cas.  Eq.,  4th 
Am.  ed.,  1533,  1579;  Foster  v.  Black- 
stone,  1  Mylne  &  K.  297;  9  Bligh, 
N.  S.,  332,  376;  Meux  v.  Bell,  1  Hare, 
73,  84,  85;  Saffron  etc.  Soc.v.  Rayner, 
L.  R.  14  Ch.  Div.  406  (what  is  a  suffi- 
cient notice  to  trustees);  In  re  Fresh- 
field's  Trusts,  L.  R.  11  Ch.  Div.  198, 
200,  202,  per  Jessel,  M.  R.  (rule  ap- 
plied when  the  second  assignee  of  a 
trust  fund,  who  gave  the  first  notice  to 
the  trustee,  took  his  assignment  from 
the  executors  of  the  cesttii  que  trust, 
the  first  assignee  having  taken  directly 
from  the  cestui  que  trust  himself);  Ex 
parte  Garrard,  L.  R.  5  Ch.  Div.  61; 
L.  R.  4  Ch.  Div.  101  (the  trustee  him- 
self the  assignee);  Addison  v.  Cox, 
L.  R.  8  Ch.  76,  79,  per  Lord  Selborne 
(a  creditor  assigned  the  money  due 
to  two  different  persons  successively; 
these  two  assignees  gave  simultaneous 
notices  to  the  debtor;  held,  that  the 
first  assignee  had  priority  over  the 
second);  Lloyd  v.  Banks,  L.  R.  3  Ch. 
488,  490,  per  Lord  Cairns,  reversing 
Lloyd  V,  Banks,  L.  R.  4  Eq.  222  (ac- 
tual knowledge  by  the  trustee  of  a  first 


assignment  by  the  cestui  que  trust  op- 
erates as  a  notice,  and  gives  tlie  first 
assignee  a  priority  over  a  second  as- 
signee, who  afterwards  served  a  formal 
notice);  see,  per  contra,  Edwards  v. 
Martin,  L.  R.  1  Eq.  121,  and  la 
re  Brown's  Trusts,  L.  R.  5  Eq.  88, 
which  must  be  regarded  as  overruled, 
so  far  as  they  differ  from  Lloyd  v. 
Banks,  L.  R.  3  Ch.  488;  Bridge  v. 
Beadon,  L.  R.  3  Eq.  664,  667;  la 
re  Atkinson,  2  De  Gex,  M.  &  G.  140; 
In  re  Barr's  Trusts.  4  Kay  &  J.  219; 
Thompson  v.  Speirs,  13  Sim.  469; 
Martin  v.  Sedgwick,  9  Beav.  333. 
The  time  of  giving  the  notice  may  be 
material.  If  it  is  given  to  a  trustee 
before  the  fund  comes  into  his  posses- 
sion, or  before  the  trust  relation  exists, 
it  will  be  wholly  nugatory,  while  a 
subsequent  notice  given  after  the 
trust  relation  commences,  or  after  the 
fund  comes  into  the  trustee's  hands, 
will  be  operative:  Somerset  jt  Cox,  33 
Beav.  634;  Webster  v.  Waster,  31 
Beav.  393;  Addison  v.  Cox,  L.  R,  8  Ch. 
76;  Buller  v.  Plunkett,  1  Johns.  &  H. 
441.  If  simultaneous  notices  are  given 
by  two  assignees,  the  one  who  is  earlier 
in  date  will  have  precedence:  Cal- 
isher  v.  Forbes,  L.  R.  7  Ch.  100;  Ad- 
dison  V.  Cox,  L.  R.  8  Ch.  76, 79.  Wher- 


969  CONCERNING    PRIORITIES.  §  696 

however,  that  to  enable  a  subsequent  assignee  to  obtain  a 
priority  in  this  manner,  by  giving  the  first  notice  to  the 
debtor  or  legal  bolder,  he  must  be  an  assignee  in  good 
faith  and  for  a  valuable  consideration.  If  he  parted 
with  no  consideration,  he  is  a  mere  volunteer,  and  stands 
in  the  same  position  as  his  assignor.  If  he  had  notice 
of  the  earlier  assignment,  then  he  took  subject  thereto. 
The  rule  thus  established  by  the  uniform  course  of  de- 
cision in  England  has  been  adopted  in  a  portion  of  the 
American  states.^  It  has  been  rejected  by  the  courts  of 
other  states,  which  hold  that  among  successive  assign- 
ments of  things  in  action  the  order  of  time  controls.* 

§  696.  To  Whom  the  Notice  should  be  Given. — Notice 
may  be  given  to  the  debtor,  trustee,  or  holder  of  the  fund, 
either  in  writing  or  verbally,  if  the  latter  form  is  explicit, 
definite,  and  certain.'  Notice  to  one  of  two  or  more  co- 
trustees or  joint  debtors  is,  in  general,  notice  to  all,  but 
it  ceases  to  be  operative  when  such  trustee  or  debtor  dies, 

ever  an  assignee  earlier  in  time  has  Gayoao  Sav.  Inst,  v.  Fellows,  6  Cold, 

done  all  in  his  power  towards  taking  467;  Clodfelter  v.  Cqx,   1  Sneed,  330; 

possession  or  perfecting   his  title,  he  McWilliams  v.  Webb,  32  Iowa,  577; 

will  retain   his  priority:    Feltham  v.  Murdoch  v.  Finney,  21  Mo.  138.     [To 

Clark,   1  De  Gex  &  S.  307;  Langton  the  same  effect,  see  Laclede  Bank  v. 

V.  Horton,  1  Hare,  549.     [See  also,  to  Schuler,    120   U.   S.   511;    Switzer  v. 

the  same  effect,  the  following  recent  Noffsinger,  82  Va.  518.] 
English  cases:  Mutual  Life  Ins.  Co.  v.         ^  Thayer  v.  Daniels,  113  Mass.  129; 

Langley,  L.  R.  26  Ch.  Div.  686;  John-  Bohlen  v.  Cleveland,    5   Mason,   174; 

stone  V.  Cox,  L.  R.  16  Ch.  Div.  571;  Warren  v.  Copelin,  4  Met.  594;  Dix 

Societe  Geuerale  de  Paris  v.  Walker,  v.  Cobb,  4  Mass.  508,  511;  Wood  v. 

L.  R.  11  App.  C.  20;  affirming  14  Q.  B.  Partridge,   11  Mass.  488,  491;  Little- 

424;  Earl  of  Sheffield  v.  London  J.  St.  field  v.  Smith.  17  Me.  327;  Stevens  v. 

Bank,  L.  R.  13  App.  C.  33.3.]  Stevens,  1  Ashm.   190;  United  States 

'  Spain  V.  Hamilton's  Ex'r,  1  Wall.  v.  Vaughan,    3    Binn.    394;    Muir   v. 

604.    624;    Campbell   v.   Day,    16  Vt.  Schenck,    3   Hill,    228;    Beckwith   v. 

558;   Barney  v.   Douglas,    19   Vt.   98;  Union  Bank,  9  N.  Y.  211;  Kennedy  v. 

Ward  V.  Morrison,  25  Vt.  593;  Loomis  Parke,  17  N.  J.  Eq.  415;    [Fairbanks 

v.  Loomis,   26  Vt.    198,  204;  Dale  v.  v.  Sargent,  104  N.  Y.  108;  58  Am.  Rep. 

Kimpton.  46  Vt.  76;  Barron  v.  Porter,  490.] 

44  vt.  587;  Bishop  v.  Holcomb,  10  'In  re  Tichener,  35  Beav.  317; 
Conn.  444;  Adams  v.  Leavens,  20  Browne  v.  Savage,  4  Drew.  635,  640. 
Conn.  72;  Foster  v.  Mix,  20  Conn.  Notice  cannot  be  given  by  a  mere  con- 
395;  Van  Buskirk  v.  Hartford  etc.  versation:  Saffron  etc.  Soc.  v.  Ray- 
Ins.  Co.,  14  Conn.  141,  144;  36  Am.  ner,  L.  R.  14  Ch.  Div.  40G;  In  re  Tiche- 
Dec.  473;  Harropv.  Landers  etc.  Co.,  ner,  35  Beav.  317.     How  far  a  notice 

45  Conn.  561;  Judah  v.  Judd,  5  Day,  to  attorneys  of  a  trustee  is  operative: 
5.S4;  Woodbridge  v.  Perkins,  3  Day,  See  Saffron  etc.  Soc.  v.  Rayner,  L.  R. 
364;  Dews  v.  Olwill,  3  Baxt.  432;  14  Ch.  Div.  4015;  VVilles  v.  Grcenhdl, 
Flickey  v.  Loney,  4  Baxt.  169;  Hob-  29  Beav.  376,  3S7,  392;  Rickards  v. 
son  v.   Stevenson,   1  Teun.  Ch.   203;  Gledstanes,  3  Giff.  298. 


§  697  EQUITY   JURISPRUDENCE.  970 

or  such  trustee  gives  up  his  position.*  Where  shares  of 
stock  in  a  business  corporation,  or  policy  of  insurance, 
are  assigned,  the  notice  required  by  the  general  rule 
should  be  given  to  a  managing  officer  of  the  company.' 
If  a  fund  is  subject  to  successive  trusts,  the  notice  should 
be  given  to  the  trustee  who  has  it  under  his  actual  control.' 
§  697.  The  Rule  does  not  Apply  to  Assignments  of 
Equitable  Interests  in  Land. — Where  a  debt  has  been  as- 
signed, and  the  debtor  refuses  or  fails  to  pay  it,  no  notice 
of  such  non-payment  is  required  to  be  given  to  the  as- 
signor, in  order  that  he  may  be  made  liable;  the  rules 
concerning  notices  to  indorsers  of  negotiable  paper  do 
not  apply.'*  Finally,  the  special  rule  requiring  a  notice  to 
the  trustee  or  other  holder  of  the  legal  title,  in  order  to 
settle  the  priority  among  successive  assignees,  is  con- 
fined to  transfers  of  personal  property,  debts,  money 
claims  arising  from  contracts,  funds,  and  the  like;  it 
does  not  extend  to  nor  embrace  assignments  of  any  equi- 
table estates  or  interests  in  land.  These  latter  are  gov- 
erned by  the  more  general  rules  concerning  priority, 
already  stated.' 

*  Meuxv.  Bell,  1  Hare,  73;  Ex  parte  cargo  of  a  ship  given  to   the  master 

Rogers,  8  De  Gex,  M.  &  G.  271;  Tim-  has  been  held  sufficient,  when  followed 

Bon    V.    Ramsbottom,    2     Keen,    35;  by  other  steps,  to  perfect  the  title  of 

Willes  V,  Greenhill,  29  Beav.  376,  387;  the  assisijnee:     Langton  v.   Horton,   1 

Wise    V.    Wise,    2    Jones   &   L.    403.  Hare,  549;  3  Beav.  464, 
Where  the  trustee  is  himself  the  as-         '  Bridge  v.  Beadon,  L.  R.  3  Eq.  664. 
eignee   from    his   cestui  que   trust,    no         *  Glya  v.  Hood,  1  De  Gex,  F.  &  J. 

further  notice  is  necessary  to  gain  pri-  334. 

ority  over  a  subsequent  assignee:  Ex         *  See   ante,    §§   682,    683;   Jones   v. 

parteGarrard,  L.  R.  5Ch.  Div.  61;L.  R.  Jones,  8  Sim.  63:^;  Wiltshire  v.  Rab- 

4  Ch.  Div.   101;  Elder  v.   Maclean,  3  bitts,   14  Sim.  76;  Wiliaot  v.  Pike,  5 

Jur.,  N.  S.,  284.    If  one  of  several  co-  Hare,  14;  Lee  v.  Howlett,  2  Kay  &  J. 

trustees  is  also  a  beneficiary,  and  assigns  531;    McCreight   v.    Foster,   L.    R.    6 

his  interest  to  a  third  person,  a  notice  Ch.  604,  610,  611.     In  this  case   the 

to  the  other  trustee  is  requisite;  but  if  vendee   in   a  contract  for  the  sale  of 

he  assigns  to  one  of  his  fellow-trustees,  land  had  agreed  to  assign  the  contract 

no  notice  is  necessary  as  loug  as  that  to    A,    and    A   gave   notice   of    such 

trustee   lives:     Browne   v.    Savage,  4  agreement    to    tlie    vendor.     It    was 

Drew.  635;  In  re  Selby,  8  De  Gex,  M.  held    by    Lord     Hatherley   that    the 

&  G.  271;  Willes  V.  Greenhill,  29  Beav.  vendor   might,   notwithstanding  such 

376,  387,  391;  Comm'rs  v.   Harby,  23  notice,  receive  payment  of  the  balance 

Beav.  508.     These  decisions  seem   to  of  the  price  and  convey  the  land   to 

be  based  upon  mere  verbal  logic.  the   original   vendee;   the   notice   did 

'  Thompson  v.  Speirs,  13  Sim.  469;  not   affect   the  rights  of   the  original 

Edwards  v.  Martin,  L.  R.  1  Eq.  121;  contracting    parties.     An    agreement 

Martin   v.    Sedgwick,    9    Beav.    333.  to  assign  would  be  treated  iu  equity 

Kotice  of  the  assignment  of  a  future  as  an  assignment. 


971 


CONCERNII^Q    PRIORITIES. 


§698 


§  698.  II.  Diligence  of  the  Assignee.  —  Irrespective  of 
any  requirement  to  give  notice  in  order  to  obtain  a  pri- 
ority, the  duty  rests  upon  all  assignees  of  things  in  action 
to  use  reasonable  diligence  in  perfecting  their  titles  or 
enforcing  their  rights.  Even  where  the  rule  concerning 
notice  to  the  debtor  or  trustee  has  not  been  adopted, 
an  assignee  who  had  otherwise  the  priority  may  lose  it 
through  his  laches,  as  against  a  subsequent  purchaser  in 
good  faith  and  for  value  who  has  been  injured  by  the 
negligence.*     It  may  be  said,  in  general,  that,  in  order  to 


»  Spain  V.  Hamilton,  1  Wall.  604. 
See,  as  illustrations  of  such  neglect 
and  of  its  consequences,  Judsoa  v. 
Corcoran,  17  How.  612;  Mercantile 
Ins.  Co.  V.  Corcoran,  1  Gray,  75;  Rich- 
ards V.  Griggs,  16  Mo.  416;  57  Am. 
Dec.  240;  Fraley's  Appeal,  76  Pa.  St. 
42;  Fisher  v.  Knox,  13  Pa.  St.  622; 
53  Am.  Dec.  503;  Maybin  v.  Kirby,  4 
Rich.  Eq.  105;  fOsborn  v.  McClelland, 
43  Ohio  St.  284.]  The  rule  that  a 
subsequent  assignee  of  a  pure  thing  in 
action  will  be  protected  by  a  cAurt  of 
equity  in  any  advantage  which  he  has 
gained  by  his  own  diligence,  or  by  the 
neglect  of  a  prior  assignee,  is  well 
illustrated  by  the  case  of  Judson  v. 
Corcoran,  17  How.  612.  One  W.  had 
a  claim  against  Mexico,  which  became 
the  subject  of  adjustment  and  award 
by  commissioners  acting  under  a 
treaty.  In  1845,  W.  assigned  this 
claim  to  Judson,  who  kept  the  trans- 
fer secret,  gave  no  notice  of  it  to  any 
one,  and  took  no  steps  whatever  until 
1851,  when  he  brought  this  suit. 
After  the  assignment  to  Judson,  W. 
assigned  the  claim  to  Corcoran,  who 
had  no  knowledge  or  notice  whatever 
of  the  prior  transfer.  He  at  once 
communicated  a  formal  notice  of  his 
assignment  to  the  United  States  Secre- 
tary of  State,  which  notice  was  filed 
with  other  papers  in  the  case;  he  ap- 
peared and  prosecuted  the  claim  be- 
fore the  treaty  commissioners,  and 
obtained  an  award  in  his  favor  as  the 
assignee  of  W.  During  all  these  pro- 
ceedings Judson  did  not  interpose  any 
claim  nor  appear  before  the  commis- 
sioners. After  the  award  in  1851  he 
brought  this  suit  against  Corcoran  to 
establish  his  own  prior  right,  and  to 
recover    the    amount    awarded    from 


Corcoran.  The  opinion  of  the  court, 
per  Catron,  J.,  said:  "Assuming  that 
both  sets  of  assignments  are  alike  fair, 
and  originally  stood  on  the  same  bona 
fide  footing,  the  rule  of  necessity  is, 
that  tile  assignor  having  parted  with 
his  interest  by  the  first  assignment, 
the  second  assignee  could  take  noth- 
ing; and  as  he  represents  the  assignor, 
is  bound  by  the  equities  imposed  on 
the  latter;  and  heuce  has  arisen  the 
maxim  in  such  cases,  that  he  who  is 
first  in  time  is  best  in  right.  But  this 
general  rule  has  exceptions."  He  then 
states  the  facts  as  given  above,  and 
proceeds:  "Corcoran's  assignment  was 
fair,  and  without  knowledge  of  Jud- 
son's.  And  assuming  Judson's  to  be 
fair  also,  and  that  no  negligence  could 
be  imputed  to  him,  then  the  case  is 
one  where  an  equity  was  successively 
assigned  in  a  chose  in  action  to  two 
innocent  persons  whose  equities  are 
equal.  Here  Corcoran  has  drawn  to 
his  equity  a  legal  title  to  the  fund, 
which  legal  title  Judson  seeks  to  set 
aside.  Now,  nothing  is  better  settled 
than  that  this  cannot  be  done.  The 
equities  being  equal,  the  law  must 
prevail.  There  are  other  objections 
to  the  case  made  by  Judson,  growing 
out  of  the  negligence  on  his  part  in 
not  presenting  his  assignment  and 
claim  of  property  to  the  state  depart- 
ment, so  as  to  notify  others  of  the 
fact.  The  assignment  was  held  up, 
and  operated  as  a  latent  and  lurking 
transaction,  calculated  to  circumvent 
subsequent  assignees,  and  such  would 
be  its  effect  on  Corcoran,  were  priority  . 
accorded  to  it  by  our  decree.  It  is 
certainly  true,  as  a  general  rule,  as 
above  stated,  that  a  purchaser  of  a 
chose  iu  action,    or  of  an  equitable 


698 


EQUITY   JURISPRUDENCE. 


972 


protect  himself  against  subsequent  transfer  by  the  as- 
signor, where  a  notice  is  not  given  to  the  debtor  or  the 
holder  of  the  legal  interest,  the  assignee  should  obtain  a 
delivery  and  possession  of  the  written  instrument,  which, 
in  ordinary  language,  constitutes  the  thing  in  action, 
which  embodies  and  is  the  highest  evidence  of  the  exist- 
ing demand;  or  when  such  delivery  and  possession  are 
impossible  from  the  very  nature  of  the  subject-matter, 
that  he  should  take  all  the  steps  permitted  by  the  law 
which  are  equivalent  to  actual  possession.'     The  ques- 


title,  must  abide  by  the  case  of  the 
person  from  whom  he  buys,  and  will ' 
only  be  entitled  to  the  remedies  of  the  ^ 
seller;  and  yet  there  may  be  cases  in 
which  a  purchaser,  by  sustaining  the  1 
character  of  a  bona  fide,  assignee,  will , 
be  in  a  better  situation  than  the  per- 
son was  from  whom  he  bought."  He 
then  gives  as  an  illustration  the  case 
of  a  subsequent  assignee  who  has  given 
notice  to  the  del)tor,  while  the  first 
assignee  has  omitted  to  do  so,  according 
to  the  settled  English  rule,  citing  Dearie 
V.  Hall,  3  Rusa.  1,  and  other  decisions, 
and  adds:  "And  the  same  principle 
of  protecting  subsequent  bona  fide  pur- 
chasers of  choses  in  action,  against 
latent  outstanding  equities  of  which 
they  had  no  notice,  was  maintained  in 
this  court  in  the  case  of  Bayley  v. 
Greenleaf,  7  Wheat.  46.  That  was  an 
outstanding  vendor's  lien,  set  up  to 
defeat  a  deed  made  to  trustees  for  the 
benefit  of  the  vendee's  creditors.  The 
court  held  it  to  be  a  secret  trust;  and 
although  to  be  preferred  to  any  other 
subsequent  equity  unconnected  with  a 
legal  advantage,  or  equitable  advan- 
tage which  gives  a  superior  claim  to 
the  legal  title,  still,  it  must  be  post- 
poned to  a  subsequent  equal  equity 
connected  with  such  advantage."  Tlie 
exact  force  of  this  decision  should  be 
carefully  apprehended.  It  certainly 
is  not  an  authority,  as  has  sometimes 
been  claimed,  for  the  theory  that  as- 
signments of  things  in  action  are  never 
subject  to  outstanding  equities  in  favor 
of  third  persons,  but  only  to  those  in 
favor  of  the  debtor.  On  the  con- 
trary, it  asserts  in  clear  and  express 
terms  the  general  doctrine  that  assign- 
ments of  choses  in  action  are  subject 
to  such  equities,  even  though  latent. 


To  this  general  doctrine  it  announces 
certain  exceptions,  and  carefully  dis- 
tinguishes the  extent  of  these  excep- 
tions. They  are  as  follows:  1.  Where 
the  second  assignee,  in  good  faith,  and 
without  notice  of  the  prior  outstand- 
ing equity,  protects  or  supports  his 
own  interest  by  obtaining  a  legal  title 
or  legal  position;  2.  Where  the  second 
assignee,  although  holding  only  an 
equitable  interest,  took  without  notice 
of  the  prior  outstanding  secret  equity, 
and  through  the  laches  of  the  third 
person  in  delaying,  or  other  similar 
conduct,  or  through  his  own  diligence, 
the  second  assignee  has  acquired  a 
position  of  advantage,  so  that  it  would 
be  inequitable  to  deprive  him  of  such 
advantage.  In  these  cases,  the  general 
doctrine  that  an  assignment  is  subject 
to  outstanding  equities  of  third  per- 
sons does  not  apply.  These  consider- 
ations would  go  far  to  reconcile  the 
conflict  of  decision  described  in  subse- 
quent paragraphs  and  notes. 

1  Ryall  v.  Rowles,  1  Ves.  Sr.  348, 
352;  Pinkerton  v.  Manchester  etc.  R. 
R.,  42  N.  H.  424.  Thus  between  two 
successive  assignees  of  a  written  thing 
in  action,  such  as  a  policy  of  insurance, 
a  bond,  etc.,  both  in  good  faith  and 
otherwise  equal,  the  one  to  whom 
possession  of  the  instrument  has  been 
actually  delivered  will  obtain  the  pre- 
cedence: Ancher  v.  Bank  of  England, 
Doug.  637,  639;  Wells  v.  Archer,  10 
Serg.  &  R.  412;  13  Am.  Dec.  682; 
Ellis  V.  Kreutzinger,  27  Mo.  311;  72 
Am.  Dec.  270. 

On  the  same  principle,  if  between 
two  successive  assignees  of  an  equita- 
ble interest,  otherwise  equal,  the  sub- 
sequent one  acquires  the  legal  title  or 
legal  advantage,   he   thereby  obtains 


973  CONCERNING    PRIORITIES.  §  699 

tions  as  to  priority  of  right  may  arise  between  the 
assignee  and  a  judgment  creditor  of  the  assignor  or  a 
subsequent  purchaser  from  the  assignor.  There  is  a 
clear  distinction  between  these  two  claimants,  since  a 
judgment  creditor  only  succeeds  to  the  rights  of  his 
debtor,  while  a  purchaser  may  acquire  higher  rights. 

§  699.  Assignment  of  Shares  of  Stock  —  Between  As- 
signee and  Assignor.  —  The  question  has  very  frequently 
arisen  in  this  country  in  connection  with  transfers  of 
shares  of  stock  in  business  corporations.  The  by-laws  of 
such  companies  generally,  and  even  in  some  states  the 
statutes,  provide  that  an  assignment  of  shares  shall  be 
consummated  and  perfected  by  the  assignee's  surrender- 
ing the  original  certificate  to  the  proper  officers  of  the 
corporation,  and  receiving  a  new  one  issued  to  himself, 
and  by  a  record  of  the  transaction  entered  in  the  com- 
pany's transfer-books.  It  is  the  common  practice,  how- 
ever, to  effect  an  assignment  by  delivering  the  certificate 
to  the  assignee,  with  a  power  of  attorney  indorsed  thereon 
executed  by  the  assignor,  authorizing  the  surrender  to  be 
made  and  all  the  other  steps  to  be  taken  as  prescribed  by 
the  by-laws.  This  method  of  transfer,  according  to  the 
overwhelming  weight  of  authority,  clothes  the  assignee 
with  a  full  legal  ownership  as  against  the  assignor,  and 
with  an  equitable  title  and  ownership  valid  at  least  as 
against  the  corporation.*     The  only  important  questions, 

the   Buperiority:     Ogden  v.    Fitzsim-  Mfg.  Co,  76  N.  Y.  365,  371;  32  Am. 

mons,  7  Cranch,  1,  18;  Judson  v.  Cor-  Rep.  315;  Dunn  v.  Commercial  Bank, 

coran,  17  How.  612;  Downer  v.  Bank,  11  Barb.  580;  McCready  v.  Rumsey, 

39  Vt.   25,    29.     This   rule   has   been  6   Duer,    574;   People   v.    Elmore,   35 

applied  to  subsequent  transferees  of  Cal.    653;   Parrott   v.  Byers,  40   Cal. 

shares   of   stock   who  have   perfected  614;  People  v.  Crockett,  9  Cal.  112;  Mt. 

their  titles  by  a  record  in  the  transfer-  Holly  Co.  v.  Ferree,  17  N.  J.  Eq.  117. 

book,  and  by  the  issue  of  a  new  cer-  [See  also  Noble  v.  Turner,  69  Md.  519; 

tificate,  as  against  prior  assignees  who  Clark  v.  German  Sav.  Bank,  61  Miss, 

have  not  taken   these  steps:    Morris  611;   Caulkins   v.  Gas   Light   Co.,  85 

etc.  Co.   V.  Fisher,  9  N.   J.   Eq.   667;  Tenn.  683;  4  Am.  St.  Rep."^786;  Joslyii 

Craig  V.  Vicksburg,  31  Miss.  216;  and  v.  St.  Paul  D.  Co.,  44  Miss.  183;  Noble 

see  infra,  ^§  712,  715.  v.  Turner,  69  Md.  519;  Reed  v.  Copo- 

1  N.  Y.  &  N.  H.  R.  R  V.  Schuyler,  land,  50  Coniu  472;  47  Am.  Rep.  663; 

34  N.  Y.  30,  80,  per  Davis,  J.;  Comm.  Otis  v.  Gardner,  105  111.  436;  Wood's 

Bank   v.    Kortright,  22    Wend.    348;  Appeal,  92  Pa.  St.  379;  37  Am.  Rep. 

34  Am.  Dec  317;  Cushmau  v.  Thayer  61)4;   Walker  v.  Detroit  Transit  Co.» 


700 


EQUITY   JURISPRUDENCE. 


974 


therefore,  relate  to  the  right  and  priority  of  such  an  as- 
signee as  against  judgment  creditors  of  the  assignor  and 
subsequent  purchasers. 

§  700.  The  Same  —  Between  Assignee  and  Judgment 
Creditors  of  Assignor.  —  It  has  been  held  by  some  courts 
that  such  a  transfer  of  shares  by  a  mere  delivery  of  the 
certificate  and  power  of  attorney,  without  the  further  steps 
for  completing  the  transaction  on  the  transfer-books,  and 
without  any  notice  thereof  given  to  the  company,  is  presump- 
tively fraudulent,  and  therefore  invalid  as  against  judg- 
ment creditors  of  the  assignor.*  A  different  rule,  how- 
ever, must  be  regarded  as  settled  by  the  great  majority  of 
decisions,  which  hold  that  this  mode  of  assignment  is 
valid  as  against  creditors  of  the  assignor,  and  gives  the 
assignee  a  precedence  over  their  subsequent  judgments, 
executions,  and  attachments.* 


47  Mich.  338;  Young  v.  Erie  Iron  Co., 
65  Mich.  Ill;  Williams  v.  Colonial 
Bank,  L.  R.  76  Ch.  Div.  671;  Winter 
V.  Montgomery  G.  L.  Co.,  89  Ala.  544; 
Nicollet  National  Bank  v.  City  Bank, 
38  Minn,  85;  8  Am.  St.  Rep.  643.] 
The  rule  is  concisely  stated  by  Davis, 
J.,  in  the  Schuyler  case,  supra,  as  fol- 
lows: "Where  the  stock  of  a  corpora- 
tion is,  by  the  terms  of  its  charter 
or  by-laws,  transferable  only  on  its 
books,  the  purchaser  who  receives  a 
certificate  with  power  of  attorney  gets 
the  entire  title,  legal  and  equitable,  as 
between  himself  and  the  seller,  with  all 
the  rights  the  latter  possessed;  but  as 
between  himself  and  the  corporation  he 
acquires  only  an  equitable  title,  which 
tliey  are  bound  to  recognize  and  per- 
mit to  be  ripened  into  a  legal  title, 
when  he  presents  himself,  before  any 
effective  transfer  on  the  books  has 
been  made,  to  do  the  acts  required  by 

the   charter  or  by-laws Until 

those  acts  be  done,  he  is  not  a  stock- 
holder, and  has  no  claim  to  act  as  such; 
but  possesses,  as  between  himself  and 
the  corporation,  by  virtue  of  the  certi- 
ficate and  power, the  right  to  make  him- 
self or  whomsoever  he  chooses  a  stock- 
holder, by  the  prescribed  transfer." 

^  Pinkertonv.  Manchester  etc.  R.  R., 
42  N.  H.  424;  Shipmanv.  ^tna  Insur- 
anco  Co.,  29  Cono.  245;  but  see  Colt  v. 


Ives,  31  Conn.  25;  81  Am.  Deo,  161. 

These  cases,  it  will  be  seen,  arose  in 
states  which  have  adopted  the  English 
rule  concerning  notice  of  an  assignment. 
Similar  decisions  have  been  made  in 
Massachusetts,  but  based  entirely  upon 
the  express  language  of  a  statute: 
Fisher  v,  Essex  Bank,  5  Gray,  373, 
Blanchard  v.  DedhamGas  Co.,  12  Gray, 
213.  The  same  rule  has  been  laid  down 
by  the  courts  in  California,  and  is  rested 
upon  the  statutes;  these  do  not,  how- 
ever, materially  differ  from  the  pro- 
visions of  statutes,  charters,  and  by- 
laws in  other  states:  Weston  v.  Bear 
River  etc.  Co.,  5  Cal.  186;  63  Am.  Dec. 
117;  6  Cal.  425,  429;  Naglee  v.  Pacific 
Wharf  Co.,  20  Cal.  530,  533;  People  v. 
Elmore,  35  Cal.  653,  655. 

*  This  conclusion  is  in  complete  har- 
mony with  the  doctrine  of  those  re- 
cent English  cases,  cited  supra,  §  694, 
which  hold  that  an  assignment,  al- 
tltoiKjh  without  notice  to  the  debtor,  or 
trustee,  has  priority  over  judgment 
creditors  of  the  assignor.  The  rule 
given  in  the  text  is  sustained  by  the 
following  among  other  decisions:  Mt. 
Holly  Co.  V.  Ferree,  17  N.  J.  Eq.  117; 
Rogers  v.  N.  J.  Ins.  Co.,  8  N.  J.  Eq. 
167;  Broadway  Bank  v.  McElrath,  13 
N.  J.  Eq.  24;  Commercial  Bank  v. 
Kortright,  22  Wend.  348;  34  Am.  Dec, 
317;  McNeil  v.  Tenth  National  Bank, 


975  CONCERNING    PRIORITIES.  §  701 

§  701.  The  Same  —  Between  Assi^ee  and  Subsequent 
Purchasers.  —  As  between  such  an  assignee  and  subse- 
quent purchasers,  the  question  is  more  complicated.  I 
think  that  general  language  has  sometimes  been  used  by 
judges,  which  indicates  a  confusion  of  mind  with  reference 
to  the  real  situation  of  the  parties,  and  the  possible  cir- 
cumstances which  might  arise  in  the  transaction.  If  the 
holder  of  shares  should  deliver  the  certificate  with  a  power 
of  attorney  executed  by  himself,  it  would  be  impossible 
for  him  to  clothe  a  subsequent  assignee  with  the  same 
indicia  of  ownership,  so  that  the  latter  should  have  a  title 
apparently  equal  to  the  former.  On  the  other  hand,  if 
the  holder  of  shares  should  assign  them  verbally  or  by  a 
written  instrument  to  A,  but  without  delivering  the  cer- 
tificate and  power  of  attorney,  and  should  afterwards 
assign  them  in  the  ordinary  manner,  by  delivering  the 
certificate  with  a  power  of  attorney  to  B,  the  apparent 
title  of  the  latter  would  certainly  be  superior  to  that  of  the 
former.  It  does  not  seem  possible,  therefore,  that  a  ques- 
tion of  priority,  on  the  assumption  that  their  equitable 
interests  are  intrinsically  equal,  can  arise  between  two 
successive  assignees  of  the  same  shares  from  the  same 
owner,  where  the  assignment  to  one  of  them  has  been  by 
a  delivery  of  the  certificate  with  a  power  of  attorney.  The 
questions  of  precedence  among  successive  transfers  exe- 
cuted in  such  a  manner  must  arise  in  cases  where  the 
earlier  assignment,  apparently  made  by  and  in  the  name 
of  the  owner,  is  procured  through  fraud,  breach  of  trust, 
or  even  forgery.^     The  discussion  of  this  particular  topic 

46  N.  Y.  325;  7  Am.  Rep.  341;  Grymes  375;  Stevens  v,  Stevens,  1  Ashm.  190; 

V.  Hone,  49  N.  Y.  17,  22;  10  Am.  Rep.  Dix  v.  Cobb,  4  Mass.  508.     [Bridge- 

313;  Coram,  v.  Watmough,  6  Whart.  water  Iron  Co.  v.  Lissberger,  116  U.  S. 

117;  United  States  v.  Vaughan,  3  Binn.  8;  Continental  National  Bank  v.  Eliot 

394;  5  Am.    Dec.  375;  People  v.   El-  National  Bank,  7  Fed.  Rep.  369;  Nicol- 

more,  35  Cal.  653;  Dale  v,  Kimpton,  let  Nat.  Bank  v.  City  Bank,  38  Minn. 

46  Vt.  76  (what  is  sufficient  notice  to  85;  8  Am.  St.  Rep.  643.] 

to  the  debtor  to  protect  an  assignee  '  Mt.  Holly  Co.  v.  Ferree,  17  N.  J, 

against  attachments  and  executions  by  Eq.  117;  Bank  of  Commerce's  Appeal, 

creditors  of   the  assignor;   casual  in-  73  Pa.  St.  59,  64;  Sabin  v.  Bank  of 

formation  or  knowledge  may  be  suffi-  Woodstock,    21    Vt.   353;    McNeil   v. 

cient);    see     also   United     States     v.  Tenth  Nat.  Bank,  46  N.  Y.  325;  7  Am. 

Vaughan,  3  Binn.  394;   5   Am.  Dec  Rep.  341. 


§§  702,  703  EQUITY   JURISPRUDENCE.  976 

propeply  belongs,  and  will  be  found,  in  the  next  subdi- 
vision, which  treats  of  the  equities  to  which  assignments 
of  things  i/i  action  are  subject.^ 

§  702.  Notice  to  the  Debtor  Necessary  to  Prevent  Sub- 
sequent Acts  by  Him.  —  Diligence  is  also  necessary  on  the 
part  of  the  assignee,  in  order  to  protect  his  right,  by 
giving  prompt  notice  of  the  transfer  to  the  debtor,  trustee, 
or  other  holder  of  the  fund.  Until  notice,  actual  or  con- 
structive, is  received  by  the  debtor  or  trustee,  payment  by 
him  to  the  assignor  would  be  a  valid  payment  of  the 
claim,  and  binding  upon  the  assignee.  The  same  would 
be  true  of  a  release  from  the  assignor  to  the  debtor  or 
trustee,  or  any  other  transaction  between  them  which 
would  operate  as  a  legal  discharge;  it  would  also  be  a  dis- 
charge as  against  the  assignee,  if  done  before  notice.'  It 
is  expressly  provided  in  many  of  the  states  that  a  demand 
in  favor  of  the  debtor,  which  might  be  a  set-off  against 
the  assignor,  not  existing  at  the  date  of  the  assignment, 
but  arising  subsequently,  and  before  notice  to  the  debtor, 
shall  be  a  valid  set-off  against  the  assignee.' 

§  703.  III.  Assignments  of  Things  in  Action  Subject  to 
Equities. — The  doctrine,  stated  in  its  most  comprehensive 
form,  is,  that  an  assignment  of  every  non-negotiable  thing 
in  action,  even  when  made  without  notice  of  the  defect  to 
the  assignee,  is  subject,  in  general,  to  all  equities  existing 
against  the  assignor.  This  broad  doctrine  has  three  dif- 
ferent applications:  1.  Where  the  equities  are  in  favor  of 
the  debtor  or  trustee;  2.  Where  they  arise  between  suc- 
cessive assignors  and  assignees, — that  is,  in  favor  of  some 
prior  assignor;  3.  Where  they  arise  entirely  in  favor  of 

»  See  infra,  §§  707-715.  Reed  v.  Marble,  10  Paige,  409;  N.  Y. 

•  Bishop  V.  Garcia,  14  Abb.  Pr.,  Life  Ins.  etc.  Co.  v.  Smith,  2  BarK 
N.  S.,  69;  Loomis  v,  Loomis,  26  Vt.  Ch.  82;  James  v,  Morey,  2  Cow.  246; 
198;  Campbell  v.  Day,  16  Vt.  558;  14  Am.  Dec.  475;  Atkinson  v.  Run- 
Rider  V.  Johnson,  20  Pa.  St.  190;  nells,  60  Me.  440;  Upton  v.  Moore,  44 
Louden  v.  Tiffany,  5  Watts  &  S.  367;  Vt.  552;  Cook  v.  Mat.  Ins.  Co.,  63 
Stocks  V.  Dobson,  4  De  Gex,  M.  &  G.  Ala.  37;  Brashear  v.  West,  7  Pet.  608; 
11;  Norrish  v.  Marshall,  5  Madd.  475;  Muir  v.  Schenck,  3  Hill,  228;  38  Am. 
Van  Kenren  v.  Corkins,  66  N.  Y.  77,  Dec.  633. 
79,  80;  Kellogg  v.  Smith,  26  N.  Y.  18;  »  See  i^fra,  §  705. 


977  CONCERNING    PRIORITIES.  §  704 

third  persons,  —  the  two  latter  cases  including  what  are 
often  called  latent  equities.  As  these  three  applications 
depend  upon  somewhat  different  grounds,  and  as  there  is 
not  a  perfect  harmony  of  decision  concerning  them,  it 
will  be  expedient  to  discuss  them  separately,  and  thus  to 
avoid  all  unnecessary  doubt  with  respect  to  the  settled 
rules. 

§  704.  1.  Equities  in  Favor  of  the  Debtor  Party.  — 
The  rule  is  settled,  by  an  unbroken  series  of  authorities, 
that  the  assignee  of  a  thing  in  action  not  negotiable 
takes  the  interest  assigned  subject  to  all  the  defenses, 
legal  and  equitable,  of  the  debtor  who  issued  the  obliga- 
tion, or  of  the  trustee  or  other  party  upon  whom  the 
obligation  originally  rested;  that  is,  when  the  original 
debtor  or  trustee,  in  whatever  form  his  promise  or  obli- 
gation is  made,  if  it  is  not  negotiable,  is  sued  by  the  as- 
signee, the  defenses,  legal  and  equitable,  which  he  had 
at  the  time  of  the  assignment,  or  at  the  time  when  notice 
of  it  was  given,  against  the  original  creditor,  avail  to  him 
against  the  substituted  creditor.*     This  rule  applies  to  all 

*  See   Pomeroy   on   Remedies,    sec.  Hayne,  29  Iowa,  339;  Norton  v.  Rose, 

157;  Callanan  v.   Edwards,  32  N.  Y.  2  Wash.  (Va.)  233;  Brashear  v.  West, 

483,486,  per  Wright,  J.:  "An  assignee  7  Pet.   608;  Wood  v.  Perry,  1  Barb. 

of   a  chose  in  action,  not  negotiable,  114,  131;  Ainslie  v.  Boynton,  2  Barb, 

takes  the  thing  assigned  subject  to  all  258,  263;  Frants  v.  Brown,  17  Serg.  & 

the  rights  which  the  debtor  had  ac-  R.  287;  Jordan  v.  Black,  2  Murph.  30; 

quired  in  respect  thereto  prior  to  the  McKinnie  v.  Rutherford,  1  Dev.  &  B. 

assignment,  or  to  the  time  notice  was  Eq.   14;  Moody  v.  Sitton,  2  Ired.  Eq. 

given  of  it,    when  there  is  an  inter-  382;  Lackay  v.   Curtiss,   6  Ired.   Eq. 

val  between  the  execution  of  the  trans-  199;  Turton   v.    Benson,   1    P.   Wms. 

fer  and  the  notice."  See  also Ingraham  497;  2  Vern.    764;  Coles   v.  Jones,  2 

V.  Disborough,  47  N.  Y.  421;  Wanzer  Vern.  692:  Priddy  v.  Rose,  3  Mer.  86; 

V.  Gary,  76  N.  Y.  526;  Andrews  v.  Gil-  Athenseum  etc.  Soc.   v.  Pooley,  3   De 

lespie,  47  N.  Y.  487;  Bush  v.  Lathrop,  Gex  &  J.  294;  Stocks  v.  Dobson,  4  De 

22  N.   Y.    535,    538,    per    Denio,  J.;  Gex,   M.    &   G.    11;    Aberaman   Iron 

Reeves   v.    Kimball,    40  N.    Y.    299;  Works  v.  Wickens,  L.  R.  5  Eq.  485, 

Commercial   Bank  v.    Colt,   15  Barb.  516,  517;  4  Ch.  101;  Graham  v.  John- 

506;  Western  Bank   v.  Sherwood,  29  son,  L.  R.  8  Eq.  36;  Ex  parte  Chorley, 

Barb.  383;  Barney  v.  Grover,  28  Vt.  L.    R.   11  Eq.   157;  In   re  China  etc. 

391;  Kamena  v.  Huelbig,  23  N.  J.  Eq.  Co.,  L.  R.  7  Eq.  240;  In  re  Natal  etc. 

78;  Bank  v,  Fordyce,  9  Pa.  St.  275;  Co.,  L.  R.  3  Ch.  355;  Ex  parte  New 

Ragsdale  v.  Hagy,  9  Gratt.  409;  Mar-  Zealand  Bank,  L.  R.  3  Ch.  154;   Houl- 

tin  V.  Richardson,  68  N.  C.  255;  An-  ditch  v.  Wallace,  5  Clark  &F.  629;RoIt 

drews  v.  McCoy,  8  Ala.  920;  42  Am.  v.   White,    31     Beav.   520;   Smith   v. 

Dec.  €69;  Jeffries  v.  Evans,  6  B.  Mon.  Parkes,  16  Beav.  115;  Cockell  v.Taylor, 

J19?   43  Am.   Dec.    158;  Kleeman   v.  ISBeav.  103;  Dibhs  v.  Goren,  11  Beav. 

F-7^   '«,   63    Dl.    482;    Boardman    v.  483.     [See  also  Pollard  v.  Viuton,  105 
2  Eq.  Jur.— 62 


§704 


EQUITY   JURISPRUDENCE. 


978 


forms  of  contract  not  negotiable,  and  to  all  defenses  which 
would  have  been  valid  between  the  debtor  party  and  the 
original  creditor.  These  defenses  may  arise  out  of  or 
be  inherent  in  the  very  terms  or  nature  of  the  obligation 
itself,  as  that  it  was  conditional  and  the  condition  has 
not  been  performed  by  the  assignor,  failure  or  illegality 
of  the  consideration,  and  the  like;  or  they  may  exist 
outside  of  the  contract,  as  set-off,  payment,  release,  the 
condition  of  accounts  between  the  original  parties,  and 
the  like.  Some  examples  are  given  in  the  foot-note,  by 
way  of  illustration.'     It   is  essential,  however,  that  the 


U.  S.  7;  Cowdery  V.  Vandenburgh,  101 
U.  S.  575;  Goldthwaite  v.  National 
Bank,  67  Ala.  549;  East  Birmingham 
Land  Co.  v.  Dennis,  85  Ala.  565;  7  Am. 
St.  Rep.  73;  Spinning  v.  Sullivan,  48 
Mich.  5;  McKenna  v.  Kirkwood,  50 
Mich.  544;  Haydon  v.  Nicoletti,  18 
Nev.  290:  Reeve  v.  Smith,  113111.  47; 
Hill  V.  Hoole,  116  N.  Y.  302;  Fair- 
banks V.  Sargent,  104  N.  Y.  116;  56 
Am.  Rep.  490;  Friedlander  v.  T.  &  P. 
R'y,  130  U.  S.  416.]  Upon  the  ques- 
tion whether  the  doctrine  stated  in  the 
text  applies  to  mortgages  given  to  se- 
cure negotiable  promissory  notes  — 
a  form  of  security  very  common  in 
some  states  —  the  authorities  are  in 
direct  conflict.  In  one  class  of  decis- 
ions it  has  been  held  that  where  a 
mortgage  is  given  to  secure  a  negoti- 
able proniisory  note  and  before  ma- 
turity of  the  note  it  and  the  mortgage 
are  assigned  to  a  bona  fide  purchaser 
for  value,  the  assignment  of  the  mort- 
gage as  well  as  of  the  note  is  free  from 
all  equities  subsisting  between  the 
original  parties  in  favor  of  the  mort- 
gagor: Carpenter  V,  Longan,  16  Wall. 
271,  273;  Kenicott  v.  Supervisors,  16 
Wall.  452,  469;  Taylor  v.  Page,  6  Allen, 
86;  Reeves  v.  Scully,  Walk.  Ch.  248; 
Croft  v.  Bunster,  9  Wis.  503,  509; 
Cornell  v.  Hichens,  11  Wis.  353;  Fisher 
V,  Otis,  3  Chand.  83;  Martineau  v. 
McCoUum,  4  Chand.  153;  Potts  v. 
Black  well,  4  Jones  Eq.  5S;  Bloomer  v. 
Henderson,  8  Mich.  395;  77  Am.  Dec. 
453;  Cicotte  V.  Gagnier,  2  Mich.  381; 
Pierce  v.  Faunce,  47  Me,  507.  [See 
also  Hawley  v.  Bibb,  69  Ala,  52;  Spence 
V.  Mobile  etc.  R'y  Co.,  79  Ala.  576; 
Jacobsen  v.  Dodd,  32  N.  J.  Eq.  403; 
Beala  v.  Neddo,  2  Fed.  Rep.  43;  Bar- 


num  V.  Phenix,  60  Mich,  388;  Cooper 
V.  Smith,  75  Mich.  247.]  Other 
cases  reach  exactly  the  opposite  con- 
clusion, and  hold  that  the  assignment 
of  such  a  mortgage  is  governed  by 
the  general  rule:  Kleeman  v,  Fris- 
bie,  63  III.  482;  Bryant  v.  Vix,  83  111. 
11;  Baily  v.  Smith,  14  Ohio  St.  396; 
84  Am.  Dec.  385;  [Scott  v.  Maglough- 
lin,  133  111.  33;  Redin  v.  Branhan, 
43  Minn.  283;  Theyken  v,  Howe  Ma- 
chine Co.,  109  Pa.  St.  95:  Earnest  v. 
Hoskius,  100  Pa.  St,  551;  Reiueman 
V.  Rohl),  98  Pa.  St.  474;  Appeal  of 
Mifflin  Co.  Nat.  Bank,  98  Pa.  St.  150; 
Vredenburgh  v.  Burnet,  31  N.  J.  Eq. 
229;  Olds  v,  Cummings,  31  111.  188; 
Towner  v.  McClelland,  110  111.  542; 
Tabor  V,  Foy,  56  Iowa,  539;  Oster  v, 
Mickley,  35  Minn,  245;  Shippen  v, 
Whittier,  117  111.  282;  Woodruff  v. 
Morristown  Inst.,  34  N.  J.  Eq.  174,] 
The  reasoning  of  these  Illinois  decis- 
ions is,  in  my  opinion,  most  in  accord- 
ance with  the  settled  doctrines  of 
equity  jurisprudence,  namely,  that  the 
assignment  of  the  mortgage,  whether 
it  be  an  incident  of  the  transfer  of  the 
note,  or  be  direct,  is  wholly  equitable, 
and  gives  only  an  equitable  title  to  the 
assignee,  and  must  therefore  be  subject 
to  all  subsisting  equities;  the  doctrine 
of  bona  fide  purchase  for  a  valuable 
consideration  not  applying  to  transfers 
of  mere  equitable  interests.  [InHoag- 
land  V.  Shampanore,  37  N.  J,  Eq.  592, 
it  is  held  that  an  assignee  of  a  chattel 
mortgage,  it  being  a  non-negotiable 
instrument,  takes  subject  to  existing 
equities.] 

*  Of  the  Kinds  of  Contract.  —  Shares 
and  obligations  of  corporations:  la 
re  China  etc  Co.,  L.  K  7  Eq.  240;  In 


979 


CONCERNING    PRIORITIES. 


§704 


equity  in  favor  of  the  debtor  should  exist  at  the  time  of 
the  assignment  or  before  notice  thereof;  after  receiving 


re  Natal  etc.  Co.,  L.  R.  3  Ch.  355; 
[East  Birmingham  L.  Co.  v.  Dennis, 
85  Ala,  565;  7  Am.  St.  Rep.  73.] 
Bonds,  or  bonds  and  mortgages:  Tur- 
ton  V.  Benson,  1  P.  Wms.  497;  West- 
era  Bank  v.  Sherwood,  29  Barb.  383; 
[Hill  V.  Hoole,  116  N.  Y.  302.]  A 
warehouseman's  receipt:  Commercial 
Bank  v.  Colt,  15  Barb.  506.  Assign- 
ment for  benefit  of  creditors:  Marine 
Bank  v.  Jauucey,  1  Barb.  486;  Maas 
V.  Goodman,  2  Hilt.  275.  Contract 
for  the  sale  of  land,  in  an  action  for  a 
specific  performance  by  an  assignee  of 
the  vendee:  Reeves  v.  Kimball,  40 
N.  Y.  299.  [Requisition  drawn  ou 
school  funds  of  public  school  dis- 
trict: Shakespear  v.  Smith,  77  Cal. 
638,  Bills  of  lading,  fraudulently 
issued  by  the  agent  of  the  carrier, 
without  receiving  the  goods  named 
therein:  Friedlander  v.  T.  &  P.  R'y 
Co.,  130  U.  S.  416.  Purchase-money 
bond,  secured  by  grantor's  lien:  Gor- 
don V.  Ring,  76  Va,  694.  County  war- 
rants: Wall  V.  County  of  Monroe,  103 
U.  S.  77;  County  of  Ouachita  v.  Wol- 
cott,  103  U.  S.  559.] 

Of  Defenses,  —  In  an  action  on  a 
bond  and ,  mortgage  by  the  assignee, 
the  defense  that  they  were  given  on 
consideration  that  the  mortgagee 
should  perform  certain  covenants  con- 
tained in  a  collateral  agreement  be- 
tween himself  and  the  mortgagor,  and 
that  he  had  wholly  failed  to  perform 
them,  was  sustained:  Western  Bank 
V,  Slierwood.  29  Barb.  383.  Failure 
or  illegality  of  the  consideration,  or 
that  the  assigned  obligation  was  given 
as  collateral  security  for  a  debt  which 
has  been  paid:  Ellis  v,  Messervie,  II 
Paige,  467;  Weaver  v.  McCorkle,  14 
Serg.  &  R.  304;  McMullen  v.  Wenner, 
16  Serg.  &  R.  18;  16  Am.  Dec.  543. 
That  the  bond  or  other  obligation  as- 
signed had  been  wholly  or  partially 
satisfied:  Simsou  v.  Brown,  68  N.  Y. 
355,  361;  Kelly  v.  Roberts,  40  N.  Y. 
432;  Turton  v.  Benson.  1  P.  Wms. 
497;  Rolt  v.  White,  31  Beav.  5'iO; 
Smith  V.  Parkes,  16  Beav.  115;  Oid 
V.  White,  3  Beav.  3.i7.  A  set-oflf  ex- 
isting in  favor  of  the  debtor  at  the 
time  of  the  assignment  or  notice 
thereof:  Loomis  v.  Loomis,  26  Vt.  198; 
Campbell  v.  Day,  16  Vt.  558;  R,ider 
V.   Johnson,    20  Pa.    St.  190;  LouJeu 


V.  TifiFany,  5  Watts  &  S.  367;  Moore 
V.  Jervis,  2  Coll.  C.  C.  60;  Stephens 
V.  Venables,  30  Beav.  625;  Willes  v. 
Greenhill,  29  Beav.  376;  Cavendish  v. 
Geaves,  24  Beav.  163,  173.  Where 
money  coming  due  on  a  contract  is 
assigned,  the  assignee's  claim  is  sub- 
ject to  all  the  conditions  and  terms  of 
the  contract:  Tooth  v.  Haliett,  L.  R. 
4  Ch.  242;  Myers  v.  United  etc.  Ass. 
Co.,  7  De  Gex,  M.  &  G.  112;  Bristow 
V.  Whitmore,  9  H.  L.  Cas.  391.  An 
assignment  by  a  stockholder  of  his 
shares  or  of  corporation  obligations 
is  subject  to  all  equities  and  claims 
with  respect  thereto  existing  against 
him  in  favor  of  the  company  at  the 
date  of  the  transfer:  In  re  Natal  etc. 
Co.,  L.  R.  3  Ch.  355;  In  re  China 
Steamship  Co.,  L.  R.  7  Eq.  240;  [Jen- 
nings  v.  Bank  of  California,  79  Cal. 
323;  12  Am.  St.  Rep.  145;  Hammond 
V.  Hastings,  134  U.  S.  401];  Kleemaa 
V.  Frisbie,  63  111.  482  (assignment 
of  a  mortgage  or  deed  of  trust  given 
to  secure  a  negotiable  promissory  note 
is  subject  to  all  equities);  Parmalee 
v.  Wheeler,  32  Wis.  429  (assignment 
of  a  judgment,  ditto);  Broadman  v. 
Hayne,  29  Iowa,  339  (of  an  order  made 
by  a  board  of  school  trustees);  Downey 
V.  Tharp,  63  Pa.  St.  322  (what  is  not 
such  an  equity  or  defense.  Where 
a  demand  has  been  twice  assigned, 
the  debtor  cannot  set  off  as  against 
the  second  assignee  a  claim  against 
the  first).  It  is  held  in  Massachu- 
setts, under  the  General  Statutes  (c 
161,  sec.  6i),  that  when  the  creditor  as- 
signs a  note  and  mortgage  given  as  col- 
lateral security  for  a  debt,  after  the  debt 
so  secured  had  been  paid,  to  an  assignee 
for  a  valuable  consideration  and  with- 
out notice,  the  title  of  such  innocent 
assignee  is  not  affected  by  the  fraud 
of  his  assignor,  and  is  therefore  good 
as  against  the  mortgagor:  Draper  v. 
Saxton,  118  Mass.  427.  Also  in  Mo- 
Masters  V,  Wilhelm,  85  Pa.  St,  218,  it 
is  held  that  the  assignee  of  a  mortgage 
is  not  affected  by  a  collateral  agree- 
ment between  the  mortgagor  and 
mortgagee,  made  at  the  time  of  execut-  . 
ing  the  mortgage,  and  of  which  he  had 
no  notice.  See,  as  further  illustrations 
of  the  doctrine  stated  in  the  text,  Allen 
V.  Watt,  79  111.  284;  Hall  v.  Hickman, 
2  Del.  Ch.  318. 


§  705  EQUITY    JURISPRUDENCE.  980 

notice,  he  cannot,  by  a  payment,  release,  obtaining  a  set- 
off, or  any  other  act,  defeat  or  prejudice  the  right  of  the 
assignee.  The  debtor  who  would  have  been  entitled  to 
equities  under  this  rule  may,  by  a  writing,  or  by  actual 
misrepresentations,  or  by  conduct,  or  even  by  silence 
towards  the  assignee,  estop  himself  from  setting  them  up, 
and  he  may  release  them.^ 

§  705.  Statutory  Provision  —  Codes  of  Procedure.  — 
Since  the  general  doctrine  concerning  the  rights  of  the 
debtor  parties  as  aguinst  assignees  has  been  expressly 
recognized  and  preserved  in  all  the  codes  and  practice 
acts  of  the  states  and  territories  which  have  adopted  the 
reformed  procedure,  it  will  be  proper  to  exhibit,  in  a 
very  brief  manner,  the  results  of  the  judicial  interpreta- 
tion put  upon  these  statutory  provisions,  although  they 
apply  to  legal  as  well  as  to  equitable  actions.  The  pro- 
vision found  in  the  various  codes  is  substantially  as  fol- 
lows: "  In  the  case  of  an  assignment  of  a  thing  in  action, 
the  action  of  the  assignee  shall  be  without  any  prejudice 
to  any  set-off  or  other  defense  existing  at  the  time  of  or 
before  notice  of  the  assignment;  but  this  section  shall  not 

'  As  where  the  maker  of  an  accom-  whicli  was  actually  without  any  con- 
modatioa  note  represents,  to  one  who  sideration,  and  C  bought  the  security 
is  about  to  discount  it  at  more  than  at  a  large  discount  (for  sixteen  thou- 
the  legal  rate  of  interest,  that  it  is  sand  dollars)  upon  the  faith  of  a  writ- 
business  paper,  and  thereby  estops  ten  statement  by  M.  that  the  amount 
himself  from  settinj^  up  the  defense  of  expressed  in  the  instrument  was  the 
usury  in  its  inception.  Representa-  true  consideration;  held,  that  M.  was 
tion  under  similar  circumstances,  that  estopped  from  asserting  a  want  of 
the  obligation  about  to  be  assigned  consideration  to  the  full  extent  of  the 
was  given  upon  a  valuable  considera-  face  of  the  bond  and  mortgage:  Gris- 
tion,  would  estop  the  debtor  from  sler  v.  Powers,  81  N.  Y.  57;  37  Am. 
relying  upon  the  actual  want  of  con-  Rep.  475.  See  also,  as  illustrations  of 
sideration  as  a  defense:  In  re  Northern  such  estoppel,  Ashton's  Appeal,  73  Pa. 
etc.  Co.,  L.  R.  10  Eq.  458,  463;  In  re  St.  153,  161,  162;  Twitchell  v.  Mc- 
Agra  etc.  Bank.,  L.  R.  2  Ch.  391;  In  re  Murtrie,  77  Pa.  St.  383;  Scott  v,  Sad- 
General  Estates  Co.,  L.  R.  3  Ch.  758;  ler,  52  Pa.  St.  211;  Weaver  v.  Lynch, 
In  re  Blakeley  Ordnance  Co.,  L.  R.  3  25  Pa.  St.  449;  64  Am.  Dec.  713;  Mc- 
Ch.  154;  Higgs  v.  Northern  etc.  Co.,  Mullen  v.  Wenner,  16  Serg.  &  R.  18; 
L.  R.  4  Ex.  387;  Watson's  Ex'rs  v.  16  Am.  Dec.  543;  Kellogg  v.  Ames,  41 
McLaren,  19  Wend.  557;  Sargeant  N.  Y.  259;  Holbrook  v.  N.  J.  Zino 
V.  Sargeant,  18  Vt.  371;  Bank  v.  Je-  Co.,  57  N.  Y.  616,  622,  623;  Petrie  v, 
rome,  18  Conn.  443;  Jones  V.  Hardesty,  Feeter,  21  Wend.  172;  Hall  v.  Pur- 
10  Gill  &  J.  404.  Where  A  executed  nell,  2  Md.  Ch,  137;  Foot  v.  Ketchum, 
a  bond  and  mortgage  purporting  to  be  15  Vt.  258;  40  Am.  Dec.  678;  King  t. 
for  twenty  thousand  dollars  to  B,  but  Lindsay,  3  Ired,  Eq.  77. 


981  CONCERNING   PRIORITIES.  §  706 

apply  to  negotiable  promissory  notes  and  bills  of  ex- 
change [and  negotiable  bouds:  Ohio,  Kansas,  Nebraska], 
transferred  in  good  faith  and  upon  good  consideration 
before  due."'  In  Ohio,  Kansas,  Nebraska,  and  Washing- 
ton the  language  is,  "The  action  of  the  assignee  shall  be 
without  prejudice  to  any  set-off  or  other  defense  now  al- 
lowed.'" 

§  706.  Same  Continued. — The  defenses  which  this  clause 
admits  should  be  carefully  distinguished  from  counter- 
claims subsequently  provided  for  by  the  codes.  This  sec- 
tion speaks  of  defenses  which  simply  prevent  the  plaintiff 
from  succeeding,  and  may  be  available  against  an  as- 
signee, as  well  as  against  the  original  creditor.  The 
counterclaim  assumes  a  right  of  action  against,  and  de- 
mands affirmative  relief  from,  the  plaintiff,  and  is  there- 
fore impossible,  as  against  an  assignee  suing,  if  it  existed 
against  the  assignor.  It  was  not  intended  by  the  codes 
to  alter  the  substantial  rights  of  parties,  but  only  to 
introduce  such  modifications  into  the  modes  of  protect- 
ing them  as  were  rendered  necessary  by  the  preceding 
section  requiring  the  real  party  in  interest  in  most  cases 
to  be  the  plaintiff.  Taking  the  two  sections  together, 
the  plain  interpretation  of  them  is:  the  assignee  of  a 
thing  in  action  must  sue  upon  it  in  his  own  name,  but 
this  change  in  the  practice  at  law  shall  not  work  any 
alteration  of  the  actual  rights  of  the  parties;  the  defend- 
ants are  still  entitled  to  the  same  defenses  against  the 
assignee  who  sues  which  they  would  have  had  if  the 
former  legal  rule  had  continued  to  prevail,  and  the  action 
had  been  brought  in  the  name  of  the  assignor,  but  to  no 
other  or  different  defenses.  This  construction  is  now 
firmly  and  universally  established.'     I  have  placed  in  the 

*  New  York  (old  code),  sec.  112;  (new  sec.  5;  Washington,  sec.  3;  Wyoming^ 

code,  sec. );  Minnesota,  sec.  27;  Cal-  sec.  33;  Arizona,  sec.  5. 

ifornia,  sec.  368;  Wisconsin,  c.  122,  sec  *  Ohio,  sec.  26;  Kansas,  sec.  27;  Ne- 

13;  Indiana,  sec  6;  Kentucky,  sec.  31;  braska,  sec.  29;  Washington,    seo.  3» 

South  Carolina,  sec  135;  North  Caro-  slightly  varied. 

lina,   sec.   55;  Oregon,   sees.   28,   382;  *  Beckwith  v.  Union  Bank,  9  N.  Y. 

Nevada,  sec.  5;   Iowa,  sec.  2546;  Da-  211,  212,  per  Johnson,  J.;   Myers  ▼, 

kota,  sec.  65;  Idaho,  sec  5;  Montana,  Davis,  22  N.  Y.  489,  490,  per  Deaio,  J, 


§  707  EQUITY   JURISPRUDENCE.  982 

foot-note  a  number  of  decisions  involving  the  meaning 
and  effect  of  this  statutory  provision,  and  relating  espe- 
cially to  the  time  at  which  the  set-off  or  other  defense 
must  exist,  in  order  that  it  may  be  available  against  the 
assignee.* 

§  707.  2.  Equities  between  Successive  Assignors  and 
Assignees.  —  The  doctrine  is  not  confined  to  the  case  of 
the  debtor  party  setting  up  a  defense  against  an  assignee; 
it  also  applies,  when  the  same  non-negotiable  thing  in 
action  has  gone  through  successive  assignments,  to  the 
second  and  subsequent  assignees,  if  there  were  equities 
subsisting  between  the  original  assignor  —  or  on?/ prior 
assignor  —  and  his  immediate  assignee  in  favor  of  the 
former.  The  instances  of  this  application  include  the 
following,  among  other  circumstances:  When  the  owner 
transfers  the  thing  in  action  upon  condition,  or  subject 
to  any  reservations,  and  this  immediate  assignee  transfers 
it  absolutely;  when  the  first  assignment  is  accomplished 

^  Set-off. —There  is  a  difiference  160;  Maas  v.  Goodman,  2  Hilt.  275; 
among  these  decisions.  In  some  it  is  Lathrop  v.  Gorlfrey,  6  Thomp.  &  C. 
held  that  the  assigned  claim,  and  the  96;  Adams  v.  Rodarmel,  19  Ind.  .S39; 
claim  iu  favor  of  the  defendant,  must  Morrow's  Assignees  v.  Bright,  20  Mo. 
both  be  existing  demands,  due  and  298;  Walker  v.  McKay,  2  Met.  (Kv.) 
payable  at  the  date  of  the  assignment,  294;  Gildersleeve  v.  Burrows,  24  Ohio 
and  that  it  is  not  sufficient  for  the  St.  204;  Norton  v.  Foster,  12  Kan.  44. 
latter  to  become  a  demand  due  and  47,  48;  Leavenson  v.  Lafontaine,  3 
payable  after  the  assignment,  but  be-  Kan.  523,  526;  Harris  v.  Burwell,  65 
fore  notice  thereof.  In  others  it  is  N.  C.  584;  Richards  v.  Daily,  34  Iowa, 
held  that  a  debt  existing  in  favor  of  427,  429;  Smith  v.  Fox,  48  N.  Y.  674; 
the  defendant,  and  becoming  due  and  Smith  v.  Felton,  43  N.  Y.  419;  Brad- 
payable  against  the  assignor  at  any  ley  v.  Angell,  3N.  Y.  475,  478;  Chance 
time  hefort  notice  of  the  assignment,  con-  v.  Isaacs,  ^  Paige,  592;  Martin  v.  Rich- 
stitutes  a  valid  set-off.  The  rule  con-  ardson,  68  N.  C.  255,  and  cases  cited; 
cerning  equitable  set-off,  when  the  McCabe  v.  Grey,  20  Cal.  509;  Herrick 
assignor  is  insolvent,  is  also  admitted  v.  Woolverton,  41  N.  Y.  581;  1  Am. 
in  several  of  these  cases:  Beckwith  v.  Rep.  461;  Miller  &  Co.  v.  Florer,  15 
Union  Bank,  9  N.  Y.  211;  Myers  v.  Ohio  St.  148,  151;  Loomis  v.  Eagle 
Davis,  22  N.  Y.  489,  490;  Martin  v.  Bank,  10  Ohio  St.  327;  Casad  v. 
KuntzmuUer,  37  N.  Y.  396;  Barlow  Hughes,  27  Ind.  141;  Lawrence  v. 
v.  Myers,  64  N.  Y.  41;  21  Am.  Rep.  Nelson,  21  N.  Y.  158;  Osgood  v.  De 
5S2;  reversing  6  N.  Y.  Sup.  Ct.  183;  Groot,  36  N.  Y.  348;  Merritt  v.  Sea- 
Roberts  V.  Carter,  38  N.  Y.  107;  Rol)-  man,  6  N.  Y.  168;  Field  v.  Mayor  etc., 
inson  v.  Howes,  20  N.  Y.  84;  Merrill  6  N.  Y.  179;  57  Am.  Dec.  435;  [Gold- 
V.  Green,  55  N.  Y.  270,  274;  Frick  v.  thwaite  v.  National  Bank,  67  Ala.  549; 
White,  57  N.  Y.  103;  Blydenburgh  v.  McKenna  v.  Kirkwood,  50  Mich.  544; 
Thayer,  3  Keyes,  293;  Williams  v.  Baker  v.  Kinsey,  41  Ohio  St.  403; 
Brown,  2  Keyes,  486;  Watt  v.  Mayor  Fairbanks  v.  Sargent,  104  N.  Y.  116; 
etc.,  1  Sand.  23;  Wells  v.  Stewart,  3  68  Am.  Rep.  490.]  And  see  Pomeroy 
Barb.  40;  Ogden  v.  Prentice,  33  Barb,  on  Remedies,  sees.  163-170. 


983  CONCERNING    PRIORITIES.  §  707 

by  a  forgery  of  the  owner's  name,  and  this  assignee  after- 
wards transfers  to  an  innocent  purchaser  for  value;  when 
the  original  assignment  is  procured  by  fraud,  duress,  or 
undue  influence,  and  a  second  assignment  is  then  made 
to  a  purchaser  for  value  and  without  notice;  when  the 
original  assignment  is  regular  on  its  face,  executed  in  the 
name  of  the  owner  and  by  means  of  his  signature  volun- 
tarily written,  but  the  transfer  is  consummated  through 
a  breach  of  fiduciary  duty  by  an  agent  or  bailee  contrary 
to  the  owner's  intention,  and  this  immediate  assignee 
transfers  to  an  innocent  holder;  and  finally,  when  the 
original  owner  assigns  the  same  thing  in  action  for  value 
and  without  notice,  first  to  A  and  afterwards  to  B,  and 
the  controversy  is  between  these  two  claimants,  or  be- 
tween subsequent  assignees  from  and  deriving  title 
through  them.  The  decisions  involving  the  doctrine, 
in  its  application  to  these  various  circumstances,  are 
directly  conflicting.  "While  a  complete  reconciliation  of 
this  conflict  is  impossible,  there  are  considerations  which 
will  bring  the  authorities  into  a  partial  harmony.  The 
rule  which  makes  the  right  of  a  subsequent  assignee  sub- 
ject to  the  equities  subsisting  in  favor  of  the  original  or 
any  prior  assignor  is  plainly  a  mere  expression  of  the 
general  principle,  that  among  successive  equitable  inter- 
ests in  the  same  thing,  the  order  of  time  prevails.  Tho 
decisions  which  uphold  the  equities  of  the  prior  assignor 
are  either  expressly  or  impliedly  based  upon  this  princi- 
ple. But  the  principle  itself  is  not  absolute;  it  prevails 
only  where  the  successive  equitable  interests  are  equal; 
indeed,  the  equity  resulting  -merely  from  priority  in  time 
has  been  said  to  be  the  feeblest  of  any,  and  to  be  resorted 
to  only  when  there  is  no  other  feature  or  incident  of 
superiority.^  "Whatever  creates  a  superior  equity  in  one 
of  the  successive  holders  will  disturb  the  order  of  time, 

*  See  supra,  vol.  1,  §  414,  and  the  is,  in  my  opinion,  ranch  too  strong;  it 

opinion  in  Rice  v.  Rice,  2  Drew.   73,  can  hardly  be  reconciled  with  the  im- 

there  (quoted.     This  description  of  the  posing  line  of  authorities  cited  in  the 

right  reaulting  from  a  priority  in  time  following  paragraphs. 


§  708  EQUITY   JURISPRUDENCE.  984 

and  many  different  features  or  incidents  will  have  this 
effect.  The  laches  of  one  having  an  interest  prior  in  time 
may  confer  a  superior  equity  upon  a  subsequent  holder; 
notice  may  destroy  a  precedence  otherwise  existing;  ab- 
sence of  a  valuable  consideration  is  always  a  badge  of 
inferiority;  and  finally,  the  doctrine  of  estoppel  may  be 
properly  invoked  to  prevent  a  prior  party  from  asserting 
his  right.  In  many  of  the  cases  which  appear  to  deny 
the  doctrine  that  a  subsequent  assignee  takes  subject  to 
the  equities  of  a  prior  assignor  or  of  a  third  person,  the 
decision  is  in  fact  rested  upon  one  or  the  other  of  these 
well-settled  exceptions  to  the  general  principle  of  priority 
in  order  of  time  among  successive  equitable  interests, 
although  the  opinion  may  not  perhaps  state  such  a  ground 
as  the  ratio  decidendi.  It  is  possible,  in  this  manner, 
to  effect  a  partial  reconcilement  among  the  authorities; 
some  conflict  of  opinion,  however,  still  remains. 

§  708.  General  Rule  —  Assignment  Subject  to  Latent 
Equities.  —  The  equities  of  a  prior  assignor,  or  of  a  third 
person,  have  sometimes  been  called  "latent."  The  theory 
that  such  "latent  equities"  cannot  prevail  against  the 
title  of  a  second  or  other  subsequent  assignee,  and  that 
an  assignee  only  takes  subject  to  the  equities  in  favor  of 
the  debtor  party,  has  received  some  judicial  support.'  It 
is,  however,  unsound;  it  is,  in  effect,  an  extension  of  the 
peculiar  qualities  of  negotiable  instruments  to  things 
in  action  not  negotiable.  The  doctrine  is  sustained  by 
the  weight  of  authority,  I  think,  and  by  principle,  that 
the  right  of  the  second  or  other  subsequent  assignee  is 
subject  to  all  equities  subsisting  in  favor  of  the  original 
or  other  prior  assignor,  unless  in  some  settled  mode  rec- 
ognized by  equity  jurisprudence  such  assignee  has  ob- 
tained a  superiority  which  gives  him  the  precedence. 
This  doctrine  must  be  regarded  as  correct,  as  based  upon 
principle,  as  long  as  the  distinction  between  negotiable 
and  non-negotiable  obligations  is  preserved  in  our  juris- 

}  See  cases  in/ra,  under  §  715. 


985 


CONCERNING   PRIORITIES. 


§  709 


prudence.*  I  shall  describe,  —  1.  Those  classes  of  cases 
in  which  the  doctrine  has  been  applied;  and  2.  Those  in 
which  it  is  not  applicable. 

§  709.  Illustrations  of  This  Rule.  —  If  the  owner  and 
holder  of  a  thing  in  action  not  negotiable  transfers  it  to 
an  assignee  upon  condition,  or  subject  to  any  reservations 
or  claims  in  favor  of  the  assignor,  although  the  instru- 
ment of  assignment  be  absolute  on  its  face,  this  imme- 
diate assignee,  holding  a  qualified  and  limited  interest, 
cannot  convey  a  greater  property  than  he  himself  holds; 
and  if  he  assumes  to  convey  it  to  a  second  assignee  by 
a  transfer  absolute  in  form,  and  for  a  full  considera- 
tion, and  without  any  notice  to  such  purchaser  of  a 
defect  in  the  title,  this  second  assignee  takes  it,  never- 
theless, subject  to  all  the  equities,  claims,  and  rights  of 
the  original  holder  and  first  assignor.'     In  the  second 


1  Bush  V.  Lathrop,  22  N.  Y.  535; 
Anderson  v.  Nicholaa,  28  N.  Y.  600; 
approved  by  Woodruff,  J.,  in  Reeves 
V.  Kimball,  40  N.  Y.  299,  311;  Mason 
V.  Lord,  40  N.  Y.  476,  487,  per  Dan- 
iels, J.;  Schafer  v.  Reilly,  50  N.  Y. 
61,  67;  McNeil  v.  Tenth  Nat.  Bank, 
55  Barb.  59,  68;  Williams  v.  Thorn, 
11  Paige,  459;  Mangles  v.  Dixon,  3 
H.  L.  Cas.  702;  Marvin  v.  Inglis,  39 
How.  Pr.  329;  Bradley  v.  Root,  5 
Paige,  632;  Poillon  v.  Martin,  1  Sand. 
Ch.  569;  Maybin  v.  Kirby,  4  Rich.  Eq. 
105;  Judson  V.  Corcoran,  17  How.  612; 
[East  Birmingham  Land  Co.  v.  Den- 
nis, 85  Ala.  565;  7  Am.  St.  Rep. 
73.]  Some  of  these  decisions  deal 
with  the  broad  doctrine  that  the  as- 
signment is  subject  to  equities  in  favor 
of  all  third  persons.  See  also  the  nu- 
merous cases  cited  under  tha  next  fol- 
lowing paragraph. 

^Bush  v,  Lathrop,  22  N.  Y.  535. 
This  is  altogether  a  leading  and  most 
instructive  case,  and  squarely  presents 
the  question  under  discussion.  The 
holder  of  a  bond  and  mortgage  for 
$1,400,  assigned  and  delivered  them, 
by  an  instrument  absolute  on  its  face, 
to  secure  an  indebtedness  of  $270,  the 
assignee  giving  back  a  written  under- 
taking to  return  the  same  upon  being 
paid  the  debt  of  $270.  This  assignee 
afterwards  transferred   the  securities 


to  a  second,  and  he  to  a  third,  as- 
signee, the  latter  paying  full  value, 
and  having  no  notice  of  any  outstand- 
ing claims  or  defects  in  the  title. 
The  original  owner  tendered  to  this 
assignee  the  $270  and  interest,  and 
demanded  a  return  of  the  securi- 
ties; and  upon  a  refusal,  brought  an 
action  to  compel  such  return.  It  was 
held  that  the  action  could  be  main- 
tained. The  opinion  of  the  court,  by 
Denio,  J.,  is  a  most  exhaustive  dis- 
cussion and  able  review  of  all  the 
authorities  which  seem  to  sustain  tha 
doctrine  that  so-called  "  latent  equi- 
ties "  are  not  protected  against  an 
assignment.  He  shows  that  the  ex- 
pressions of  judicial  opinion  to  that 
effect  are  obiter  dicta,  while  a  large 
number  of  direct  decisions  are  neces- 
sarily opposed  to  that  view.  I  would 
add  that  the  course  of  authoritative 
decisions  in  reference  to  the  sale  of 
chattels  by  conditional  vendees  who 
have  been  put  in  possession,  and  who 
have  been  held  unable  to  transfer  an 
absolute  title  to  bona  Jide  purchasers 
for  value,  fully  supports  the  reason- 
ing and  conclusions  of  Judge  Denio. 
There  can  be  no  possible  ground  of  a 
valid  distinction  between  the  transfer 
of  a  thing  in  action  when  the  trans- 
ferrer appears  to  be  clothed  with  the 
complete   uvvnership,  but   is   actually 


§709 


EQUITY   JURISPRUDENCE. 


986 


place,  where  the  original  assignment  is  accomplished  by 
a  forgery  of  the  holder's  name,  or  where  it  is  efifected  by 


not,  and  the  transfer  of  a  chattel  by 
a  person  similarly  situated  and  hav- 
ing all  the  outward  indicia  of  perfect 
title:  See  Ballard  v.  Burgett,  40 
N.  Y.  314,  and  cases  cited.  Davis  v. 
Bechstein,  69  N.  Y.  440,  442,  25  Am. 
Rep.  218,  is  a  recent  case,  and  im- 
portant as  explaining  and  limiting  the 
effect  of  certain  other  decisions  men- 
tioned in  a  following  paragraph. 
Plaintifif  had  executed  a  bond  and 
mortgage  to  R.,  simply  as  an  accom- 
modation, and  to  be  used  as  collateral 
security  for  a  loan  which  R.  expected 
to  make.  R.  did  not  procure  the  loan, 
but  assigned  the  securities,  in  form 
absolutely,  to  defendant,  who  was  a 
purchaser  for  value  and  without  notice. 
Plaintiff  brings  this  action  to  have 
the  bond  and  mortgage  canceled.  The 
court  sustained  the  action  upon  the 
general  doctrine  of  the  text,  that  a 
purchaser  of  a  thing  in  action  not 
negotiable  takes  it  subject  to  all  equi- 
ties subsisting  in  favor  of  an  original 
owner  or  assignor,  and  the  immediate 
assignor  can  give  no  better  title  than 
he  has  himself.  The  defendant  claimed 
that  the  plaintiff  was  estopped,  accord- 
ing to  a  rule  supposed  to  have  been 
laid  down  in  two  former  decisions  of 
the  same  court.  In  disposing  of  this 
claim,  the  court  said,  per  Church,  C. 
J.  (p.  442):  "Neither  the  decision  in 
McNeil  V.  Tenth  National  Bank,  46 
N.  Y.  325,  7  Am.  Rep.  341,  nor  in 
Moore  v.  Metropolitan  Nat.  Bank,  55 
N.  Y.  41,  14  Am.  Rep.  173,  affect  the 
question  involved  in  this  case."  He 
quotes  a  passage  from  the  opinion  of 
Grover,  J.,  in  the  last  case,  re-afiBrm- 
ing  the  general  doctrine,  and  adds: 
"It  is  only  where  the  owner,  hy  hisoivn 
affirmative  act,  has  conferred  the  ap- 
parent  title  and  absolute  ownership  upon 
anotJier,  upon  the  faith  of  which  tlie 
chose  in  action  haa  been  purchased  for 
value,  that  he  is  precluded  from  assert- 
ing his  real  title,  and  this  conclusion 
was  arrived  at  by  the  application  of 
the  doctrine  of  estoppel."  See  also 
Matthews  v.  Sheehan,  69  N.  Y.  585 
(action  between  the  assignor  and  hia 
immediate  assignee).  The  following 
eases  fully  sustain  the  position  of  the 
text;  and  most  of  them  are  particularly 
important  in  their   bearing  upon  the 


question  suggested  in  some  of  the 
authorities,  whether  the  original  owner 
or  assignor  having  the  equities  is  not 
estopped  from  asserting  them  against 
the  subsequent  and  innocent  assignee: 
Reeves  v.  Kimball,  40  N.  Y.  299,  304, 
per  Lott,  J.;  311,  per  Woodruff,  J.; 
Ingraham  v.  Disborough,  47  N.  Y. 
421;  Schafer  v.  Reilly,  50  N.  Y.  61, 
67,  68,  per  Allen,  J.  (equities  in  favor 
of  a  third  person);  Ledwich  v.  McKim, 
53  N.  Y.  307;  Cutts  v.  Guild,  57  N.  Y. 
229,  232,  233,  per  Dwight,  J.  (the  doc- 
trme  pronounced  to  be  "well  settled," 
and  applied  to  the  assignment  of  a 
judgment);  Barry  v.  Equitable  Life 
lus.  Co.,  59  N.  Y.  587,  591;  Trustees 
etc.  v.  Wheeler,  61  N.  Y.  88,  104-106, 
113,  114  (an  elaborate  discussion  and 
review  of  authorities,  carefully  limit- 
ing the  effect  of  decisions  which  have 
invoked  the  doctrine  of  estoppel,  and 
applying  the  rule  to  equities  subsisting 
in  favor  of  thii'd  peisons);  Greene  v. 
Warnick,  64  N.  Y.  220,  224,  225  (re- 
stricting and  limiting  the  doctrine  of 
estoppel  as  suggested  in  Moore  v. 
Metropolitan  Nat.  Bank,  55  N.  Y.  41, 
14  Am-  Rep.  173,  and  sustaining  the 
equities  subsisting  in  favor  of  third 
persons);  Marvin  v.  Inglis,  39  How. 
Pr.  329.  [In  Smith  v.  Clews,  114 
N.  Y.  194;  11  Am.  St.  Rep.  627,  a  dia- 
mond merchant  delivered  some  dia- 
monds to  a  broker,  with  authority 
merely  to  show  them  to  a  customer 
and  report  to  the  owner.  The  broker 
sold  them  to  a  purchaser  for  value,  who 
had  no  notice  of  the  want  of  authority 
to  sell.  It  was  contended,  in  an  action 
brought  by  the  owner  against  the  pur- 
chaser, that  the  owner  was  estopped 
to  question  the  validity  of  the  sale.  In 
overruling  this  contention,  the  court 
said:  "The  rightful  owner  may  be 
estopped  by  his  own  acts  from  assert- 
ing his  title.  If  he  has  invested  an- 
other with  the  usual  evidence  of  title, 
or  an  apparent  authority  to  dispose  of 
it,  he  will  not  be  allowed  to  make 
claim  against  an  innocent  purchaser 
dealing  on  the  faith  of  such  apparent 
ownership.  But  mere  possession  has 
never  been  held  to  confer  a  power  to 
sell,  and  an  unauthorized  sale,  al- 
though for  a  valuable  consideration, 
and   to   one   having    no    notice    that 


987 


CONCERNINQ    PRIORITIES. 


-09 


a  wrongful  conversion  of  the  security,  together  with  a 
written  instrume'nt  of  transfer  which  has  been  signed  by 
the  owner,  or  where  it  is  made  upon  an  illegal  considera- 
tion between  the  owner  and  his  immediate  assignee,  or 
where  it  is  procured  by  fraud,  duress,  or  undue  influence 
upon  the  owner,  and  in  either  of  these  cases  the  thing  in 
action  is  afterwards  transferred  from  the  first  to  a  second 
or  other  subsequent  assignee,  who  takes  it  for  value  and 
without  notice,  the  same  rule  must  control:  the  equities 
of  the  original  owner  must  prevail  over  the  claims  of  the 
subsequent  though  innocent  assignee/ 


another  is  the   true   owner,  vests  no 
higher  title  in   the  vendee    than  wag 
possessed  by  his  vendor."]     In  Sher- 
wood  V.  Meadow  Valley  M.   Co.,  50 
Cal.  412,  an  owner  of  a  stock  certifi- 
cate, which  he  had  indorsed  in  blank, 
lost  it,  and  it  fell  into  the  hands  of  a 
bona  fide    purchaser    for   value,    and 
held   that   the   original   owner's   title 
was  superior  to  that  of  this  purchaser. 
This  decision  agrees  completely  with 
the  positions  of  the  text;  but  in  Winter 
V.   Belmont  M.  Co.,  53  Cal.  428,  432, 
W.,    being    owner    of    shares,    caused 
them  to  be  entered   on   the  transfer- 
books  in  the  name  of  M.,  and  a  cer- 
tificate  thereof    in    due    form    to   be 
issued  to  M.,  which  certificate  M.  in- 
dorsed in  blank  and  delivered  to  W. 
Afterwards,  and  while  the  same  con- 
dition of   facts  existed,  M.  stole  this 
certificate  from  W.,  and  sold  it  in  the 
market  to  a  6ona_/i(^c  purchaser.    Held, 
that   the    latter's   title   was   good    as 
against  W.     The  court  strongly  inti- 
mated an  opinion  that  the  preceding 
case  in  50  California  was  incorrectly  de- 
cided.    [In  the  subsequent  case  of  Bar- 
stow  V.  Savage  Mining  Co.,  64  Cal.  388, 
certificates  of   stock   standing  on  the 
books  of  the  company  in  the  name  of  a 
person  not  the  true  owner,  but  which 
were   properly  indorsed   by  the   per- 
son in  whose  name  they  stood,  were 
stolen  from  the  owner  and  sold  to  a 
purchaser  for  value  and   without  no- 
tice.    The  court  held  that  the  owner's 
title  was  superior  to  that  of  the  pur- 
chaser, and  that  he  was  not  estopped. 
The  decision  in  Sherwood  v.  Meadow 
Valley  M.  Co.,  50  Cal.  412.  was  fol- 
lowed and  approved,  and  the  decision 
in  Winter  v.  Belmont  M.  Co.,  53  Cal. 


428,  so  far  as  it  departed  therefrom,  was 
disapproved.  The  court  said  that  the 
doctrine  of  estoppel  should  not  be 
applied,  "  unless  the  facts  presented  by 
a  case  should  bring  it  within  the  law 
as  stated  in  McNeil  v.  Tenth  National 
Bank,  46  N.  Y.  .325;  7  Am.  Rep.  341.  " 
The  court  further  said:  "If  the  pur- 
chaser from  one  ■who  has  not  the  title, 
and  has  no  authority  to  sell,  relies  for 
his  protection  on  the  negligence  of  the 
true  owner,  he  must  show  that  such 
negligence  was  the  proximate  cause 
of  the  deceit."  In  France  v.  Clark, 
L.  R.  26  Ch.  Div.  256,  it  was  held  that 
a  person  who  without  inquiry  takes 
from  another  an  instrument  signed  in 
blank  by  a  third  party,  and  fills  up 
the  blanks,  cannot,  even  in  the  case 
of  a  negotiable  instrument,  claim  the 
benefit  of  being  a  purchaser  for  value 
without  notice,  so  as  to  acquire  a 
greater  right  than  the  person  from 
whom  he  himself  received  the  instru- 
ment.] 

'  Anderson  v.  Nicholas,  28  N.  Y.  600. 
Certificates  of  stock,  with  a  power  of 
attorney  indorsed  upon  them,  and 
signed  so  that  they  were  transferable 
in  the  market,  were  wrongfully  con- 
verted from  the  owner,  and  were  sold 
to  the  defendant,  and  it  was  held  that 
the  latter  acquired  no  higher  title  than 
that  held  by  his  immediate  transferrer, 
—  the  one  who  wrongfully  converted 
the  stock, — and  the  original  owner 
could  recover  the  securities  or  their 
value.  This  case  cannot,  perhaps,  be 
regarded  as  a  divert  authority  for  the 
doctrine  contained  in  the  text;  because 
there  were  certain  facts  wh  ch  pre- 
vented the  defendant  from  relying 
upon  the  position  ot  a  b<ma  fide  pur- 


§710 


EQUITY   JURISPKUDENCE. 


988 


§  710.  When  the  Rule  does  not  Apply  — Effect  of  Es- 
toppel.  —  I  proceed  next  to  consider  the  third  case,  where 
the  original  assignment  is  regular  on  its  face,  executed  in 
the  name  of  the  original  owner  and  by  his  signature  vol- 


chaser,  and  these  circumstances  may 
have  influenced  the  decision.  Three 
opinions  were  delivered.  Davies,  J., 
based  his  judgment  entirely  upon  the 
ground  that  an  assignee  of  a  non-nego- 
tiable thing  in  action  could  under  no 
circumstauces  acquire  a  better  title 
than  that  possessed  by  his  assignor, 
and  he  made  no  allusion  to  the  defend- 
ant's want  of  good  faith.  Denio,  J., 
dwelt  upon  the  facts  which  showed 
bad  faith;  but  was  very  careful  to 
protest  against  any  inference  from  his 
course  of  argument  to  the  effect  that, 
if  the  purchase  had  been  in  good  faith, 
the  assignee  would  have  been  pro- 
tected. Hogeboom,  J.,  seems  to  have 
adopted  the  view  taken  by  Mr.  Jus- 
tice Davies.  On  the  whole,  although 
the  fact  of  bad  faith  was  an  element 
in  the  case,  it  was  not  made  the  ratio 
decidendi,  and  the  doctrine  laid  down 
applies  to  all  transfers,  those  in  good 
faith  as  well  as  those  in  bad  faith. 
Other  decisions  are  directly  in  point. 
Mason  v.  Lord,  40  N.  Y.  476,  487,  is  a 
very  strong  case.  The  lessee  of  prem- 
ises assigned  the  lease  by  an  instru- 
ment valid  on  its  face,  but  in  fact  as  a 
security  for  a  usurious  loan  made  to 
him  by  the  assignee.  (The  statute  at 
that  time  declared  all  securities  given 
upon  usurious  loans  to  be  void,  and 
liable  to  be  canceled  at  the  suit  of  the 
borrower,  even  without  paying  or  ten- 
dering the  money  actually  borrowed. ) 
This  lease  was  afterwards  transferred 
by  the  assignee,  passed  through  divers 
hands,  and  was  finally  purchased  by 
the  defendant,  who  paid  full  value 
and  had  no  notice  of  any  defect  in 
the  first  transfer.  Subsequent  to  the 
original  assignment  by  the  lessee,  but 
before  the  transfer  to  the  defendant, 
the  plaintiffs  recovered  a  judgment 
against  such  lessee,  and  the  lessee's 
interest  in  the  leased  premises  and  in 
the  lease  itself,  was  sold  on  execution, 
bought  in  by  the  plaintiffs,  and  a  sher- 
iff's deed  of  such  interest  was  deliv- 
ered to  them,  which  deed,  however, 
was  executed  after  the  assignment  to 
the  defendant.  The  plaintiffs  then 
commenced  an  action  to  recover  pos- 


session of  the  leased  premises,  and 
to  set  aside  the  transfer  of  the  lease 
to  the  defendants  on  account  of  the 
usury  which  affected  and  nullified  the 
first  assignment  made  by  the  lessee  to 
his  immediate  assignee.  The  court, 
adopting  to  its  full  extent  the  doctrine 
as  laid  down  in  the  text,  held  that  the 
action  could  be  sustained;  that  the 
lessee  might  have  set  aside  the  trans- 
fer from  himself  on  account  of  the 
usury  which  tainted  it;  that  the  sub- 
sequent assignees,  including  the  de- 
fendant, succeeded  to  all  the  rights, 
and  were  subject  to  all  the  liabilities, 
possessed  by  and  imposed  upon  the 
first  assignee,  and  finally,  that  the 
judgment  creditors  of  the  lessee  were 
clothed  with  his  rights  and  powers  in 
the  matter:  Raid  v.  Sprague,  72  N.  Y. 
457,  462.  A  trustee,  holding  a  bond 
and  mortgage  as  part  of  the  trust 
fund,  sold  and  a-ssigned  it,  in  viola- 
tion of  the  trust,  to  the  defendant, 
who  was  a  purchaser  for  value  and 
without  any  notice.  A  suit  on  behalf 
of  the  cestui  que  trust  to  set  aside  the 
assignment  and  regain  the  securities 
was  sustained,  the  court  holding  that 
the  defendant  took  them  subject  to  all 
the  claims  of  the  cestui  que  trust.  See 
also  Davis  v.  Bechstein,  69  N.  Y.  440; 
25  Am,  Rep.  218  (supra,  under  §  700); 
Ingraham  v.  Disborough,  47  N.  Y.  421 
(failure  of  consideraion);  Schafer  v. 
Reilly,  50  N.  Y.  61,  67,  C8;  Ledwich 
V.  McKim,  53  N.  Y.  307;  Cutts  v. 
Guild,  57  N.  Y.  229,  232,  233;  Barry 
V.  Equitable  Life  Ins.  Co.,  59  N.  Y. 
587,  591  (where  an  assignment  of  a 
non-negotiable  thing  in  action  —  a  life 
policy  —  is  obtained  from  the  owner 
by  undue  influence  or  coercion,  and 
is  then  transferred  to  an  innocent 
purchaser  for  value,  this  second  as- 
signee takes  subject  to  all  the  rights 
of  the  original  holder);  Trustees  etc. 
V.  Wheeler,  61  N.  Y.  88,  104-106, 
113,  114;  Greene  v.  Warnick,  64 
N.  Y.  220,  224,  225;  Hall  v.  Erwin, 
66  N.  Y.  649;  Crane  v.  Turner,  67 
N.  Y.  437,  440  (equities  in  favor  of 
third  persons). 


989  CONCERNLNQ    PRIORITIES.  §  710 

untanly  written,  but  the  transfer  is  consummated  through 
a  breach  of  fiduciary  duty  by  an  agent  or  bailee  contrary 
to  the  owner's  intention,  and  this  immediate  assignee  may 
afterwards  transfer  to  an  innocent  holder.  In  relation  to 
this  particular  condition  of  facts,  a  rule  has  been  adopted 
by  most  able  courts,  and  may  be  regarded,  I  think,  as 
settled,  which  is  entirely  consistent  with  that  stated  in 
the  preceding  paragraphs.  It  is  based  upon  the  doctrine 
of  estoppel.  This  special  rule  may  be  formulated  as  fol- 
lows: The  owner  of  certain  kinds  of  things  in  action  not 
technically  negotiable,  but  which,  in  the  course  of  busi- 
ness customs,  have  acquired  a  semi-negotiable  character 
in  fact,  may  assign  or  part  with  them  for  a  special  pur- 
pose, and  at  the  same  time  may  clothe  the  assignee  or 
person  to  whom  they  have  been  delivered  with  such 
apparent  indicia  of  title,  and  instruments  of  complete 
ownership  over  them,  and  power  to  dispose  of  them,  as  to 
estop  himself  from  setting  up  against  a  second  assignee, 
to  whom  the  securities  have  been  transferred  without 
notice  and  for  value,  the  fact  that  the  title  of  the  first 
assignee  or  holder  was  not  perfect  and  absolute.  The 
ordinary  and  most  important  application  of  this  rule  is 
confined  to  the  customary  mode  of  dealing  with  certifi- 
cates of  stock.  If  the  owner  of  stock  certificates  assigns 
them  as  collateral  security,  or  pledges  them,  or  puts  them 
into  the  hands  of  another  for  any  purpose,  and  accom- 
panies the  delivery  by  a  blank  assignment  and  power  of 
attorney  to  transfer  the  same  in  the  usual  form,  signed 
by  himself,  and  this  assignee  or  pledgee  wrongfully  trans- 
fers them  to  an  innocent  purchaser  foT  value  in  the  reg- 
ular course  of  business,  such  original  owner  is  estopped 
from  asserting,  as  against  this  purchaser  in  good  faith, 
his  own  higher  title  and  the  want  of  actual  title  and  au- 
thority in  his  own  immediate  assignee  or  bailee.*     This 

'  McNeil  V.  Tenth  Nat.  Bank,  46  N.  respect  negotiable;  and  2.  The  rule  as 

Y.  325;  7  Am.  Rep.  341;  reversing  55  laid   down  by  Denio,  J.,  in   Bush  v. 

Barb.  59.     The  supreme  court  held,  —  Lathrop,    22    N.    Y.    535.      The    law 

1.  That  certificates  of  stock  aie  in  no  of  estoppel  was  not  alluded   to.     In 


710 


EQUITY    JURISPRUDENCE. 


990 


conclusion  is  in  no  respect  necessarily  antagonistic  to  the 
general  doctrine  concerning  the  assignment  of  things  in 


the  court  of   appeals   the  doctrine  of 
lateat  equities  was  discussed;  the  de- 
cision of  the  court  in  Bush  v.  Lathrop, 
22  N.  y.  535,  and   the   reasoning  of 
Denio,  J.,   were  expressly  recognized 
as  correct,  and    as   applicable   to   all 
cases  in  which  the  facts  do  not  war- 
rant the  application  of  the  principle  of 
estoppel.     Mr.  Justice  Hapallo,  in  his 
able   judgment,  does  not   discuss  the 
rule  in  relation  to  things  in  action  of 
all  kinds;   he  confines  himself   exclu- 
sively  to    the    particular    species    of 
security  then  before  the  court,  —  cer- 
tificates of   shares   in   stock   corpora- 
tions; and  while  he  does  not  claim  for 
them  absolute  negotiability,  he   does 
in  fact  render  them  indirectly  negotia- 
ble by  means  of   the  estoppel  which 
arises  upon  dealing  with  them  in  the 
manner  universally  prevalent   among 
business    men.      Speaking    of    Judge 
Denio's    opinion,    he    says    (p.    329): 
"But  in  no  part  of   his  learned  and 
exhaustive   opinion   does  he   seek   to 
apply  its  doctrine  to  shares  in  corpo- 
rations or  other  personal  property  the 
legal  title  to  which  is  capable  of  being 
transferred  by  assignment;  and  the  free 
transmission  of  which  from   hand   to 
hand  is  essential  to  the  prosperity  of  a 
commercial   people.     The  question  of 
estoppel  does  not  seem  to  have  been 
considered  in  that  case,  and  perhaps 
it   would   have   been   inappropriate." 
He   expressly  approves   the   rule  fre- 
quently laid  down  as  to  chattels,  and 
while  invoking  the  aid  of  estoppel,  is 
very  careful  to  state  the  narrow  limits 
within  which  it  may  be  used,  and  the 
kind  of  facts  necessary  to  its- use.     He 
says  (pp.  329,  330):   "Simply  intrust- 
ing the  possession  of  a  chattel  to  an- 
other as  depositary,  pledgee,  or  other 
bailee,  or  even  under  a  conditional  ex- 
ecutory  contract   of    sale,    is   clearly 
insufficient  to  preclude  the  real  owner 
from  reclaiming  his  property  in  case 
of  an  unauthorized  disposition  of  it  by 
the  person    so   interested:   Ballard  v. 
Surge tt,  40   N.    Y.  3U.      'The  mere 
possession    of   chattels,    by   whatever 
means  acquired,  if  there  be  no  other 
evidence  of  property  or  authority  to 
sell  from  the  true  owner,  will  not  en- 
able the  possessor  to  give  a  good  title,' 
But  if  the  owner  intrusts  to  another 


not  merely  the  possession  of  the  prop- 
erty, but  also  written  evidence  over  his 
own  signature  of  title  thereto,  and  of 
an  unconditional  power  of  disposition  over 
it,  the  case  is  vastly  different."  The 
following  seems  to  be  the  only  rule 
sanctioned  by  the  court  in  this  im- 
portant decision:  If  the  owner  of  a 
thing  in  action,  of  the  particular  species 
described,  delivers  it  to  an  assignee  for 
a  special  purpose,  with  a  simple  writ- 
ten assignment,  even  absolute  on  its 
face,  this  of  itself  is  not  enough  to  raise 
the  estoppel;  but  if,  as  a  part  of  or  ac- 
companying this  writing,  the  owner 
further  gives  "an  unconditional  power 
of  disposition  "  over  the  security,  then 
the  estoppel  may  be  involved.  It  re- 
mains to  inquire  whether  other  decis- 
ions have  been  confined  to  this  narrow 
rule.  In  Holbrook  v.  N.  J.  Zinc  Co., 
57  N.  Y.  G16,  622,  623,  the  doctrine  of 
estoppel  was  applied  to  the  corporation 
itself  whose  stock  had  been  transferred 
in  good  faith,  and  in  the  usual  manner, 
to  the  plaintiff.  In  Combes  v.  Chan- 
dler, 33  Ohio  St.  178,  181-185,  the 
supreme  court  commission  of  Ohio  ap- 
plied the  doctrine  of  McNeil  v.  Tenth 
Nat.  Bank,  46  N.  Y.  325,  7  Am.  Rep. 
341,  to  the  assignment  of  a  non-ne- 
gotiable promissory  note,  —  an  instru- 
ment in  the  form  of  a  promissory  note, 
but  payable  to  the  payee  named,  with- 
out any  words  of  negotiability.  The 
payee  indorsed  and'delivered  the  note, 
but  without  any  consideration,  and  by 
the  fraud  of  the  immediate  assignee; 
by  this  person  it  was  transferred  to  a 
second  assignee  for  value  and  without 
notice.  The  court  held  that  the 
payee  — the  original  owner —  was  es- 
topped from  asserting  his  title  as 
against  that  of  the  second  and  inno- 
cent purchaser.  This  decision  may 
be  sustained  on  principle,  by  reason 
of  the  peculiar  nature  of  the  security 
itself.  Although  it  is  commonly  said, 
in  general  terms,  that  the  transferee 
of  a  promissory  note  after  maturity, 
when  it  has  become  non-negotiable, 
takes  it  subject  to  all  equities  and 
defenses,  yet  this  proposition  is  not 
true  as  to  all  kinds  of  equities  even  in 
favor  of  the  maker.  It  is  well  settled 
that  the  assignment  under  such  cir- 
cumstances   is    subject    only   to    the 


991  CONCERNING    PRIORITIES.  §  710 

action  heretofore  stated.  The  courts  have  simply  recog- 
nized the  growing  and  universal  tendency  of  business 
men,  in  their  customary  modes  of  dealing,  to  treat  stock 
certificates  as  though  they  were  in  all  respects  negotiable 
instruments;  and  they  have  felt  themselves  bound  to  give 
validity  and  effect  to  this  general  practice  of  merchants, 
as  far  as  that  could  be  done  consistently  with  the  estab- 
lished doctrines  of  the  law.  It  is  another  instance  of  the 
manner  in  which  mercantile  customs  have  been  adopted 
and  incorporated  into  the  law  by  the  progressive  course 
of  judicial  legislation.  The  decisions  announcing  the 
rule  are  based  exclusivel}^  upon  the  form  of  the  blank 
assignment  and  power  of  attorney,  executed  by  the  as- 
signor and  delivered  to  the  assignee,  which  clothed  him 
with  all  the  apparent  rights  of  ownership  that  are  recog- 
nized by  business  men,  in  their  usual  course  of  dealing 
with  like  securities,  as  sufficient  to  confer  a  complete  title 
and  power  of  disposition  upon  the  assignee.     Should  the 

equities  and  defenses  inherent  in  the  41,  14  Am.  Rep.  173,  does  not  apply 
security  itself  transferred,  and  not  to  to  assignments  of  ordinary  things  in 
those  which  are  collateral  or  inciden-  action,  even  when  absolute  on  their 
tal.  The  same  rule  would  probably  face,  when  procured  by  fraud  or  coer- 
embrace  notes  non-negotiable  from  cion,  or  upon  an  illegal  consideration, 
the  want  of  words  of  negotiability:  or  without  any  consideration.  The 
See  Story  on  Promissory  Notes,  sec,  following  decisions  are  also  supported 
178;  Kyle  v.  Thompson,  11  Ohio  St.  by  and  illustrations  of  the  text: 
616;  Hayward  v.  Stearns,  39  Cal.  58;  Brewster  v.  Sime,  42  Cal.  139,  147; 
In  re  Overend,  Gurney,  &  Co.,  L.  R.  Thompsonv.Toland,  48  Cal.  99;  Winter 
6  Eq.  344;  In  re  European  Bank,  L.  R.  v.  Belmont  Min.  Co.,  53  Cal.  428,  432; 
6  Ch.  358;  Sturtevant  v.  Ford,  4  but  see  Sherwood  v.  Meadow  Val.  M. 
Maule  &  G.  101;  Quids  v.  Harrison,  Co.,  50  Cal.  412.  [See  also  Fairbanks 
lOEx.  572;  Burrough  v.  Moss,  lOBarn.  v,  Sargent,  104 N.  Y.  117;  58  Am.  Rep. 
&C.  558;  Holmes  V.  Kidd,  3  Hurl.  &N.  490;  Laughlin  v.  District  of  Colum- 
891;  [Spinning  V.  Sullivan,  48  Mich.  5;  bia,  116  U.  S.  489;  Cowdery  v,  Van- 
Moore  V.  Moore,  112  Ind.  149;  2  Am.  denburgh,  101  U.  S.  575;  Menasha  v. 
St.  Rep.  170.J  While  the  decis/ora  it-  Hazard,  102  U.  S.  81;  Colonial  Bank 
self  is  thus  undoubtedly  correct,  I  do  v.  Cady,  L.  R.  15  App.  C.  267;  Jos- 
not  think  that  some  observations  of  the  lyn  v.  St.  Paul  Distilling  Co.,  44  Miiwi. 
learned  judge  concerning  the  effect  of  183;  Caulkins  v.  Gas  Light  Co.,  85 
estoppel  upon  assignors  in  general  Tenn.  683;  4  Am.  St.  Rep.  786; 
can  be  sustained  by^McNeil  v.  Tenth  Wood's  Appeal,  92  Pa.  St.  379;  37 
Nat,  Bank,  46  N.  Y.  325,  7  Am.  Rep.  Am.  Rep.  694;  Walker  v.  Detroit 
341,  as  explained  by  the  later  cases  in  Transit  R'y  Co.,  47  Mich.  338;  Young 
the  same  court  cited  in  the  two  preced-  v.  Erie  Iron  Co.,  65  Mich.  Ill;  Morris 
ing  notes.  In  several  of  those  cases,  v.  Citizens' Nat.  Bank,  111  U.  S.  165; 
as  I  have  shown,  it  is  expressly  held  Railroad  Co.  v.  Schutte,  103  U.  S.  144; 
that  the  rule  of  McNeil  v.  Tenth  Nat.  Easton  v.  London  Joint-stock  Bank,  34 
Bank,46N.Y.  325, 7Am.Rep.  Sll.and  Ch.  Div.  95;  Williams  v.  Colonial 
Moore  v.  Metropolitan  Bank,  55  N,  Y.  Bank,  L,  R.  36  Ch.  Div.  671.] 


§  710  EQUITY    JURISPRUDENCE.  992 

doctrine  thus  invoked  to  protect  the  customary  modes  of 
transacting  business  with  certificates  of  stock  and  similar 
quasi  negotiable  securities  be  extended  to  all  other  things 
in  action  ?  Should  the  effect  of  an  estoppel  be  produced 
from  a  mere  assignment  of  any  security,  absolute  on  its  face, 
executed  by  the  original  owner,  and  delivered  to  his  assignee  f 
There  are  cases  which  seem  to  have  reached  this  result. 
The  tendency  of  these  decisions  is  towards  the  conclusion 
that  whenever  the  owner  of  any  non-negotiable  thing  in 
action  delivers  the  same  to  another  person  with  an  as- 
signment thereof  absolute  on  its  face,  and  this  person 
transfers  it  to  a  purchaser  for  value,  who  relies  upon  the 
apparent  ownership  created  by  the  written  assignment, 
and  has  no  notice  of  anything  limiting  that  title,  the 
original  owner  is  estopped  from  asserting  against  such 
purchaser  any  equities  existing  between  himself  and  his 
immediate  assignee,  and  any  interest  or  property  in  the 
security  which  he  may  have  notwithstanding  the  written 
transfer,  even  when  those  equities  might  arise  from  fraud, 
coercion,  violation  of  a  fiduciary  duty,  absence  or  illegal- 
ity of  consideration,  and  the  like.* 

•  Moore  v.  Metropolitan  Bank,  55  being  subject  to  equities  as  declared 
N.  Y.  41,  46-49,  14  Am.  Rep.  173.  in  Bush  v.  Lathrop,  22  N.  Y.  535,  and 
Moore,  the  owner  of  a  certificate  of  other  authorities,  but  held  that  this 
indebtedness  for  ten  thousand  dollars,  case  was  controlled  by  jMcNeil  v. 
delivered  it  to  one  Miller  for  a  certain  Tenth  Nat.  Bank,  46  N.  Y.  325,  7  Am. 
special  purpose,  but  not  intending  to  Rep.  341,  and  that  the  judgment  in 
transfer  any  property  therein;  in  fact,  the  latter  case  was  inconsistent  with 
M.  was  to  procure  it  to  be  discounted,  the  reasoning  of  Denio,  J.,  in  Bush  v. 
and  to  hand  over  the  proceeds,  or  else  Lathrop,  22  N.  Y.  535,  and  with  the 
to  return  the  certificate.  Moore,  how-  decision  made  on  the  facts  of  that  case, 
ever,  gave  M.  the  following  writ-  Grover,  J.,  does  not  allude  to  the  care- 
ing,  indorsed  on  the  instrument:  "For  ful  distinction  drawn  by  Rapallo,  J., 
value  received,  I  hereby  transfer,  between  the  circumstances  of  the  two 
assign,  and  set  over  to  Isaac  Miller  cases,  nor  his  approval  of  the  general 
the  within  described  amount,  say  doctrine  and  course  of  reasoning  con- 
ten  thousand  dollars.  Levi  Moore."  tained  in  Judge  Denio's  masterly  opin- 
Miller  assigned  the  certificate  to  ion.  Nor  does  Judge  Grover  make 
the  defendant  for  value,  who  took  the  slightest  allusion  to  the  narrow 
it  on  the  faith  of  this  written  as-  limits  placed  by  Rapallo,  J.,  upon  the 
signment  without  notice  of  the  true  use  of  the  estoppel,  namely,  to  those 
relations  between  Moore  and  Miller,  cases  in  which  the  assignor,  by  a  writ- 
The  action  was  brought  to  recover  ten  instrument  over  his  signature, 
possession  of  the  certificate.  The  court  confers  not  only  the  apparent  title, 
said,  per  Grover,  J.  (pp.  46-49),  that  but  the  unconditional  power  of  dispoxi- 
it  did  not  intend  to  al)andon  the  gen-  tion  over  the  security.  While  the 
eral  doctrine  concerning  assignments  judgment  of  Rapallo,  J.,  in  McNeil  v. 


993  CONCERNING    PRIORITIES.  §  711 

§  711.  True  Limits  of  Estoppel  as  Applied  to  Assign- 
ments of  Things  in  Action.  —  While  the  particular  appli- 
cation of  the  doctrine  of  estoppel  to  the  usual  dealings  with 
shares  of  stock,  as  made  in  McNeil  v.  Tenth  National 
Bank^  and  kindred  cases,  is  clearly  a  step  in  the  interests 
of  commerce,  since  it  recognizes  and  validates  mercantile 
customs  which  had  become  universal  throughout  this 
country,  the  extension  of  the  same  rule  to  all  things  in 
action,  as  described  in  the  preceding  paragraph,  plainly 
tends  to  undermine,  shake,  and  finally  abrogate  the  well- 
settled  doctrine  which  renders  the  assignments  of  non- 
negotiable  things  in  action  subject  to  the  equities  subsisting 
in  favor  of  the  debtor  parties,  as  well  as  those  outstanding 
in  favor  of  third  persons;  or  at  all  events,  it  tends  to  con- 
fine the  operation  of  that  doctrine  to  cases  in  which  the 
assignment  is  so  drawn  that  it  is,  on  its  face,  constructive 
notice  to  all  subsequent  assignees  deriving  title  through 
it.  In  the  class  of  decisions  alluded  to,  —  Moore  v.  Metro- 
politan Bank'  and  like  cases,  —  the  estoppel  is  made  to 

Tenth  Nat.  Bank,  46  N.  Y.  325,  7  Am.  and  result  were  correct,  most  of  these 
Rep.  341,  was  guarded  and  cautious,  cases  would  of  necessity  have  been 
and  eminently  proper  in  respect  to  differently  decided:  See  Trustees  etc. 
the  peculiar  class  of  securities,  that  of  v.  Wheeler,  61  N.  Y.  88;  Greene  v. 
Grover,  J.,  is,  I  think,  unsupported  Warnick,  64  N.  Y.  220,  and  other  cases 
by  authority,  and  unsound  in  principle,  quoted  sitpra,  in  note  2,  under  §  709. 
In  comparing  and  weighing  such  con-  In  Farmers'  Nat.  Bank  v,  Fletcher,  44 
flictiug  decisions,  it  is  proper  for  me  Iowa,  252,  this  same  doctrine  of  estop- 
to  express  the  opinion  that  the  author-  pel  was  applied  to  the  assignor  of  a 
ity  of  Judge  Denio,  for  ability,  learn-  mortgage,  as  against  an  assignee  for 
ing,  and  experience,  is  immeasurably  value  and  without  notice.  [In  the  re- 
superior  to  that  of  Judge  Grover,  and  cent  case  of  Fairbanks  v.  Sargent,  104 
is  not,  perhaps,  surpassed  by  that  of  N.  Y.  117,  58  Am.  Rep.  490,  the  New 
any  of  his  contemporaries  among  the  York  court  of  appeals  took  occasion. 
American  judiciary.  In  fact,  the  to  say  that  the  doctrine  announced  in. 
special  force  of  the  decision  in  Moore  Bush  v.  Lathrop,  22  N.  Y.  535,  re- 
V.  Metropolitan  Bank,  55  N.  Y.  41,  14  mains  in  "full  force  unquestioned," 
Am.  Rep.  173,  has  been  completely  exceptsofar  as  they  have  been  modified, 
destroyed,  and  it  has  been  strictly  in  "the  case  of  a  pufchase  in  good, 
confined  to  the  doctrine  laid  down  in  faith  of  a  non-negotiable  instrument; 
McNeil  V.  Tenth  Nat.  Bank,  46  N.  Y.  from  an  assignee  of  the  real  owner, 
325,  7  Am.  Rep.  341,  by  the  more  re-  upon  whom  he  has  by  assignment  con- 
cent cases  in  the  same  court  heretofore  ferred  the  apparent  absolute  owner- 
cited.  While  these  cases  have  not  ship,  when  such  purchase  has  been 
expressly  overruled  Moore  v.  Metropol-  made  in  reliance  upon  the  title  appar* 
itan  Bank,  55  N.  Y.  41,  14  Am.  Rep.  ently  acquired  by  such  assignee.  '] 
173,  it  is  plain  that  they  are  wholly  '  46  N.  Y.  .325;  7  Am.  Rep.  341. 
inconsistent  with  it;  if  its  reasoning  *  55  N.  Y.  41;  14  Am.  Rep.  173. 
2EQ,JnE.  — 63 


§  711  EQUITY   JURISPRUDENCE.  994 

arise  from  a  mere  naked  transfer  in  writing,  absolute  in 
form;  the  ratio  decidendi  is  the  apparent  ownership  thus 
conferred  upon  the  assignee;  and  these  elements  of  the 
rule  will  apply  to  so  many  cases  that  things  in  action  are 
practically  rendered  negotiable  as  between  the  series  of 
successive  holders,  —  the  assignors  and  assignees.  This 
point  being  reached,  it  will  be  an  easy  and  almost  neces- 
sary step  to  extend  the  estoppel  to  the  debtor  party  him- 
self,—  the  obligor  or  promisor  who  utters  the  security.  If 
negotiability  is  produced  by  means  of  an  estoppel  between 
the  assignor  and  assignee,  arising  from  the  fact  and  form 
of  a  transfer  from  one  to  another,  by  parity  of  reasoning 
the  debtor  may  be  regarded  as  estopped  by  the  fact  and 
form  of  his  issuing  the  undertaking  and  delivering  it  to  the 
first  holder,  and  thus  creating  an  apparent  liability  against 
himself.  In  short,  there  seems  to  be  exactly  the  same 
reason  for  holding  the  debtor  estopped  from  denying  his 
liability  upon  a  written  instrument  which  apparently 
creates  an  absolute  liability,  when  that  instrument  has 
passed  into  the  hands  of  a  purchaser  who  had  no  notice 
of  the  actual  relations  between  the  original  parties,  as  for 
holding  an  assignor  estopped  from  denying  the  complete- 
ness of  a  transfer  made  by  him  simply  because  it  is  abso- 
lute on  its  face.  This  result,  if  reached,  would  make  all 
things  in  action  practically  negotiable.  According  to  the 
law  merchant,  "negotiability"  consisted  of  two  elements: 
1.  The  fact  that  the  transferee  obtained  the  legal  title 
and  could  sue  at  law  in  his  own  name;  and  2.  The  fact 
that  the  transferee  in  good  faith  and  for  value  took  free 
from  all  equities  and  nearl}''  all  defenses  subsisting  in 
favor  of  prior  parties  to  the  paper.  The  first  of  these 
elements  now  belongs,  in  the  great  majority  of  the  states, 
to  all  things  in  action.  There  is,  as  it  seems  to  me,  an 
evident  tendency,  on  the  part  of  the  courts  in  many  states, 
to  enlarge  the  scope  of  the  second  element,  and  to  extend 
it  also  to  all  species  of  things  in  action  which  are  embod- 
ied in  contracts  or  instruments  in  writing. 


995  CONCERNING    PRIORITIES.  §  712 

§  712.  Subsequent  Assignee  Obtaining  the  Legal  Title 
may  be  Protected  as  a  Bona  Fide  Purchaser.  —  In  the  dis- 
cussions of  the  foregoing  paragraphs/  it  has  been  con- 
stantly assumed  that  the  assignee  had  acquired  only  an 
equitable  title,  in  order  that  he  might  take  subject  to  the 
equities  subsisting  in  favor  of  a  prior  assignee  or  of  a 
third  person.  If,  in  addition  to  his  equitable  interest  con- 
ferred by  the  assignment,  he  has  also  obtained  the  legal 
title,  or  even  if  his  situation  is  such  that  he  has  the  best 
right  to  call  for  the  legal  title,  then  the  doctrine  of  pur- 
chase for  a  valuable  consideration  and  without  notice 
may  apply  so  as  to  protect  him  against  all  such  outstand- 
ing equities.  It  should  be  constantly  borne  in  mind  that 
priority  of  time  gives  precedence  of  right  among  succes- 
sive and  conflicting  equitable  interests  only  when  these 
equitable  interests  are  equal  in  their  nature  or  incidents. 
An  illustration  may  be  seen  in  the  decisions  of  many  able 
courts  with  respect  to  dealings  in  shares  of  stock.  Where 
a  transfer  of  a  certificate  has  been  made  by  the  owner's 
own  signature,  but  procured  only  through  the  fraud, 
breach  of  duty,  or  conversion  of  the  person  who  actually 
efifects  the  first  assignment,  or  without  consideration,  or 
upon  an  illegal  consideration,  and  even  where  the  trans- 
fer is  accomplished  solely  by  a  forgery  of  the  owner's 
name  to  the  indorsement  and  power  of  attorney,  and  the 
certificate  thus  comes  into  the  hands  of  a  purchaser  for  a 
valuable  consideration  and  without  notice,  and  he  per- 
fects his  legal  title  by  surrendering  the  original  certifi- 
cate to  the  corporation  and  receiving  a  new  one  in  his 
own  name,  and  by  procuring  the  transaction  to  be  prop- 
erly entered  upon  the  company's  transfer-books,  which 
thereupon  show  him  to  be  the  legal  owner  of  the  shares, 
the  assignee  under  these  circumstances,  as  is  held  in 
many  cases,  obtains  a  complete  precedence  over  the  origi- 
nal owner;  he  is  not  liable  to  the  owner  for  the  shares 
nor  for  their  value;  the  owner's  remedy,  if  any  exists  at  all, 

»  Viz.,  from  §§  707  to  711. 


§713 


EQUITY   JURISPRUDENCE. 


996 


is  against  the  corporation  alone,  to  compel  it  either  to  issue 
new  shares  or  to  pay  the  value  of  the  old  ones/  These 
decisions  should,  on  principle,  apply  to  and  protect  the 
assignee  of  every  other  species  of  thing  in  action  who 
has  acquired  the  legal  title. 

§  713.  Successive  Assignments  by  Same  Assignor  to 
Different  Assignees.  —  The  remaining  case  to  be  con- 
sidered under  this  head,  as  mentioned  in  a  former  para- 
graph,^ is  that  of  successive  transfers  of  the  same  thing 
in  action  made  by  the  same  person  —  the  creditor  party 
—  to  different  assignees.  The  American  decisions  upon 
this  particular  case  cannot  be  reconciled.  I  can  only 
present  those  settled  doctrines  of  equity  which,  it  would 


*  This  conclusion  has  been  reached 
in  cases  ol  forgery,  and  it  would  ajor- 
Hon  seem  to  follow  in  cases  of  fraud, 
conversion,  want  of  consideration,  etc.; 
in  the  latter  cases,  however,  the  cor- 
poration might  not  be  liable:  Pratt  v. 
Taunton  Copper  M.  Co.,  123  Mass.  110, 
112;  25  Am.  Rep.  37.  Plaintifif's  cer- 
tificate of  shares,  with  a  forged  power 
of  attorney,  was  delivered,  without  his 
knowledge  or  assent,  to  an  auctioneer 
for  sale;  this  certificate  was  surren- 
dered to  the  corporation,  and  it  issued 
a  new  one  in  the  name  of  the  auc- 
tioneer, who  sold  and  delivered  it  to 
a  bona  fide  purchaser  for  value  and 
without  notice,  and  this  assignee  in 
turn  surrendered  the  second  certificate 
and  received  a  third  one  issued  to 
himself.  The  owner  brought  a  suit  in 
equity  against  the  corporation  and  the 
purchaser.  The  court  held,  —  1.  That 
the  plaintiflf  could  maintain  a  suit 
against  the  corporation  to  compel  it 
to  issue  a  certificate  of  a  like  number 
of  shares  to  him,  and  to  pay  him  all 
the  dividends  thereon;  citing  Ashby  v. 
Blackwell,  2  Eden,  299;  Amb.  503;  Slo- 
man  v.  Bank  of  England,  14  Sim.  475; 
Midland  R'y  v.  Taylor,  8  H.  L.  Cas. 
751 ;  Pollock  V.  National  Bank,  7  N.  Y. 
274;  57  Am.  Dec.  520;  but  2.  The 
plaintiif  was  entitled  to  no  relief 
against  the  purchaser,  who  was  a  pur- 
chaser in  good  faith  for  a  valuable 
consideration  and  without  notice,  and 
who  did  not  hold  the  certificate  of  shares 
which  the  plaintiff  had;  citing  Bank  v. 
Lanier,  11  Wall.  369;  In  re  Bahia  etc 


R'y,  L.  R.  3  Q.  B.  584;  and  the  Massa- 
chusetts cases  hereafter  named  in  this- 
note;  3.  If  the  purchaser  claimed 
under  a  transfer  which  he  knew  or 
was  bound  to  know  to  be  forged  or 
invalid,  a  difi'erent  case  would  be  pre- 
sented; citing  Cottam  v.  Eastern  Co. 
R'y,  1  Johns.  &  H.  243;  Johnston  v. 
Renton,  L.  R.  9  Kq.  181;  Tayler  v. 
Great  Ind.  Pen.  R'y,  4  De  Gex  &  J. 
559;  Denny  v.  Lyon,  38  Pa.  St.  98;  80 
Am.  Dec.  4C3.  See  also,  to  the  same 
efi'ect,  Sewall  v.  Boston  Water  P.  Co., 
4  Allen,  277;  81  Am.  Dec.  701;  Loring 
V.  Salisbury  Mills,  125  Mass,  138;  Pratt 
V.  Boston  &  A.  R.  R.,  126  Mass.  443; 
Machinists'  Nat.  Bank  v.  Field,  126 
Mass.  345;  (this  case  holds  that  the 
ba,nk,  after  having  obeyed  the  decree 
under  the  circumstances  stated  in  123 
Mass.  110,  cannot  maintain  any  suit 
for  reimbursement  against  the  pur- 
chaser); Telegraph  Co.  v.  Davenport, 
97  U.  S.  369  (holds  the  corporation 
liable,  but  rather  implies  than  ex- 
pressly declares  the  purchaser  not  to 
be  liable).  The  following  California 
decisions  involve,  if  they  do  not  ex- 
pressly declare,  the  same  rule:  Brews- 
ter V.  Sime,  42  Cal.  139,  147;  Thomp- 
son  V.  Toland,  48  Cal.  99;  Winter  v, 
Belmont  Min.  Co.,  53  Cal.  428,  432 
(but  see  Sherwood  v.  Meadow  Valley 
M.  Co.  50  Cal.  412);  People  v.  Elmore, 
35  Cal.  653;  Weston  v.  Bear  River  etc. 
Co.,  5  Cal.  186;  63  Am.  Dec.  ll7;6CaU 
425;  Naglee  v.  Pac  Wharf  Co.,  20  CaL 
529,  533. 
»  See  §  707. 


997  CONCERNING    PRIORITIES.  §  714 

seem,  should  apply  to  and  govern  such  a  condition  of 
circumstances.  In  England  and  in  several  of  the  states 
the  rule  giving  to  the  assignee  who  first  notifies  the  debtor 
party  or  trustee  a  precedence  over  all  others,  even  those 
who  are  earlier  in  date,  furnishes  a  certain  and  simple 
criterion  for  determining  the  priority,  it  being  remem- 
bered that  this  rule  is  confined  to  pure  personal  things  in 
action,  and  does  not  extend  to  liens  and  other  equitable 
interests  in  real  estate.'  In  the  states  where  the  rule  re- 
ferred to  does  not  prevail,  the  question  must  turn  upon 
other  doctrines.  If  the  interests  are  equitable  in  their 
nature,  and  the  equity  of  no  assignee  is  intrinsically  su- 
perior to  the  others,  the  settled  principle  of  equity  should 
control,  that  the  order  of  time  determines  the  order  of 
priority;  or  in  other  words,  that  the  subsequent  assignee 
takes  subject  to  the  rights  of  the  one  prior  in  time;  and 
this  principle  has  been  applied,  in  such  cases,  by  many 
able  decisions.^  On  the  other  hand,  if  the  subsequent 
assignee  has  acquired  the  legal  title,  and  was  a  purchaser 
in  good  faith  for  a  valuable  consideration  and  without 
notice,  he  is  protected;  and  this  doctrine  of  bona  fide  pur- 
chase seems  to  have  been  extended,  by  some  decisions,  to 
subsequent  assignees  who  had  only  obtained  an  equitable 
interest.' 

§  714.  3.  Equities  in  Favor  of  Third  Persons.  —  Equi- 
ties in  favor  of  third  persons  through  whom  the  title  to 
the  thing  in  action  has  never  passed,  and  those  in  favor 
of  a  former  assignor,  are  intimately  connected;  indeed, 
they  are  only  different  phases  of  the  same  doctrine,  and 
must  stand  or  fall  together.  If  the  imperfection  of  an 
assignee's  title  is  not  confined  to  equities  subsisting  in 

*  See  supra,  §§  695-697.  '  See  Judson  v.  Corcoran,  17  How. 

'  Taylor  v.  Bates,  5  Cow.  376;  Muir  612,  and  other  decisions,  where  a  sub- 

V.  Schenck,  3  Hill,  228;  38  Am.  Dec.  sequent   assignee  without    notice   has 

633;  Pratt's  Appeal,  77  Pa.   St.  378,  been   protected   by  obtaining  a   legal 

381;    Coon  v.  Reed,   79   Pa.    St.  240;  title  or  advantage,  or  by  his  diligence, 

Lindsay  V.  Wilson,  2  Dev.    &  B.   Eq.  or  the  laches,  etc.,  of  the  prior  assignee, 

85:  Allen  v.  Smitherman,  6  Ired.  Eq.  tupra,  §  698,  and  notes. 
341;  Wallston  V.  Braswell,  1  Jones  Eq. 
137;  Downer  v.  Bank,  39  Vt  25,  32. 


§  714  EQUITY   JURISPRUDENCE.  998 

favor  of  the  debtor  party,  there  is  no  reason,  in  the  nature 
of  things,  why  it  should  not  extend  to  the  equities  of  all 
other  parties,  —  third  persons  as  well  as  previous  holders 
and  assignors;  in  fact,  the  doctrine  would  apply  with 
fewer  exceptions  in  the  case  of  third  persons  than  in  the 
case  of  prior  assignors.  As  a  third  person,  although 
having  some  interest  or  claim  which  constitutes  his 
"equity,"  has  never  been  an  owner  or  holder  of  the  chose 
in  action,  and  has  never  transferred  it,  his  conduct  tow- 
ards it  cannot,  in  general,  enable  the  assignee  to  invoke 
against  him  the  doctrine  of  estoppel.  These  conclusions 
are  fully  sustained  by  judicial  authority.  Wherever  the 
narrower  view  that  an  assignee  takes  subject  only  to  the 
equities  of  the  debtor  has  been  rejected,  and  the  theory 
of  "latent"  equities  has  been  disregarded,  the  courts 
have  described  the  assignment  as  subject  to  all  claims  ex- 
isting against  the  assignor,  —  have  laid  down  the  rule  in 
comprehensive  and  positive  terms,  that  the  assignee  takes 
subject  to  all  equities,  latent  or  open,  of  third  persons. 
Of  course  the  "  equity,"  in  such  a  case,  must  be  some 
subsisting  claim  to  or  against  the  thing  in  action  itself, 
or  the  fund  which  it  represents,  which  the  third  person 
held  and  could  have  enforced  if  it  had  remained  in  the 
hands  of  the  assignor;  as,  for  example,  a  lien  or  charge 
upon  the  fund  or  some  part  of  it,  or  upon  the  security, 
or  an  equitable  ownership  or  right  to  the  fund  or  secu- 
rity, and  the  like.*     The  case  of  subsequent  execution  or 

'  Davies  v,  Austen,  1  Ves.  247,  per  v.  Lathrop,  22  N.  Y.  535,  per  Denio, 

Lord  Thurlow;    Mangles  v.   Dixon,  3  J,  (a  most  able  review  of  the  preced- 

H.  L.  Cas.  702,  731;  Bebee  v.  Bank  of  ing  authorities);  Schafer  v.  Reilly,  50 

New   York,   1    Johns,    529,    552,    per  N!  Y.  61,  67,  68,  per  Allen,  J.;  Trus- 

Spencer,    J.;   549,    per  Tompkins,  J.  tees  etc.  v.  Wheeler,  61  N.  Y.  88,  104- 

(in  these  cases  the  rule  is  laid   down  106,  113,  114,  per  Dwight,  J.;  Greene 

in  the  most  general  form);  Shropshire  v.  VV^arnick,  64  N.  Y.   220,   224,   225 

etc.  R'y  V.  The  Queen,  L.  R.  7  H.  L.  (the  rule  fully  discussed  and  applied 

496  (A,  for  value  and  without  notice,  to    equities   of    third    persons);    Van 

obtained  an  equitable  interest  by  as-  Rensselaer  v.  StafiFord,  Hopk.  Ch.  569, 

signment  in  certain  shares  of    stock  575;   aflBrrhed  9  Cow.  316,  318    (Van 

from  B,  wlio  had  the  legal  title.     A's  in-  D.    bought    lands    from   Van    R.    on 

terest  was  held  subject  to  the  rights  credit;  sold  part   to  W.,  from  whom 

of  a  cestui  que   trust,  C,  for  whom   B  he   took   two  mortgages  of   the  same 

really  held  the  shares  as  trustee.     See  date  for  the  price,  intending  to  assign 

the  cases  cited  in  the  opinions);  Bush  one  of  them  to  Van  R.  as  security  for 


999 


CONCERNING    PKIORITIES. 


§715 


attachment  creditors  of  tlie  assignor  stands  upon  a  some- 
what different  footing,  since  their  equities  in  the  subject- 
matter  are  not  existing  at  the  time  of  the  assignment. 

§  715.  Contrary  Rule,  that  Assignments  of  Things  in 
Action  are  Free  from  Latent  Equities  in  Favor  of  Third 
Persons  or  Previous  Assignors.  —  On  the  other  hand,  the 
conclusions  reached  by  this  imposing  line  of  authorities 
have  been  wholly  rejected.  Able  judges  and  courts  have 
maintained  the  position  that  assignments  of  things  in 
action  are  subject  only  to  equities  of  the  debtor  party;  that 
they  are  never  subject  to  equities  in  favor  of  third  per- 
sons, and  especially  that  they  are  free  from  that  kind  of 
prior  claim  often  called  "latent  equities."*  Although 
this  direct  conflict  cannot  be  completely  reconciled,  yet 


the  debt  due  him.  Both  mortgages 
were  recorded  at  the  same  time;  he 
first  assigned  cne  of  them  to  Van  R., 
and  afterwards  assigned  the  other  to 
S.  S.,  who  was  a  bona  Jide  purchaser 
for  value,  etc.  Held,  that  the  mort- 
gage assigned  to  Van  R.  obtained  a 
priority,  aad  S.  S.  took  the  one  as- 
signed to  him  subject  to  all  the  equi- 
ties which  Van  R.  had  against  the 
assignor,  Van  D.,  and  in  or  upon  the 
land);  Taylor  v.  Bates,  5  Cow.  376 
(A,  a  bona  Jide  assignee  of  an  entire 
pecuniary  demand  held  subject  to  the 
rights  of  B,  who,  by  a  previous  ar- 
rangement with  the  creditor-assignor, 
was  entitled  to  a  portion  of  the  pro- 
ceeds); Muir  V.  Schenck,  3  Hill,  228; 
38  Am.  Dec.  633  (disapproving  of 
dicta  of  Chancellor  Kent  in  Murray 
V.  Lylburn,  2  Johns.  Ch.  441,  443); 
Brooks  V.  Record,  47  111.  30  (assignee 
of  a  negotiable  note  and  chattel  mort- 
gage after  maturity  held  subject  to 
the  rights  of  one  who  had  purchased 
the  chattels  for  value  and  without  no- 
tice after  the  mortgage  was  given; 
the  mortgagee  had  estopped  himself 
by  his  conduct  from  enforcing  the 
mortgage  against  such  purchaser,  and 
the  assignee  was  affected  by  the  same 
equity);  Allen  v.  Watt,  79  111.  284 
(assignee  of  a  judgment  held  subject 
to  a  lien  acquired  by  creditors  previous 
to  the  assignment);  Pindall  v.  Trevor, 
.30  Ark,  249;  Trabue  v.  Bankhead,  2 
Tenn.  Ch.  412;  Parrish  v.  Brooks,  4 
Brewst.  154;  Bradley  v.  Root,  5  Paige, 


632;  Poillon  v.  Martin,  1  Sand.  Ch. 
509;  Maybin  v.  Kirby,  4  Rich.  Eq.  105; 
Judson  V.  Corcoran,  17  How.  612. 

'  Livingston  v.  Dean,  2  Johns.  Ch. 
479;  Murray  v.  Lylburn,  2  Johns.  Ch. 
441,  443  (the  opinion  of  Kent,  C, 
in  these  cases  seems  to  be  the  author- 
ity on  which  all  the  later  similar  decis- 
ions are  rested.  His  opinion  on  this 
point  has  been  repeatedly  overruled 
by  the  New  York  courts:  See  Muir  v. 
Schenck,  3  Hill, -228;  38  Am.  Dec.  6.33; 
Bush  V.  Lathrop,  22  N.  Y.  535);  Bebee 
V.  Bank  of  New  York,  1  Johns.  529, 
573,  per  Kent,  C.  J. ;  James  v.  Morey, 
2  Cow.  246,  298;  14  Am.  Dec.  475,  per 
Sutherland,  J.;  Losey  v.  Simpson,  11 
N.  J.  Eq.  246;  Bloomer  v.  Henderson, 
8  Mich.  395,  402;  77  Am.  Dec.  453; 
Croft  V.  Bunster,  9  Wis.  503,  508; 
Mott  V.  Clark,  9  Pa.  St.  399,  404;  49 
Am.  Dec.  566;  Taylor  v.  Gitt,  10  Pa. 
St.  428;  Metzgar  v.  Metzgar,  1  Rawle, 
227;  McConnellv.  Wenrich,  16  Pa.  St. 
365;  Moore  V.  Holcombe,  3  Leigh,  597; 
24  Am.  Dec.  683;  Ohio  Life  Ins.  Co. 
V.  Ross,  2  Md.  Ch.  25,  39;  [Woodruff 
V.  Morristown  Inst..  34  N.  J.  Eq.  174; 
Duke  V.  Clark,  58  Miss.  465.]  An  as- 
signee for  value  and  without  notice 
of  a  chattel  mortgage,  fraudulent  as 
against  the  creditors  of  the  mortgagor, 
obtains  a  good  title  superior  to  the 
equities  of  such  creditors:  Sleeper  v* 
Chapman,  121  Mass.  404;  see  also, 
upon  the  general  question  discussed  in 
the  text,  Sumner  v.  Waugh,  66  IlL 
531. 


§  716  .EQUITY    JURISPRUDENCB.  1000 

the  apparent  discrepancy  which  exists  among  similar 
cases  may  be  explained,  and  at  least  partly  removed,  by 
certain  well-settled  principles  of  equity  which  are  recog- 
nized by  all  courts.  The  equity  of  the  second  assignee 
may,  from  some  intrinsic  element  or  some  external  inci- 
dent, be  "  superior,"  and  may  therefore  be  entitled  to  a 
precedence;  or  the  second  assignee  may  have  obtained  a 
legal  title,  so  that  the  doctrine  of  bona  fide  purchaser  for 
a  valuable  consideration  will  apply  and  give  him  protec- 
tion; or  the  holder  of  the  prior  equity  may  have  been 
guilty  of  laches  or  other  conduct  making  it  inequitable  to 
subject  an  innocent  subsequent  assignee  to  his  claim/ 

§  716.  Equitable  Estates,  Mortgages,  Liens,  and  Other 
Interests.  —  Having  thus  considered  the  general  princi- 
ples concerning  priority  in  their  effect  upon  assignments 
of  pure  things  in  action,  I  shall  now  examine  their  appli- 
cation to  another  group  of  equitable  interests  in  property, 
including  estates,  liens,  charges,  and  the  like.  The  gen- 
eral doctrines  which  control  these  kinds  of  interests,  and 
determine  their  order  of  priority,  have  been  presented 
in  the  former  part  of  this  section,  and  require  no  further 
discussion;  it  only  remains  to  illustrate  their  application 
under  various  circumstances  to  different  conditions  of 
fact.  It  will  be  remembered  that  among  equitable  in- 
terests only  in  the  same  subject-matter,  otherwise  equal, 
the  order  of  time  controls;  that  between  two  or  more  equi- 
ties, one  may  be  intrinsically  superior  in  its  nature,  and 
thus  entitled  to  the  precedence;  that  between  an  equitable 
title  and  a  legal  title  in  the  same  thing,  the  latter  gen- 
erally prevails;  and  finally,  the  priority  resulting  from 
order  of  time  merely,  or  that  resulting  from  the  superior 
nature  of  the  equity  itself,  or  that  belonging  to  a  legal 
title,  may  be  postponed  or  defeated  in  various  manners 
and  by  various  incidents,  among  which  the  most  im- 
portant are,  notice  given  to  or  fraud   or  negligence  of 

^  See  supra,  §  698.  quotation  from  Judaon  v.  Corcoran,   17  How.  612,  and 
other  cases  cited. 


1001  CONCERNING   PRIORITIES.  §  717 

the  holder  of  the  interest   which  would  otherwise  have 
been  preferred.^ 

§  717.  Doctrine  of  Priorities  Greatly  Modified  by  the 
Recording  Acts.  —  These  doctrines,  forming  a  most  im- 
portant part  of  the  equity  jurisprudence,  have  been  well 
settled,  applied  to  every  kind  of  equitable  estate,  lien,  and 
interest,  and  illustrated  by  innumerable  examples.  The 
scope  and  operation  of  these  purely  equitable  doctrines 
throughout  the  United  States  have  been  greatly  broken 
in  upon  and  modified  by  the  various  recording  acts;  so 
that  any  uniformity  of  the  practical  rules  has  been  made 
virtually  impossible.  The  provisions  of  the  recording 
acts  differ  exceedingly  in  the  different  commonwealths,  as 
has  been  shown  in  the  preceding  section.'  In  some  states 
only  "conveyances,"  including  deeds  and  mortgages,  are 
to  be  recorded;  in  others,  every  kind  of  instrument  cre- 
ating or  assigning  any  interest  in  or  lien  or  charge  upon 
land,  and  even  instruments  dealing  only  with  personal 
property,  may  be  recorded.  A  similar  diversity  exists  in 
the  statutory  provisions  regulating  the  effect  of  docketed 
judgments.  Another  cause  which  has  disturbed  the  uni- 
formity of  rules  upon  this  general  subjectis  found  in  the 
various  theories  which  prevail  concerning  the  nature  and 
effect  of  mortgages  of  land, — theories  which  are  not  only 
unlike  the  common  law  and  equitable  system  originally 
settled  in  England,  but  which  greatly  differ  among  them- 
selves. To  discuss  in  an  exhaustive  manner  the  subject 
of  priorities  as  modified  by  the  statutory  legislation,  and 
to  present  all  the  rules  growing  out  of  their  local  record- 
ing acts,  as  settled  in  the  various  states,  would  plainly 
transcend  the  limits  of  this  work,  and  would,  in  fact,  re- 
quire a  volume  by  itself;  for  such  an  extended  and  minute 
treatment  the  reader  must  be  referred  to  treatises  upon 
mortgages  and  conveyancing,  and  to  the  decisions  in  each 
state  which  have  given  a  construction  to  its  own  statutes. 

»  See  supra,  §§  683-692.     [See   also        »  See  suvra,  §  646. 
Trentraaa  v.  Eldridge,  98  lad.  525.] 


§  718  EQUITY  JURISPRUDENCE.  1002 

I  shall  endeavor  simply  to  illustrate  the  well-settled  doc- 
trines of  equity,  independent  of  statutory  rules,  and  then 
to  describe  some  effects  of  the  registration  system,  with 
the  modifications,  somewhat  different  in  different  com- 
monwealths, which  it  has  introduced. 

§  718.  I.  Priority  of  Time  among  Equal  Equities. — 
The  general  doctrine  is  well  settled,  as  already  stated,* 
that  among  successive  equitable  estates,  liens,  and  inter- 
ests which  are  equal,  —  that  is,  where  neither  claimant 
holds  the  legal  estate  or  has  the  best  right  to  call  for  it, 
and  neither  is  intrinsically  superior  to  the  others,  nor  is 
affected  with  any  collateral  incident,  such  as  negligence 
or  fraud, — the  order  of  time  controls,  even  though  a  sub- 
sequent holder  acquired  his  interest  without  any  notice 
of  the  prior  one.  Under  these  circumstances  the  maxim. 
Qui  prior  est  tempore,  potior  est  jure,  applies.  The  doctrine 
has  been  fully  recognized  and  constantly  enforced  by 
American  courts,  wherever  its  operation  has  not  been 
interfered  with  or  modified  by  the  recording  acts.^  The 
equities  to  which  this  rule  has  been  most  frequently  ap- 
plied by  the  English  courts  are  equitable  mortgages,  espe- 
cially those  created  by  a  deposit  of  title  deeds, —  a  kind 
of  security  almost  unknown  in  this  country.  In  order  to 
accurately  appreciate  the  decisions  upon  this  subject,  it 
is  important  to  keep  in  mind  the  peculiar  rules  concern- 
ing the  nature  of  legal  and  equitable  mortgages  which 
prevail  in  the  English  law,  and  which  are  in  many  re- 
spects different  from  our  own  system.' 

"  See  .sf<pm,  §§  678,  682.  Gex  &  J.    1;   Beckett   v.  Cordley,  1 

«  Phillips  V,  Phillips,  4  De  Gex,  F.  &  Brown    Ch.     353,    358;    Mackreth   v. 

G.  208,  215,  218;  Cave  v.  Cave,  L.  R.  Symmons,   15  Yea.  329,  354;  Wilmot 

15  Ch.  Div.  639,  646  (interest  of  a  cestui  v.  Pike,  5  Hare,  14;  Potter  v.  Sanders, 

que  ti~uM  and  an  equitable  mortgage);  6  Hare,   1;  Ford  v.  White,   16  Bear. 

Rice   V.  Rice,   2   Drew.  73   (vendor's  120;  Berry  v.  Mut.  Ins.  Co.,  2  Johns, 

lien  and  equitable  mortgage);  Bradley  Ch.    603;   Cherry  v.   Monro,  2   Barb. 

V,  Riches,  L.  R.  9  Ch.  Div.  189  (two  Ch.  618;  Grosvenor  v.  Allen,  9  Paige, 

equitable  mortgages);  Dixon  v.   Muc-  74,  76:   Thorpe  v.  Durbon,  45  Iowa, 

kleston,  L.  R.  8  Ch.  155;   Newton  v.  192;  Hoadley  v.  Hadley,  48  Ind.  452; 

Newton,  L.  R.  4  Ch.  143;  6  Eq.   1.S5,  Stevens  v.  Watson,  4  Abb.  App.  302; 

140;   Waldy   v.  Gray,  L.   R.  20   Eq.  Littlefield   v.    Nichols,    42    Cal.    372; 

238;  Thorpe  v.  Holdsworth,  L.  R.  7  Walker  v.  Matthews,  58  111.  196. 
Eq.  139;  Cory  v.  Eyre,  1  De  Gex.  J.  &         *  With  respect  to  priorities  between 

S.   149,   163;  Roberts  v.  Croft,  2   De  successive     equitable    mortgages,    sea 


1003 


CONCERNING    PRIORITIES. 


§719 


§  719.  Illustrations  —  Simultaneous  Mortgages,  Sub- 
stituted Liens,  etc.  —  It  has  naturally  followed,  from  the 
provisions  of  the  recording  acts,  and  from  the  quite  dif- 
ferent modes  of  conducting  business  prevailing  in  this 
country,  that  the  questions  presented  to  the  American 
courts  for  decision  have  been  of  another  character,  aris- 
ing from  other  circumstances.  Among  these  questions, 
one  relates   to  simultaneous  mortgages  or   other   liens.* 


Bradley  v.  Riches,  L.  R.  9  Ch.  Div. 
189;  Dixon  v.  Mucklestou,  L.  R.  8 
Ch.  155;  Waldy  v.  Gray,  L.  R.  20 
Eq.  238;  Thorpe  v.  Holdsworth,  L.  R. 
7  Eq.  139,  and  other  cases  cited  in  last 
note.  With  respect  to  such  priority 
where  there  has  been  negligence  on 
the  part  of  the  one  first  in  order  of 
time,  see  Layard  v.  Maud,  L.  R.  4  Eq. 
397,  406;  Hunter  v.  Walters,  L.  R.  11 
Eq.  292;  Pease  v.  Jackson,  L.  R.  3 
Ch.  570.  If  the  legal  owner  of  laud 
gives  a  first  mortgage  on  it  to  A  in 
the  ordinary  form  known  to  the  com- 
mon law,  of  a  deed  with  a  condition, 
this  is.  of  course,  a  legal  mortgage;  A 
obtains  and  holds  the  legal  title  and 
estate,  if  the  mortgage  is  of  the  fee, 
then  his  estate  is  the  legal  fee.  While 
this  first  mortgage  is  outstanding,  all 
subsequent  mortgages  of  the  same 
land  to  B,  C,  D,  etc.,  no  matter  what 
may  be  their  forms,  are  necessarily 
equitable  mortgages;  even  if  such  a 
subsequent  mortgage  be  in  the  form 
of  a  legal  conveyance,  it  can  only  con- 
vey an  equitable  estate,  since  the  legal 
estate  has  already  been  conveyed  away 
and  is  vested  in  the  first  mortgagee,  A. 
This  is  the  settled  rule  necessarily  re- 
sulting from  the  English  theory  of 
mortgages.  Again,  if  the  legal  owner 
of  land  creates  a  first  mortgage  upon 
it  by  depositing  all  his  title  deeds  with 
A,  A's  interest  is  certainly  an  equi- 
table mortgage;  but  since  he  is  first 
in  order  of  time,  and  possesses  all  the 
legal  muniments  of  title,  and  has  the 
right  to  call  for  the  execution  of  an  or- 
dinary legal  mortgage  by  conveyance 
in  order  to  perfect  his  security,  hia 
position  is  plainly  similar  to  that  of  a 
legal  mortgagee. 

»  Morse  v.  Brockett,  67  Barb.  234. 
A  first  mortgage  being  given  to  A 
and  a  second  to  B,  both  on  the  same 
land,  and  as  a  part   of  one  and  the 


same  arrangement,  no  money  passing 
between  the  parties  at  the  time,  B 
may  insist  that,  as  against  his  own 
mortgage,  A's  mortgage  has  no  force 
except  to  the  extent  that  A  has  per- 
formed the  agreement  under  which 
they  were  given.  The  consideration 
of  A's  mortgage  was  his  undertaking 
to  satisfy  the  mortgagor's  liabilities 
to  the  amount  of  twenty  thousand 
dollars.  Held,  that  he  could  only  en- 
force to  the  extent  he  had  performed 
his  agreement.  Also,  by  his  agree- 
ment, he  became,  as  between  himself 
and  the  mortgagor,  with  respect  to 
these  liabilities,  the  principal  debtor; 
and  when  he  had  satisfied  judgments 
against  the  mortgagor,  he  could  not 
hold  them  as  assignee,  and  enforce 
them  against  the  mortgagor:  Van 
Aken  v.  Gleason,  34  Mich.  477.  Where 
two  mortgages  are  of  even  date,  and 
intended  to  be  simultaneous,  but  re- 
corded on  difi"erent  days,  the  fore- 
closure of  one  of  them  by  advertise- 
ment would  not  settle  the  equities  of 
the  purchaser  at  the  sale  and  of  the 
person  holding  the  other;  a  suit  in 
equity  would  be  necessary  to  deter- 
mine their  respective  rights.  The 
fact  that  the  one  recorded  on  the  later 
day  bore  an  acknowledgment  of  an 
earlier  date  does  not  show  that  it  was 
intended  to  be  the  prior  security: 
Gausen  v.  Tomlinson,  23  N.  J.  Eq. 
405.  Where  two  mortgages  on  the 
same  land  are  given  at  the  same  time 
to  the  same  person,  an  earlier  record 
of  one  will  not  give  it  any  precedence 
over  the  other,  even  when  between 
assignees.  Such  mortgages,  in  the 
hands  of  difi'erent  assignees,  are  con- 
current liens,  payable  ratably,  if  ne- 
cessary: Gausen  v.  Tomlinson,  23  N, 
J.  Eq.  405;  Howard  v.  Chase,  104 
Mass.  249.  Where  two  simultaneous 
mortgages   are   given  with  au  agree* 


§719 


EQUITY    JURISPRUDENCE. 


1004 


Two  or  more  mortgages  having  been  given  at  the  same 
time,  or  as  parts  of  the  same  single  transaction,  vrith  the 
intention  that  they  should  be  simultaneous  liens,  they 
may  perhaps  be  recorded  on  different  days,  and  the  court 
may  be  called  upon  to  settle  the  equities  between  the  mort- 
gagees or  their  assignees.  A  second  and  most  important 
question  concerns  the  respective  claims  of  precedence 
between  a  prior  unrecorded  mortgage  or  other  specified 
equitable  lien,  and   a   subsequent   docketed  judgment.* 


ment  that  they  are  to  be  equal  liens, 
the  earlier  record  of  one  gives  no 
priority  over  the  other,  even  to  an 
assignee  of  the  one  first  recorded. 
Such  assignee  is  charged  with  notice 
by  the  record  of  the  other  mortgage. 
If  both  the  mortgages,  or  either  of 
them,  contain  a  stipulation  that  they 
are  to  be  simultaneous,  or  a  statement 
that  both  were  given  for  purchase- 
money,  then  the  first  record  of  one 
will  give  it  no  priority,  either  in  the 
hands  of  the  mortgagee  or  of  an  as- 
signee: Greene  v.  Warnick,  64  N.  Y. 
220.  On  the  other  hand,  if  simul- 
taneous mortgages  are  given  to  differ- 
ent persons  as  parts  of  the  same 
transaction,  each  having  notice  of  the 
other,  their  priorities  as  between  the 
mortgagees  will  depend  upon  the 
equities  intrinsically  belonging  to 
them,  without  reference  to  the  order 
of  recording:  Rhodes  v.  Canfield,  8 
Paige,  545;  Jones  v.  Phelps,  2  Barb. 
Ch.  440;  Pomeroy  v.  Latting,  15  Gray, 
435;  Sparks  v.  State  Bank,  7  Blackf. 
469,  If,  however,  one  of  these  mort- 
gages is  assigned  to  a  bona  fide  pur- 
chaser for  value  and  without  notice, 
he  may,  by  obtaining  the  earliest  record, 
secure  the  priority  over  the  other 
which  has  intrinsically  a  superior 
equity:  Corning  v.  Murray,  3  Barb. 
65"2.  If  a  grantee  of  land,  as  a  part  of 
his  purchase,  and  the  whole  constitut- 
ing one  transaction,  gives  a  mortgage 
back  to  his  grantor  for  purchase-money, 
and  also  a  mortgage  to  another  person, 
aud  the  deed  and  two  mortgages  are 
recorded  at  the  same  time,  the  pur- 
chase-money mortgage  to  the  grantor 
is  entitled  to  the  priority:  Clark  v. 
Brown,  3  Allen,  509;  and  see  Dusen- 
bury  V.  Hulbert,  2  Thomp.  &.  C.  177. 
This  subject  is  more  fully  discussed  in 


1  Jones  on  Mortgages,  sees.  566-568, 
from  which  a  portion  of  this  note  has 
been  borrowed.  [No  presumption  of 
priority  arises  from  the  fact  of  prior 
recording,  nor  does  such  fact  tend  to 
show  that  the  one  first  recorded  was 
executed  and  delivered  before  the 
other:  Walker  v.  Buffandeau,  63  Cal. 
312.  If,  however,  facts  appearing  on 
the  face  of  the  mortgages  show  that  it 
was  the  intention  of  the  parties  to  give 
preference  to  one  over  the  other,  that 
lien  will  be  given  priority:  Coleman 
V.  Carhart,  74  Ga.  392.  Where,  how- 
ever, as  between  the  simultaneous 
mortgagees,  an  equitable  priority  ex- 
ists in  favor  of  one,  and  the  other  as- 
signs for  value,  and  the  assignee  has 
no  notice, actual  or  constructive, of  such 
priority,  he  will  take  his  mortgage 
discharged  of  the  equity:  Riddle  v. 
George,  58  N.  H.  25.  And  where  the 
concurrent  mortgages  are  held  by  the 
same  person,  and  one  is  assigned  by 
the  mortgagee,  with  a  representation 
that  it  is  the  first  lien,  such  represen- 
tation will  give  it  priority  as  against 
the  mortgagee,  but  not  as  against  a 
subsequent  assignee  of  the  other  mort- 
gage without  notice:  Vreden burgh  v. 
Burnet,  31  N.  J.  Eq.  229.  But  the  fact 
that  one  of  the  mortgages  becomes  due 
before  the  other  is  held  not  to  give  it 
priority:  CoUerd  v.  Huson,  34  N.  J. 
Eq.  38.] 

'  This  particular  question,  which 
has  given  rise  to  a  direct  conflict  of 
opinion,  is  more  fully  examined  under 
the  next  head  (infra,  §§  721-724), 
and  I  simply  here  cite  some  of  the  cases 
involving  it:  Galway  v.  Malchow,  7 
Neb.  285;  King  v.  Portis,  77  N.  C. 
25;  Corpnian  v.  Baccastow,  84  Pa.  St. 
363;  Van  Thorniley  v.  Peters,  2ti  Ohio 
St.  471;  Stevens  v.  Watson,  4  Abb. 


1005 


CONCERNING    PRIORITIES. 


§  720 


Another  question  relates  to  the  effect  of  substituting  a  dif- 
ferent lieu  in  the  place  of  one  already  existing,  whether 
the  substituted  lien  retains  the  precedence  which  belonged 
to  the  one  which  it  has  replaced.*  Very  many  cases  have 
arisen,  involving  special  facts,  and  depending  for  their 
decision  upon  their  particular  circumstances.  Some  of 
them  have  been  placed  as  illustrations  in  the  foot-note.^ 

§  720.  II.  One  Equity  Intrinsically  the  Superior  — 
Prior  General  and  Subsequent  Specific  Lien.  —  The  doc- 
trine has  already  been  stated'  that  where  one  of  two 
equities  is  intrinsically  the  superior,  it  is  entitled  to  pre- 
cedence;* and  that  an  equitable  interest  in  rem,  such  as 

cretly  given  to  the  mortgagor's  father- 
in-law,  for  money  which  he  had  pre- 
viously advanced  to  mortgagor's  wife. 
It  was  made  with  the  design  of  giving 
him  priority,  but  without  his  partici- 
pation. Held,  that  this  mortgage  must 
be  postponed  to  that  of  the  plaintiff, 
since,  on  the  assumption  that  it  was 
not  fraudulent,  the  mortgagee  had  no 
equities  which  could  make  it  anything 
but  a  second  mortgage  against  the 
plaintiff's  substituted  securitv.  la 
Kitchell  V.  Mudgett,  37  Mich.  81, 
there  were  three  successive  mortgages, 
and  K.  paid  off  attd  discharged  the  first 
and  second,  and  then  took  a  new  mort- 
gage for  the  amount  which  he  had  thus 
paid.  Held,  that  this  one  was  subject 
to  the  mortgage  No.  3,  and  K.  could 
not  keep  alive  the  lieu  of  the  first  two, 
so  as  to  give  his  mortgage  the  priority. 

» Deere  v.  Young,  39  Iowa,  588; 
Hemminway  v,  Davis,  24  Ohio  St. 
150;  Dusenbury  v.  Hulbert,  2  Thomp, 
&  C.  177;  Lowry  v.  McKinney,  68  Pa. 
St.  294;  Armstrong  v.  Ross,  20  N.  J. 
Eq.  109.  [When  two  notes  are  given 
for  the  purchase  price  of  land,  and 
the  vendor  assigns  the  one  last  falling 
due,  retaining  the  other,  the  assigned 
note  is  entitled  to  the  prior  lien:  Par- 
sons V.  Martin,  86  Ala.  352;  Alabama 
Gold  Life  Ins.  Co.  v.  Hall,  58  Ala.  1.] 

»  See  supra,  S.%  684-692. 

*  As  an  illustration,  in  Rice  v.  Rice, 
2  Drew.  73,  a  vendor  conveyed,  with- 
out receiving  the  purchase  price,  but 
indorsing  the  receipt  of  it  upon  the 
deed,  and  delivering  the  title  deeds  to 
the  grantee.  This  grantee  then  made 
an  e(^uitable  mortgage  by  a  deposit  of 


App.  302;  Merriman  v.  Polk,  5 
Heisk.  717;  Fain  v.  Inman,  6  Heisk.  5; 
Wheeler  v.  Kirtland,  24  N.  J.  Eq. 
552;  Knell  v.  Building  Ass'u,  34  Md. 
67. 

*  It  will  be  found,  I  think,  from  the 
decisions  that  no  general  rule  can  be 
formulated  which  shall  be  an  answer 
to  this  question.  The  effect  of  the 
substitution,  in  retaining  the  original 
priority,  must  depend,  it  would  seem, 
both  upon  the  intent  of  the  parties, 
and  upon  the  mode  in  which  it  was 
consummated.  Each  case  must  there- 
fore, to  a  certain  extent,  turn  upon 
its  own  special  circumstances.  In 
Thorpe  V.  Durbon,  45  Iowa,  192,  it  is 
said  that  in  exchanging  one  form  of 
security  for  anotlier,  for  the  same 
debt,  no  other  lien  can  intervene  and 
obtain  a  precedence.  A  vendor  in  a 
land  contract  retained  his  lien  on  the 
land  for  the  unpaid  price,  which  was 
prior  to  a  mechanic's  lien  which  had 
subsequently  arisen  and  attached  for 
the  building  of  a  house  by  the  vendee. 
Afterwards  the  vendor  gave  a  deed  of 
conveyance  and  took  back  a  mortgage 
to  secure  the  purchase  price.  The  lien 
of  this  mortgage,  it  was  held,  being 
substituted  for  the  vendor's  lien,  re- 
tained the  precedence  which  had  be- 
longed to  the  latter,  and  prevailed 
over  the  mechanic's  lien,  although 
actually  later  in  date:  Eggeman  v. 
Eggeman,  37  Mich.  436.  The  parties 
to  a  mortgage  agreed  that  a  new  one 
should  be  substituted.  On  the  same 
day  that  this  substituted  security  was 
completed,  but  executed  and  recorded 
before  it,  another  mortgage  wa^  se- 


§721 


EQUITY   JURISPRUDENCE. 


1006 


that  created  by  a  mortgage,  contract,  trust,  and  the  like,  is 
superior  to  a  mere  voluntary  interest,  and  to  the  general 
lien  of  a  judgment.  It  would  seem  to  be  a  general  rule, 
at  all  events  a  correct  deduction  from  settled  principles, 
that  where  there  is  a  prior  general  lien,  embracing,  among 
other  things,  a  certain  subject-matter,  and  a  specific  lien 
is  subsequently  created  upon  that  same  particular  sub- 
ject-matter, not  voluntary,  but  arising  from  a  new  and 
valuable  consideration,  such  subsequent  specific  lien  would 
be  intrinsically  superior,  and  therefore  entitled  to  the  pre- 
cedence, at  least  if  it  were  acquired  by  the  holder  thereof 
without  notice  of  the  prior  general  encumbrance.  This 
rule  is  certainly  recognized  by  some  decisions.* 

§  721.  Prior  Unrecorded  Mortgage  Superior  to  Subse- 
quent Docketed  Judgment. — The  most  important  ques- 
tion under  this  head  which  has  come  before  the  American 
courts  relates  to  the  respective  claims  arising  from  a  prior 


the  title  deeds,  and  absconded.  Held, 
that  the  vendor's  lien  lor  the  unpaid 
price,  although  prior  in  time,  must  be 
postponed  to  the  equitable  mortgage, 
because  the  possession  of  the  title 
deeds  and  the  fact  of  the  indorsement  of 
the  receipt  on  the  deed  made  the  mort- 
gagee's equity  superior.  See  also 
Newton  V.  McLean,  41  Barb.  285. 

'  In  re  Hamilton's  etc.  Ironworks, 
L.  R.  12  Ch.  Div.  707,  710,  711.  A 
company  gave  a  mortgage  of  all  its 
land,  fixtures,  stock  in  trade,  and  its 
undertaking,  to  secure  its  bond-holders 
and  other  creditors.  The  company 
afterwards  borrowed  a  sum  of  money 
to  use  in  carrying  on  its  business  from 
A,  who  knew  of  the  previous  mort- 
gage, and  gave  him  as  security  a 
charge  by  way  of  assignment  on  a  cer- 
tain sum  of  money  about  to  become 
due  to  the  company  for  the  completion 
of  certain  work.  The  work  being 
completed,  and  the  money  due,  it  was 
held  that  A's  claim  to  it  was  entitled 
to  preference  over  that  of  the  mort- 
gagees. The  same  rule  seems  to  be 
sustained  by  the  following  cases:  In 
Stevens  v.  Watson,  4  Abb.  App.  302, 
it  is  held  that  while  a  mortgage  by 
a  railroad  company  of  all  its  prop- 
erty then  existing  or  afterwards  to 
be  acquired,  creates  a  valid  equitable 


lien  upon  all  the  after-acquired  prop- 
erty, which  is  superior  to  that  of  an 
ordinary  subsequent  judgment,  still, 
if  such  subsequent  judgment  is  con- 
fessed to  secure  the  payment  of  money 
advanced  at  the  time  on  the  faith  of 
it  by  the  judgment  creditor,  the  latter 
lien  thereby  becomes  entitled  to  a 
precedence  over  the  prior  encumbrance 
by  the  mortgage;  citing,  to  the  same 
effect,  Hulett  v.  Whipple,  .58  Barb. 
224.  In  Fain  v.  Inman,  6  Heisk.  5, 
it  is  held  that  where  the  vendor  con- 
veys the  legal  title  without  retaining 
a  lien  for  the  purchase-money  in  any 
express  manner,  his  right  to  enforce 
payment  against  the  land  in  the  hands 
of  the  vendee  is  a  mere  "equity," 
and  must  be  postponed  to  a  specific 
lien  subsequently  acquired,  either  with 
or  without  notice,  by  a  creditor  of  the 
vendee.  This  case  seems  to  recognize 
the  rule  stated  in  the  text,  but,  in  vay 
opinion,  by  a  mistaken  course  of  rea- 
soning. By  the  overwhelming  weight 
of  authority,  the  lien  of  a  vendor, 
even  when  not  reserved  by  any  ex- 
press language,  is  more  than  a  mere 
equity;  it  is  an  equitable  interest  in 
rem,  and  entitled  to  preference  over 
all  subsequent  equitable  interests  of 
no  higher  nature:  See  Rice  v.  Rice, 
2  Drew.  73. 


1007 


CONCERNING    PRIORITIES. 


§721 


specific  and  a  subsequent  general  lien.  The  doctrine  is 
certainly  established  as  part  of  the  equity  jurispru- 
dence, and  rests  upon  the  solid  basis  of  principle,  that 
prior  equitable  interests  in  rem,  including  equitable  liens 
upon  specific  parcels  of  land,  have  priority  of  right  over 
the  general  statutory  lien  of  subsequent  docketed  judg- 
ments, although  the  latter  is  legal  in  its  nature.  Judg- 
ment creditors  are  not  **  purchasers  "  within  the  meaning 
of  the  recording  acts,  and  unless  expressly  put  upon  the 
same  footing,  they  do  not  obtain  the  benefit  which  a  sub- 
sequent purchaser  does  by  a  prior  record.  The  equitable 
doctrine  is,  that  a  judgment  and  the  legal  lien  of  its 
docket  binds  only  the  actual  interest  of  the  judgment 
debtor,  and  is  subject  to  all  existing  equities  which  are 
valid  as  against  such  debtor.*     It  follows,  as  a  necessary 


*  The  doctrine  was  well  stated  by 
Bartley,  J.,  in  White  v.  Denman,  1 
Ohio  St.  110,  112,  although  the  decis- 
ion upon  the  authority  of  earlier  Ohio 
cases  were  not  in  accordance  with  it. 
"It  is  a  principle  of  familiar  applica- 
tion in  equity  jurisprudence  .that  a 
specific  equitable  interest  in  real  es- 
tate, whether  it  be  created  by  an 
executory  agreement  for  the  sale  of 
land,  or  by  deed  so  defectively  exe- 
cuted as  not  to  pass  the  legal  estate, 
but  treated  in  equity  as  a  contract  to 
convey,  or  even  a  vendor's  lien,  is  up- 
held by  courts  of  equity,  and  uni- 
formly takes  priority  over  judgment 
liens,  assignments  in  bankruptcy,  and 
assignments  for  the  benefit  of  creditors 
generally."  See  also  Finch  v.  Earl  of 
Winchelsea,  1  P.  Wms.  277;  Legard 
V.  Hodges,  1  Ves.  477;  Burn  v.  Burn, 
3  Ves.  573,  582;  Lodge  v.  Tyseley,  4 
Sim.  70;  Beavan  v.  Earl  of  Oxford,  6 
De  Gex,  M.  &  G.  507,  517,  518;  New- 
lands  v.  Paynter,  4  Mylne  &  C.  408; 
Langton  v.  Horton,  1  Hare,  549;  Ev- 
erett V.  Stone,  3  Story,  446,  455; 
Briggs  V.  French,  2  Sum.  251;  [Cow- 
ardin  v.  Anderson,  78  Va.  88;  Sum- 
mers V.  Darne,  31  Gratt.  791.]  In  the 
following  cases  the  doctrine  has  been 
applied  to  a  great  variety  of  equitable 
interests,  — that  of  a  vendee,  to  the  lien 
of  a  vendor,  to  the  interest  of  a  cestui 
que  trust,  whether  the  trust  was  express 
or  by  operation  of   law,  to  equitable 


mortgages  or  liens  arising  from  con- 
tract, or  from  intended  legal  mort- 
gages defectively  executed,  etc. :  Ells 
V.  Tousley,  1  Paige,  280;  In  re  Howe, 
1  Paige,  125;  White  v.  Carpenter,  2 
Paige,  217,  266;  Gouverneur  v.  Titus, 
6  Paige,  347;  Kiersted  v.  Avery,  4 
Paige,  9;  Arnold  v.  Patrick,  6  Paige, 
310;  Morris  v.  Mowatt,  2  Paige,  586, 
590;  22  Am.  Dec.  661;  Buchan  v. 
Sumner,  2  Barb.  Ch.  165,  207;  47  Am. 
Dec.  305;  Hoagland  v.  Latourette,  2 
N.  J.  Eq.  254;  Dunlap  v.  Burnett,  5 
Smedes  &  M.  702;  45  Am.  Dec.  269; 
Money  v.  Dorsey,  7  Smedes  &  M.  15; 
Bank  v.  Campbell,  2  Rich.  Eq.  179; 
Watkins  v.  Wassell,  15  Ark.  73,  94, 
95;  Cover  v.  Black,  1  Pa.  St.  493; 
Shryock  v.  Waggoner,  28  Pa.  St.  430; 
Hampson  v.  Edelen,  2  Har.  &  J.  64; 
3  Am.  Dec.  5.30;  Hackett  v.  Callender, 
32  Vt.  97,  108,  109;  Hart  v.  Farmer's 
etc.  Bank,  33  Vt.  252;  Brown  v. 
Pierce,  7  Wall.  205;  Baker  v.  Morton, 
12  Wall.  150.  In  these  two  latter 
cases  the  doctrine  was  applied  to  the 
equitable  interest  of  a  grantor  who 
had  executed  a  deed  through  duress, 
but  had  remained  in  possession, 
against  a  judgment  creditor  of  the 
grantee.  [See  also  Hurt  v.  Prillaman, 
79  Va.  257;  Sinclair  v.  Sinclair,  79  Va. 
40;  Bowman  v.  Hicks,  80  Va.  806; 
Boyd  V.  Anderson,  102  Ind.  217; 
Heberd  v.  Wine,  105  Ind.  237;  Wells 
V.  Benton,   108   Ind.    585;   Justice  v. 


§  721 


EQUITY   JURISPRUDENCE. 


1008 


consequence,  tnat,  unless  prevented  by  express  statutory 
provisions,  the  equitable  lien  of  a  prior  unrecorded  mort- 
gage given  upon  a  specific  parcel  of  land  should  have 
precedence  over  the  general  legal  lien  of  a  subsequent 
docketed  judgment  against  the  owner  of  the  mortgaged 
premises,  even  when  the  judgment  was  recovered  and 
docketed  without  any  notice  to  the  judgment  creditor  of 
each  outstanding  mortgage.  This  rule,  which  is  plainly 
correct,  as  being  in  accordance  with  principle  and  pre- 
serving the  consistency  and  symmetry  of  the  equity  juris- 
prudence, has  been  adopted  and  firmly  established  by  the- 
courts  in  many  of  the  states.^     The  general  rule,  wher- 


Justice,  115  Ind,  201;  Leonard  v. 
Broi;ghton,  120  Ind.  536;  16  Am.  St. 
Rep.  347;  Shirk  v.  Thomas,  121  Ind. 
147;  16  Am.  St.  Rep.  .381;  Koons  v. 
Millett,  121  Ind,  591;  Warren  v.  Hull, 
123  Ind.  126;  Lowe  v.  Allen,  68  Ga. 
225;  Peck  v.  Williams,  113  Ind.  256; 
Calvert  v.  Roche,  59  Tex.  463:  Cain  v. 
Woodward,  74  Tex.  549;  Senter  v. 
Lambeth,  59  Tex.  259;  Parks  v. 
People's  Bank,  97  Mo.  130;  10  Am. 
St.  Rep.  295;  Brandes  v.  Cochrane, 
112  U.  S.  344;  Lissa  v.  Porey,  64  Miss. 
362.]  Notwithstanding  this  imposing 
array  of  authorities,  the  doctrine  has 
been  rejected  or  departed  from  in  a 
few  cases.  In  Richeson  v.  Richeson, 
2  Gratt.  497,  the  lien  of  a  vendor  was 
held  subordinate  to  the  right  of  the 
vendee's  creditor.  In  Bayley  v. 
Greenleaf,  7  Wheat,  46,  51,  the  same 
preference  was  given  to  a  subsequent 
judgment  against  the  vendee  over  the 
lien  of  the  vendor.  The  decision  can- 
not be  of  any  weight,  since  Marshall, 
C.  J.,  doubts  whether  the  vendor's  lien 
exists  at  all  in  the  law  of  this  country, 
and  expressly  declares  that  there  is  no 
American  case  protecting  it. 

'  In  some  of  these  cases  it  is  a  prior 
unrecorded  deed  that  prevails  over  the 
subsequent  judgment;  but  where  this 
is  so  held  of  a  deed,  it  must  of  neces- 
sity be  also  held  of  a  mortgage:  Ste- 
vens V,  Watson,  4  Abb.  App.  302; 
Wheeler  v.  Kirtland,  24  N.  J.  Eq, 
552;  Knell  v.  Building  Ass'n,  34  Md. 
67;  Galway  v.  Malchow,  7  Neb.  285; 
Jackson  v.  Dubois,  4  Johns.  216; 
Schmitt  V,  Hoyt,  1  Edw,  Ch.  652; 
Thomas    v.    Kelsey,    30    Barb.    268; 


Wilder  v.  Butterfield,  50  How,  Pr. 
385;  In  re  Howe,  1  Paige-  125  (con- 
tract for  a  mortgage);  Scliroeder  v. 
Gurney,  73  N.  Y.  430  (a  deed);  Moyer 
V.  Hinman,  13  N.  Y.  180;  17  Barb, 
137  (equitable  interest  of  a  vendee); 
Wilcoxson  V,  Miller,  49  Cal.  193 
(deed);  Pixley  v.  Huggins,  15  Cal. 
127  (deed);  Plant  v.  Smythe,  45  Cal. 
161;  Hunter  v.  Watson,  12  Cal.  363; 
73  Am.  Dec.  543;  Rose  v.  Munie,  4 
Cal.  173;  First  Nat.  Bank  v,  Hayzlett. 
40  Iowa,  659;  Hoy  v.  Allen,  27  Iowa, 
208;  Churchill  v.  Morse,  23  Iowa,  229; 
92  Am.  Dec.  422;  Evans  v,  McGlasson, 
18  Iowa,  150;  Welton  v.  Tizzard,  15 
Iowa,  495;  Patterson  v,  Linder,  14 
Iowa,  414;  Bell  v.  Evans,  10  Iowa, 
353;  Norton  v.  Williams,  9  Iowa,  528; 
Sappington  V.  Oeschli,  49  Mo.  244;  Pot- 
ter V,  McDowell,  43  Mo.  93;  Stillwell 
V,  McDonald,  39  Mo.  282;  Valentine  v. 
Havener,  20  Mo.  133;  Apperson  v,  Bur- 
gett,  33  Ark.  328;  Kelly  v.  Mills,  41 
Miss,  267;  Righter  v.  Forrester,  1 
Bush,  278;  Morton  v.  Robards,  4 
Dana,  258;  Greenleaf  v,  Edes,  2  Minn. 
264;  Orth  v.  Jennings,  8  Blackf.  420; 
Hampton  v.  Levy,  1  McCord  Ch.  107, 
111.  [To  the  same  effect  are  Moorman 
v.  Gibbs,  75  Iowa,  537;  Martin  v.  Og- 
den,  41  Ark.  186;  Carraway  v,  Carra- 
way,  27  S,  C.  576;  Masterson  v.  Little, 
75  Tex,  682,  And  the  same  priority 
exists  in  favor  of  a  grantee  or  mort- 
gagee under  an  unrecorded  deed  or 
mortgage,  as  against  a  subsequent  at- 
tachment lien:  Hoag  v,  Howard,  55 
Cal,  564;  Moorman  v.  Gibbs,  75  Iowa, 
437;  Boston  Music  Hall  Ass'n  v.  Cory, 
129  Mass.  435;  Morrow  v.  Graves,  77 


1009 


CONCERNING    PRIORITIES. 


§  722 


ever  it  thus  prevails,  is  still  susceptible  to  modifications 
and  exceptions  depending  upon  special  circumstances.* 

§  722.  Contrary  Rule,  in  Some  States,  that  the  Subse- 
quent Judgment  has  Precedence.  —  A  very  different  rule 
prevails  in  many  states,  in  which  it  is  settled  that  the 
lien  of  a  subsequent  docketed  judgment  prevails  over 
that  of  a  prior  unrecorded  mortgage  or  other  prior  equi- 
table interest  or  lien  not  recorded,  of  which  the  judg- 
ment creditor  had  no  notice  at  the  time  of  recovering 
and  docketing  his  judgment.  This  result  is  reached,  in 
some  of  the  states,  from  express  provisions  of  the  statutes; 
in  others,  from  what  was  deemed  to  be  the  necessary  in- 
terpretation of  the  statutory  language;  and  in  a  few,  as  it 
would  seem,  from  an  intentional  rejection  of  the  equi- 
table doctrine  which  lies  at  the  basis  of  the  whole  sub- 
ject.2 


Cal.  218;  Taylor  v.  Mississippi  Mills, 
47  Ark.  247.  But  where  there  is  no 
agreement  for  the  mortgage  until  after 
the  attachment  has  been  levied,  no 
subsequent  assent  can  tix  a  lien  on  the 
attached  property  that  would  take 
priority  over  the  lien  of  the  attach- 
ment: Wallis  V.  Taylor,  67  Tex.  431.] 
In  Galway  v.  Mulchow,  7  Neb.  2S5,  it 
is  held  that  where  land  is  omitted 
from  a  mortgage  by  mistake,  the  lien 
of  a  subsequent  judgment  against  the 
mortgagor  is  still  subject  to  the  equity 
of  the  mortgagee  and  to  the  mortgage 
when  corrected.  This  is  a  correct  ap- 
plication of  the  equitaljle  doctrine. 
[See,  to  the  same  effect,  Boyd  v.  An- 
derson, 102  Ind.  217;  Martin  v.  Nixon, 
92  Mo.  26;  and  the  same  rule  of  prior- 
ity is  enforced  against  the  lien  of  at- 
taching creditors:  Bush  v.  Bush,  33 
Kan.  556;  but  compare,  per  contra. 
Van  Thorniley  v.  Peters,  26  Ohio  St. 
471.] 

'  As  illustrations:  In  Stevens  v. 
Watson,  4  Abb.  A  pp.  302,  while 
the  rule  is  expressly  recognized  as  or- 
dinarily controlling,  it  is  said  to  be 
otherwise  where  the  subsequent  judg- 
ment is  one  confessed  to  secure  the 
repayment  advanced  at  the  time  on  the 
faith  of  it  by  the  judgment  creditor; 
and  to  the  same  efifect  is  Hulett  v, 
Whipple,  58  Barb.  224.  In  Wheeler 
2  Eq.  Jua.  — 64 


V.  Kirtland,  24  N.  J.  Eq.  552,  it  is 
held  that  an  equitable  mortgage  for  a 
precedent  debt  will  not  prevail  over 
the  lien  of  a  subsequent  valid  judg- 
ment; between  two  such  contestants, 
the  first  perfected  legal  lien  should 
have  preference.  If  the  prior  equi- 
table mortgage  arose  upon  a  new  con- 
sideration paid  at  the  time,  it  would 
have  priority  of  right.  And  in  Dwight 
V.  Newell,  3  N.  Y.  185,  it  is  said  that 
where  an  equitable  lien  and  a  judg- 
ment lien  come  into  existence  at  the 
same  time,  the  former  will  not  prevail, 
unless  it  was  given  upon  a  new  con- 
sideration advanced  on  the  faith  of  it. 
■■'  For  the  statutes,  see  ante,  §  646; 
Corpman  v.  Baccastow,  84  Pa.  St.  363 
(an  absolute  deed  and  a  defeasance 
made  at  the  same  time  constitute  a 
mortgage,  and  if  the  deed  only  is  re- 
corded, and  the  defeasance  is  not,  they 
are  to  be  regarded  as  an  unrecorded 
mortgage,  and  postponed  to  a  subse- 
quent judgment);  King  v.  Portis,  77 
N.  C.  25;  Van  Thorniley  v.  Peters,  26 
Ohio  St.  471  (a  defective  recorded 
mortgage  when  reformed  will  not  af- 
fect the  lien  of  a  judgment  docketed 
between  the  execution  and  the  refor- 
mation of  the  mortgage);  White  v. 
Denman,  1  Ohio  St.  110,  112,  114; 
Mayham  v.  Coombs,  14  Ohio,  428; 
Jackson  v.  Luce,  14  Ohio,  514;  Holli- 


§723 


EQUITY    JURISPRDDENCB. 


1010 


§  723.  Subsequent  Judgment  Creditor  had  Notice  of 
the  Prior  Unrecorded  Mortgage.  —  In  a  large  number  of 
the  states,  including  many  of  those  which  have  adopted 
tlie  rule  as  laid  down  in  the  last  paragraph,  if  the  judg- 
ment creditor  has  notice  of  a  prior  unrecorded  mortgage, 
or  other  outstanding  equitable  lien  upon  or  interest  in 
the  land  of  his  judgment  debtor,  at  the  time  when  he 
recovers  the  judgment,  the  lien  arising  from  the  docket 
of  his  judgment  is  postponed  to  such  prior  encumbrance 
or  equity.^  In  a  few  of  the  states,  however,  the  statutory 
language  is  regarded  as  so  peremptory,  and  the  necessity 
of  recording  so  complete,  that  even  notice  of  an  unre- 
corded mortgage  or  other  subsisting  equity,  given  to  the 


day  V.  Franklin  Bank,  16  Ohio,  533; 
Guiteau  v.  Wisely,  47  111.  433;  Mc- 
Fadden  v.  Worthington,  45  111.  362; 
Massey  v.  Westcott,  40  111.  160; 
Reichert  v.  McClure,  23  111.  516; 
Barker  v.  Bell,  37  Ala.  354;  Main- 
■waring  v.  Templeman,  51  Tex.  205; 
Firebaugh  v.  Ward,  51  Tex.  409;  Cav- 
anaugh  v.  Peterson,  47  Tex.  197; 
Grace  v.  Wade,  45  Tex.  522;  Andrews 
V.  Mathews,  59  Ga.  466;  Young  v. 
Devries,  31  Gratt.  304;  Eidson  v.  Huff, 
29  Gratt.  338;  McClure  v.  Thistle's 
Ex'rs,  2  Gratt.  182;  Anderson  v.  Na- 
gle,  12  W.  Va.  98;  Uhler  v.  Hutchin- 
son, 23  Pa.  St.  110;  Jaques  v.  Weeks, 
7  Watts,  261;  Hulir.gs  v.  Guthrie,  4 
Pa.  St.  123;  Hibberd  v,  Bovier,  1 
Grant  Oas.  266;  Mallory  v.  Stodder, 
6  Ala.  801;  Ohio  Life  Ins.  &  T.  Co.  v. 
Ledyard,  8  Ala.  866;  Pollard  v.  Cocke, 
19  Ala.  188  (these  three  cases  are  of 
unrecorded  deeds).  [See,  in  addition. 
Cutler  V.  Ammon,  65  Iowa,  281; 
Walker  v.  EUedge,  65  Ala.  51;  Co- 
lumbus Buggy  Co.  V.  Graves,  108  111. 
459;  Wilkins  v.  Bevier,  43  Minn.  213; 
19  Am.  St.  Rep.  238;  Dutton  v.  Mc- 
Reynolds,  31  Minn.  66;  Wilcox  v. 
Leominster  Nat.  Bank,  43  Minn.  541; 
19  Am.  St.  Rep.  259;  Clark  v.  Duke, 
59  Miss.  575.  In  Mississippi  the 
"creditors"  who  are  protected  by 
their  judgment  lien  against  a  prior 
unrecorded  conveyance  of  which  they 
had  no  notice  are  creditors  of  the 
grantor,  not  of  the  grantee:  Missis- 
sippi Valley  Co.  v.  C.  etc,  R.  R.  Co., 


68  Mias.  846.  In  Alabama,  by  reason 
of  the  provisions  of  the  code  render- 
ing void  an  unrecorded  transfer  of 
corporate  stock,  it  is  held  that  the 
lien  of  a  judgment  or  an  attachment 
is  entitled  to  priority  over  such  unre- 
corded transfer:  See  Ala.  Code  1876, 
sees.  2043,  2044;  1886,  sees.  1670,  1671; 
Berney  Nat.  Bank  v.  Pinckard,  87 
Ala.  577.  In  this  state  the  statute 
(Code,  sec.  122)  gives  judgment  cred- 
itors having  a  lien  a  priority  over  se- 
cret equities,  —  such  as  a  vendor's  lien: 
Dickerson  v.  Carroll,  76  Ala.  377.] 

1  Priest  V.  Rice,  1  Pick.  164;  11  Am. 
Dec.  156;  Hart  v.  Farmers'  etc.  Bank, 
33  Vt.  252;  Hackett  v.  Callander,  32 
Vt.  97,  108,  109;  Cover  v.  Black,  1 
Pa.  St.  493;  O'Rourke  v,  OConnor, 
39  Cal.  442;  Britten's  Appeal,  45  Pa. 
St.  172;  Mellon's  Appeal,  32  Pa.  St. 
121;  Lawrence  v.  Stratton,  6  Cush. 
163,  167;  Goddard  v.  Prentice,  17 
Conn.  546;  Cox  v.  Milner,  23  111. 
476;  Ogden  v.  Haven,  24  111.  57; 
Dixon  v.  Doe,  1  Smedes  &  M.  70; 
Ayres  v.  Duprey,  27  Tex.  593;  86 
Am.  Dec.  657;  Wyatt  v.  Stewart,  34 
Ala.  716,  721;  Burt  v.  Cassety,  12 
Ala.  734;  Wallis  v.  Rhea,  10  Ala.  451; 
12  Ala,  646;  Garwood  v,  Garwood,  9 
N.  J.  L.  193;  [Lebanon  Sav,  Bank 
V.  Hollenbeck,  29  Minn.  322.  But  an 
assignee  of  the  judgment  is  not  af- 
fected by  his  assignor's  notice  before 
its  rendition  of  an  unrecorded  deed, 
but  he  must  have  the  notice  himself: 
Clark  V.  Duke,  59  Miss.  675.] 


1011  CONCERNING    PRIORITIES.  §  724 

creditor  before  the  recovery  and  docketing  of  his  judg- 
ment, is  held  not  to  affect  the  priority  of  the  lien  acquired 
by  the  subsequent  docketed  judgment.* 

§  724.  Between  Prior  Unrecorded  Mortgage  and  a 
Purchase  at  Execution  Sale  under  Subsequent  Judgment. 
—  Having  thus  examined  the  relations  subsisting  between 
unrecorded  mortgages  and  other  equities,  and  the  liens  of 
subsequent  docketed  judgments,  it  remains  to  consider  the 
effects  produced  by  a  judicial  sale  under  such  judgments. 
Several  varying  conditions  of  fact  may  exist,  and  conflict- 
ing rules  concerning  them  prevail  to  a  certain  extent,  in 
different  states.  In  the  first  place,  it  is  a  rule  universally 
adopted,  and  in  strict  accordance  with  the  general  doc- 
trine concerning  bona  fide  purchasers  as  established  in 
this  country,  that  in  all  the  instances  heretofore  men- 
tioned, even  where  the  lie7i  of  a  subsequent  judgment  is 
subject  to  an  outstanding  equity,  if  the  judgment  is  en- 
forced at  a  sheriff's  sale,  and  the  judgment  debtor's  land 
is  sold  and  conveyed  to  a  bona  fide  purchaser  for  a  valu- 
able consideration  and  without  any  notice,  he  stands  in 
the  position  of  any  other  bona  fide  purchaser  who  acquires 
the  legal  estate,  and  takes  the  land  free  from  any  un- 
recorded mortgage  and  any  outstanding  equitable  inter- 
est or  lien  not  appearing  of  record  which  might  have 
affected  the  land  in  the  hands  of  the  judgment  debtor. 
In  other  words,  such  a  purchaser  at  the  execution  sale  is 
to  all  intents  a  purchaser  in  good  faith  for  a  valuable 
consideration  and  without  notice,  as  is  described  in  the 
succeeding  section.'     Secondly,  where  the  lien  of  the  sub- 

^  Guerrant  v.    Anderson,    4  Rand.  588;  9  Cow.  120;  Jackson  v.  Town,  4 

208;  Davidson  v.  Cowan,  1  Dev,  Eq.  Cow.  599;  15  Am.  Dec.  405;  Gouver- 

474;  Davey  v.  Littlejohn,  2  Ired.  Eq.  neur  v.  Titus,  6   Paige,  347;    Den  v. 

495;   Mayham   v.    Coombs,    14   Ohio,  Richman,  13  N.  J.  L.  43;  Morrison  v. 

428;   Butler   v.    Maury,    10    Humph.  Funk,    23   Pa.    St.    421;    Stewart    *-. 

420;  Lillard  v.  Ruckers,  9  Yerg.  64.  Freeman,  22  Pa.  St.  120,  123;  Kellam 

*  Orth  V.  Jennings,  8   Blackf.  420;  v,    Janson,    17    Pa.    St.    467;   Mann's 

Rodgers   v.   Gibson,   4    Yeates,    111;  Appeal,  1  Pa.  St.  24;  Wilson  v.  Shono- 

Heister  V.  Fortner,  2  Binn.  40;  4  Am.  ber^er,    34   Pa.    St.  121;   Scribner  v. 

Dec.  417;  Siemanv.  Schurck,  29N.  Y.  Lockwood,    9    Ohio,     184;    Paine    t. 

598;  Jackson  v.  Chamberlain,  8  Wend.  Mooreland,  15  Ohio,  435;  45  Am.  Deo. 

620,  625;  Jacksoa  v.  Post,  15  Wend.  585;   Runyan   v.    McClellan,  24  Lid. 


§724 


EQUITY   JURISPRUDENCE. 


1012 


sequent  judgment  is,  in  pursuance  of  the  settled  doctrine 
of  equity,  subject  to  a  prior  unrecorded  mortgage  or  other 
outstanding  equity,  even  without  notice  thereof  to  the 
judgment  creditor,  and  also  where  the  lien  of  the  judg- 
ment is  thus  subject  because  the  judgment  creditor  had 
received  notice  before  its  recovery,  if  the  judgment  is 
enforced,  and  the  land  is  sold  and  conveyed  to  a  purchaser 
who  has  duly  received  notice  of  the  prior  unrecorded 
mortgage  or  other  subsisting  equity,  the  inferiority  of 
the  judgment  lien  still  remains  and  attaches  to  the  con- 
veyance which  is  the  result  of  that  lien.  The  purchaser 
under  these  circumstances  is  not  a  bo7ia  fide  purchaser; 
he  takes  the  land  subject  to  the  same  encumbrances  and 
equities  which  afifected  the  lien  of  the  docketed  judgment.* 


165;  Ehle  v.  Brown,  31  Wis.  405,  414; 
Rogers  v.  Hussey,  36  Iowa,  664; 
Draper  v.  Bryson,  26  Mo.  108;  69  Am. 
Dec.  483;  Harrison  v.  Cachelin,  23 
Mo.  117,  126;  Waldo  v.  Russell,  5 
Mo.  387;  Ohio  Life  Ins.  &  T.  Co.  v. 
Ledvard,  8  Ala.  866;  Ayres  v.  Duprey, 
27  Tex.  593,  605;  86  Am.  Dec.  657; 
Cooper  V.  Blakey,  10  Ga.  263;  Miles 
V.  King,  5  S.  C.  146.  [The  following 
are  recent  authorities  to  the  same 
effect:  Landell's  Appeal,  105  Pa.  St. 
152;  Holmes  v.  Buckner,  67  Tex.  107; 
Lumpkins  v.  Adams,  74  Tex.  97; 
Cooper  V.  Loughlin,  75  Tex.  524; 
Sharpe  v.  Tatnall,  5  Del.  Ch.  302; 
Carden  v.  Lane,  48  Ark.  216;  3  Am. 
St.  Rep.  228;  Barb  v.  Sayers,  107  Pa. 
St.  246;  and  by  parity  of  reasoning, 
one  who  redeems  from  the  sale  is  also 
entitled  to  priority:  Martin  v.  Bald- 
win, '60  Minn.  537;  but  a  purchaser  at 
a  bankrupt  sale  is  not:  Renick  v. 
Dawson,  55  Tex.  102.]  It  has  even 
been  held  that  if  the  judgment  cred- 
itor purchases  at  the  sheriff's  sale 
without  notice,  takes  a  conveyance, 
and  has  his  bid  applied  in  partial  or 
full  discharge  of  his  judgment,  he  be- 
comes a  bona  fide  purchaser  for  value 
without  notice,  with  all  the  rights  be- 
longing to  that  position:  Gower  v. 
Doheney,  33  Iowa,  36,  39;  Halloway 
V.  Platner,  20  Iowa,  121;  89  Am.  Dec. 
517;  and  see  Wood  v.  Chapin,  13  N. 
y.  509;  67  Am.  Dec.  62;  [Hunter  v. 
Watson,  12  Cal.  377;  73  Am.  Dec.  543; 
Foorman    v.   Wallace,   75    Cal,    552; 


Ettenheimer  v.  Northgraves,  75  Iowa, 
28.]  But  this  conclusion  is  clearly  in- 
consistent with  the  settled  doctrine 
concerning  the  nature  of  the  "valu- 
able consideration  "  which  entitles  a 
purchaser  to  the  rights  of  a  bona  fide 
purchaser,  and  has  been  rejected  by 
many  decisions:  Arnold  v.  Patrick,  6 
Paige,  310,  316;  Dickerson  v.  Tilling- 
hast,  4  Paige,  215;  25  Am.  Dec.  528; 
Wright  V.  Douglass,  10  Barb.  97;  Sar- 
gent V.  Sturm,  23  Cal.  359;  83  Am. 
Dec.  118;  Orme  v.  Roberts,  33  Tex. 
768;  Ayres  v.  Duprey,  27  Tex.  693; 
86  Am.  Dec.  657.  [See  also  McKamey 
V.  Thorp,  61  Tex.  648;  Yoe  v.  Mont- 
gomery, 68  Tex.  341;  Loughbridge  v. 
Bowland,  52  Miss.  546;  Collins  v. 
Smith,  57  Wis.  284;  Duke  v.  Clark, 
68  Miss.  465;  Williams  v.  Mcllroy,  34 
Ark.  85;  Wallace  v.  Campbell,  54 
Tex.  87.  Such  creditor,  however,  ac- 
quires all  the  rights  of  the  defendant 
in  the  execution;  Walker  v.  Elledge, 
65  Ala.  51;  Nugent  v.  Priebatch,  61 
]\liss.  402.  In  Hawkins  v.  Files,  51 
Ark.  417,  the  lien  acquired  by  the  levy 
of  an  execution  is  held  superior  to  that 
of  a  prior  unrecorded  mortgage,  al- 
though the  mortgage  be  subsequently 
filed  for  record  before  the  sale  of  the 
land;  and  the  same  is  held  in  Texas: 
Stevenson  v.  Texas  R'y  Co.,  105  U.  S. 
703.] 

'  This  rule  must  clearly  apply  to  the 
case  of  the  judgment  creditor  who, 
having  received  notice,  himself  be- 
comes  the  purchaser  at  the  aberifiPs 


1013  CONCERNING   PBIORITIES.  §  725 

Thirdly,  wherever,  in  pursuance  of  the  rule  adopted  in 
many  states,  the  lien  of  a  subsequent  judgment  is  para- 
mount to  that  of  a  prior  unrecorded  mortgage  and  to  any 
outstanding  equitable  interest  not  of  record,  if  the  judg- 
ment is  enforced  and  the  land  sold  and  conveyed  to  a 
purchaser  who  has  received  notice  of  the  prior  encum- 
brances or  equities,  the  superiority  of  the  lien  still  con- 
tinues and  attaches  to  the  conveyance.  The  purchaser 
liolds  the  land  free  from  all  such  claims  not  of  record,  on 
the  ground  that  when  a  right  has  once  been  vested  and 
made  absolute,  it  cannot  be  divested  or  defeated  by  any 
mere  notice.  The  judgment  creditor  having  obtained  a 
complete  and  fixed  right,  any  notice  which  he  might 
afterwards  receive  could  not  affect  that  right;  nor  would 
it  be  affected  by  a  transfer  to  a  purchaser  having  notice.* 
§  725.  Purchase-money  Mortgages.  —  Another  very  im- 
portant instance  in  this  country,  of  intrinsic  superiority, 
is  that  of  the  purchase-money  mortgage.'  A  mortgage  to 
secure  the  purchase-money  of  land,  given  at  the  same  time 
with  the  deed  of  conveyance,  or  in  pursuance  of  agreement 

sale:   Ella  v.  Tousley,  1   Paige,  280;  359,  362;  91  Am.  Dec.  163;  Massey  v. 

Gouverneur   v.    Titus,  6  Paige,    347;  Westcott,  40  111.  160;   McFadden  v. 

Morris  v.  Mowatt,  2  Paige,  586,  590;  Worthington,  45  111.  362;  Guiteau  t. 

22  Am.  Dec.  661;  Parks  v.  Jackson,  11  Wisely,  47  IIL  433;  Potter  v.  McDow. 

Wend.  442;  25  Am.  Dec.  656;  Siemon  ell,  43  Mo.  93;  Stillwell  v.  McDonald, 

V.  Schurck,  29  N.  Y.  598;  Moyer  v.  39  Mo.  282;  Davis  v.  Ownsby,  14  Mo. 

Hinman,  13  N.  Y.  180,  and  cases  cited,  170;   55  Am.  Dec.   105;  Oreenleaf  v. 

per  Denio,  J.;  Bank  v.  Campljell,  2  Edes,    2    Minn.    264;    Henderson   v. 

Rich.  Eq.  179;  C'hurchill  v.  Morse,  23  Downing,  24  Miss.  106;  Kelly  v.  Mills, 

Iowa,  229;  92  Am.  Dec.  422;  Hoy  v.  41  Miss.  267,  273;  Fash  v.  Ravesies,  32 

Allen,   27    Iowa,    208;    Chapman    v.  Ala.  451;  De  Vendell  v.  Hamilton,  27 

Coats,   26    Iowa,    288;    O'Rourke  v.  Ala.  156;   Pollard  v.  Cocke,  19  Ala. 

O'Connor,    39    Cal.    442;     Davis    v.  188;   Smith  v,   Jordan,   25  Ga.    687. 

Ownsby,    14  Mo.   170;   55   Am.   Dec.  [See  also  Coudit  v.  Wilson,  36  N.  J. 

105;   Valentine   v.    Havener,  20   Mo.  Eq.  370;  Hitz  v.  Nat.  Mat  Bank,  111 

133;   Sappington   v.    Oeschli,  49   Mo.  U.  S.  722;  Stevenson  v.  Texas  R'y  Co., 

244,   246;   Byers  v.  Engles,   16  Ark.  105  U.  S.  703.]    The  conclusion  reached 

543;  Prescott  v.  Heard,  10  Mass.  60;  by  these  cases,  which  seems  to  be  in 

Ogden  V.  Haven,  24  111.  57;  Ayres  v.  such    direct    antagonism   with    well- 

Duprey,  27  Tex.  593;  86  Am.  Dec.  657.  settled  doctrines  concerning  the  effect 

[See  also  Haworth  v.  Taylor,  108  111.  of  notice  upon  the  rights  of  purchasers, 

275;  Glendenning  v.  Bell,  70  Tex.  632;  is  in  most  instances  the  result  of  what 

Walker  v.  Elledge,  65  Ala.  51;  Hart  v.  is  supposed  to  be  the  imperative  Ian* 

McDade,  61  Tex.  208;  Senter  v.  Lam>  guage  of  the  recording  statutes, 
beth,  59  Tex.  259.]  *  See   1   Jones  on  Mortgages,  sees. 

>  Jaques  v.   Weeks,   7  Watts,  261,  464-466,  from  which  I  bar*  borrowed 

270;  Uhler  v.  Hutchinson,  23  Pa.   St.  in  this  paragraph. 
110;  Calder  v.  Chapman,  52  Pa.  St. 


§  725  EQUITY   JURISPRUDENCE.  1014 

as  a  part  of  the  same  transaction,  has  precedence,  so  far  as 
it  is  a  charge  upon  the  particular  parcel  of  land,  over  judg- 
ments and  other  debts  of  the  mortgagor.'  It  is  a  familiar 
rule  in  those  states  where  the  common-law  dower  exists 
that  such  a  mortgage,  although  not  executed  by  the  wife, 
takes  precedence  over  her  dower  right  in  the  same  land.' 
The  statutes  of  some  states  give  a  purchase-money  mort- 
gage precedence  over  a  previous  judgment  recovered 
against  the  mortgagor.  This  provision  applies  only  to 
mortgages  executed  by  the  grantee  directly  to  his  grantor, 
and  not  to  those  executed  to  third  persons  as  security  for 
money  loaned  for  the  purpose  of  paying  the  purchase 
price.'  Even  in  the  absence  of  any  statute,  and  upon  the 
general  principles  of  equity,  a  purchase-money  mortgage 
given  at  the  same  time  as  the  deed,  or  as  a  part  of  the 
same  transaction,  has  precedence  over  any  prior  general 
lien,  such  as  that  of  a  prior  judgment  against  the  mort- 
gagor.*    The  same  equitable  rule  applies  in  like  manner 

'  In  many  states  this  ia   expressly  In  Jacob's  Appeal,  107  Pa.  St.  137,  it 

enacted  by  statute.  is  held  that  the  entry  of  a  judgment 

"  Mills  V.  Van  Voorhies,  20  N.  Y,  bond  for  part  of  the  purchase-money 

412;  McGowan  v.  Smith,  44  Barb.  232;  must  be  a  continuous  act  with  the  giv- 

Kittle  V.  Van  Dyck,   1  Sand.  Ch.  76;  ing  of  the  deed,  in  order  to  entitle  the 

Clark  V.  Munroe,  14  Mass.  351;  Young  judgment  to  priority  as  a  purchase- 

V.  Tarbell,  37  Me.  509;  Birnie  v.  Main,  money  lien.]      In  Curtis  v.  Root.,  20 

29  Ark.  591.  [See also  Seibert  v.  Todd,  111.  53,  Caton,  C.   J.,  said:    "It  is  a 

31  S.  C.  206;  Agnew  v.  Renwick,  27  principle  of  law,  too  familiar  to  justify 

S.  C.  562.]  a  reference  to  authorities,  that  a  mort- 

•  Heuisler  v.  Nickum,  38  Md.  270;  gage  given  for  the  purchase-money  of 
Alderson  v.  Ames,  6  Md.  52,  56;  Cla-  land,  and  executed  at  the  same  time 
baugh  V.  Byerly,  7  Gill,  354;  48  Am.  the  deed  is  executed  to  the  mortgagor, 
Dec.  576;  Stansele  v.  Roberts,  13  Ohio,  takes  precedence  of  a  judgment  agamst 
148.  As  to  other  matters  arising  un-  the  mortgagor.  The  executicn  of  the 
der  such  statutes,  see  Ahern  v.  White,  deed  and  mortgage  being  simultaneous 
39  Md.  409;  Heuisler  v.  Nickum,  38  acts,  the  title  to  the  land  does  not  for 
Md.  270;  Cake's  Appeal,  23  Pa.  St.  a  single  moment  vest  in  the  purchaser, 
186;  62  Am.  Dec.  328;  Foster's  Appeal,  but  merely  passes  through  his  hands 
3  Pa.  St.  79;  Banning  v.  Edes,  6  Minn,  and  vests  in  the  mortgagee,  without 
402;  Stephenson  v.  Haines,  16  Ohio  St.  stopping  at  all  in  the  purchaser,  and 
478;  Maybury  v.  Brien,  15  Pet.  21.  during  this  instantaneous  passage  the 

*  Curtis  V.  Root,  20  111.  53;  Fitts  v.  judgment  lien  cannot  attach  to  the 
Davis,  42  111.  391;  Grant  v.  Dodge,  43  title.  This  ia  the  reason  assigned  by 
Me.  489;  Banning  v.  Edes,  6  Minn,  the  books  why  the  mortgage  takes 
402;  Bolles  v.  Carli,  12  Minn.  113.  precedence  of  the  judgment,  rather 
[See  also  Bradley  v.  Bryan,  43  N.  J.  than  any  supposed  equity  which  the 
Eq.  396;  Stewart  V.  Smith,  36  Minn.  82;  vendor  may  be  supposed  to  have  for 
1  Am.  St.  Rep.  651;  Cowardin  v.Ander-  the  purchase-money."  Whatever  of 
son,  78  Va.  88;  Roane  v.  Baker,  120  truth  there  may  be  in  the  reason  thus 
111.  308;  Pope  v.  Mead,  99  N.  Y.  201;  assigned,  it  ia  certainly  not  all  th© 


1015 


GONCERNINQ    PRIORITIES. 


§72g 


to  a  mortgage  given  by  the  grantee  to  a  third  person,  as 
security  for  money  loaned  for  the  purpose  of  being  used, 
and  which  is  actually  used,  in  paying  the  purchase  price.* 
A  substitution  of  one  species  of  lien  for  another,  by 
changing  the  form  of  the  security  given  for  the  purchase- 
money,  does  not  affect  the  operation  of  the  rule.'  The 
purchase-money  mortgage  not  only  thus  takes  precedence 
of  a  prior  judgment,  but  it  also  cuts  off  or  prevents  the 
attachment  of  any  other  lien  upon  the  premises  which 
might  otherwise  have  affected  them.' 


truth.  la  the  first  place,  the  notion 
that  the  title  passes  through  the  mort- 
gagor and  vesta  in  the  mortgagee,  and 
that  the  mortgagor  obtains  but  an  in- 
stantaneous seisin,  has  been  entirely 
abandoned  in  very  many  of  the  states, 
and  the  mortgagee  is  regarded  as  ac- 
quiring only  a  lien.  In  the  second 
place,  since  the  grantor  exchanges  his 
ownership  of  the  land  for  the  lien  of 
the  mortgage,  so  that  the  mortgage  in 
his  hands  represents  the  title  to  the 
land  which  he  has  conveyed,  it  is  very 
clear  that  the  mortgage,  so  far  as  it  is 
a  specific  charge  upon  the  very  land, 
is  intrinsically  superior  to  any  other 
general  lien,  although  existing  prior  in 
time. 

*  Beebe  v.  Austin,  15  Johns.  477; 
Haywood  v.  Nooney,  3  Barb.  643; 
Adams  v.  Hill,  29  N."H.  202;  Curtis  v. 
Root,  20  111.  53;  [Laidley  v.  Aiken, 
80  Iowa,  112;  20  Am.  St.  Rep.  408; 
Cowardin  v.  Anderson,  78  Va.  88;  and 
as  between  a  purchase-money  mortgage 
given  to  the  grantor  to  secure  a  bal- 
ance due  on  the  purchase  price,  and  a 
mortgage  given  to  a  third  person  to  se- 
cure the  money  used  in  making  the 
cash  payment  to  the  grantor,  the 
mortgage  to  the  grantor  has  prefer- 
ence, although  the  latter  be  first  re- 
corded: Rogers  v.  Tucker,  94  Mo.  346.] 

*  As,  for  example,  substituting  a 
deed  of  trust  for  the  mortgage:  Cur- 
tis v.  Root,  20  HI.  53;  Austin  v.  Un- 
derwood, 37  111.  438;  87  Am.  Dec.  254; 
[Cowardin  v.  Anderson,  78  Va.  88.] 

*  As  illustrations:  A  lien  for  work 
and  materials  furnished,  or  a  mechanic's 
lien  for  a  building  erected,  on  behalf 
of  the  grantee,  after  the  purchase  was 
arranged,  but  before  the  deed  and 
mortgage    were    executed:   Virgin   t. 


Brubaker,  4  Nev.  31;  Guy  v.  Carriere, 
5  Cal.  511;  Strong  v.  Van  Denrsen,  23 
N.  J.  Eq.  369;  Lamb  v.  Cannon,  38 
N.  J.  L.  362;  Macintosh  v.  Thurston, 
25  N.  J.  Eq.  242.  A  contract  con- 
cerning the  premises  made  by  th© 
grantee  before  the  purchase:  Bolles  v. 
Carli,  12  Minn.  113;  Morris  v.  Pate, 
31  Mo.  315.  A  homestead  right  oa 
the  land:  Hopper  v.  Parkinson,  5  Nev. 
233;  Nichols  V.  Overacker,  16  Kan.  54j 
Pratt  V.  Topeka  Bank,  12  Kan.  570? 
Carr  v.  Caldwell,  10  Cal.  380;  70  Am. 
Dec.  740;  Magee  v.  Magee,  51  111.  500; 
99  Am.  Dec.  571;  Allen  v.  Hawley,  66 
111.  164,  168;  Austin  v.  Underwood,  37 
111.  438;  87  Am.  Dec.  254;  Amphlett 
V.  Hibbard,  29  Mich.  298;  New  Eng- 
land etc.  Co.  v.Merriam,  2  Allen,  391; 
Lane  v.  Collier,  46  Ga.  580.  [A  mort- 
gage which  is  prior  recorded:  Phelps 
v.^Fockler,  61  Iowa,  340;  Walker  v. 
Abbey,  77  Iowa,  705;  Koon  v.  Tramel, 
71  Iowa,  137;  Balen  v.  Mercier,  76 
Mich.  42.  But  where  two  mortgages 
are  given  upon  certain  crops  to  be 
grown,  they  are  entitled  to  precedence: 
in  the  order  of  their  execution  and, 
registi-ation,  although  the  latter  one 
was  given  for  the  purchase  price  of  the- 
seed  from  which  the  crops  were  to  b« 
grown:  Bradley  v.  Gelkinsou,  57  Iowa, 
300.] 

If  a  grantee,  as  a  part  of  the  same 
transaction,  gives  back  a  purchase- 
money  mortgage  to  his  grantor,  and! 
also  gives  another  mortgage  to  a  third; 
person,  and  the  deed  and  two  mort- 
gages are  all  recorded  at  the  samo 
time,  the  purchase-money  mortgage  is 
entitled  to  a  precedence  over  the  other: 
Clark  v.  Brown,  3  Allen,  509.  As  to 
the  effect  of  delay  in  the  recording, 
see  Dusenbury  v.  Hulbert,  2  Thomp. 


§§  726,  727  EQUITY   JURISPRUDENCE.  1016 

§  726.  Other  Illustrations.  —  In  addition  to  these  most 
important  questions  of  priority  between  different  equi- 
table liens,  there  may  be  many  other  particular  instances 
in  which  a  subsequent  interest  is  intrinsically  superior, 
or  an  earlier  one  intrinsically  inferior,  so  as  to  determine 
the  precedence  between  them.  A  few  may  be  mentioned 
by  way  of  illustration.  Fraud  inhering  in  a  prior  mort- 
gage, encumbrance,  or  other  apparent  claim  will,  of  course, 
postpone  it  to  a  subsequent  valid  lien.*  A  prior  equitable 
lien  upon  chattels  arising  from  contract  will  not  prevail 
against  a  subsequent  chattel  mortgage  which  has  been 
perfected  and  filed  according  to  statute.*  The  priority 
among  liens  may  also  be  fixed  by  express  agreement 
among  the  parties  at  the  time  they  are  created,  so  as  even 
to  follow  them  sometimes  into  the  hands  of  an  assignee.* 

§  727.  III.  A  Subsequent  Equity  Protected  by  the 
Legal  Title.  —  The  case  to  be  considered  is  not  that 
merely  of  an  equitable  interest  held  by  A,  and  a  subse- 
quent conveyance  of  the  legal  estate  to  B,  in  which  the 
latter's  superior  right  would  be  a  simple  application  of 
the  do3trine  concerning  bona  fide  purchase  for  a  valuable 
consideration.  The  subject  to  be  examined  assumes  the 
existence  of  successive  equities  held  by  different  persons, 
equal  in  their  nature,  and  acquired  in  such  a  manner 

&  C  177.     [The  purchaser  at  the  fore-  the  vendor  to  secure  the  purchase  price, 

closure  sale  of  such  mortgage  is  also  the   latter  mortgage,  although  subse- 

entitled  to  the  same  priority:  Barb  v.  quently     recorded,     takes     priority: 

Sayers,  107  Pa.  St,  246;  Roane  v.  Ba-  Montgomery  v.  Keppel,  75  Cal.  128;  7 

ker,  120  111.  308.     It  is  held,  however.  Am.  St.  Rep.  125.] 
that  the  purchase-money  mortgage  ia         *  Kelly   v.    Lenihan,    56    Ind.    448 

not  entitled  to  priority  over  a  subse-  (fraudulent  mortgage  and  subsequent 

quent  deed  which  is  first  recorded:  El-  judgment);  Eggeman  v.  Eggeman,  37 

der  v.  Derby,  98  111.  228;  Jackson  v.  Mich.  436  (prior  fraudulent  and  sub- 

Reid,  30  Kan.  10;  and  where  a  prior  sequent  valid  mortgage), 
mortgagee,  pending   the   negotiations         *  Smith  v.  Worman,  19  Ohio  St.  145. 

for  his  mortgage,  acquires  knowledge  The  equitable  lien  in  favor  of  a  lessor, 

that  the  property  ofifered  for  security  arising  from  a  stipulation  in  the  lease, 

belongs  to  a  third  person,  and  was  to  be  upon  the  lessee's  chattels  which  were 

purchased  by  the  mortgagor,  and  that  placed  upon  the  premises,  postponed 

negotiations  for  its  purchase  were  then  to  a  subsequent  chattel  mortgage  given 

pending,  he  ia  charged  with  notice  of  by  the  tenant,  which  had  been  duly 

the  terms  upon  which  the  purchase  is  filed,  etc. 

to  be  made;  and  when  such  terms  in-        ^  Balkum  v.  Owens,  47  Ala.  266,  aa 

T<^v«  the  execution  of  a  mortgage  to  an  illustration. 


1017 


CONCERNING    PRIORITIES. 


§727 


that,  having  regard  to  these  interests  alone,  the  priority 
of  right  among  them  would  depend  upon  their  order  of 
time.  Under  these  circumstances,  it  is  assumed  that  one 
of  the  parties  acquires,  in  some  manner,  the  legal  title  in 
addition  to  his  equity.  The  settled  doctrine  is,  that  if  a 
second  or  other  subsequent  holder,  who  would  otherwise 
be  postponed  to  the  earlier  ones,  obtains  the  legal  estate, 
or  acquires  the  best  right  to  call  for  the  legal  estate,  he 
thereby  secures  an  advantage  which  entitles  him  to  a 
priority.^  It  is  absolutely  essential,  however,  that  he 
should  have  acquired  his  equitable  interest  without  any 
notice  of  the  prior  claims,  and  that  his  subsequent  pro- 
curement of  the  legal  estate  should  be  free  from  fraud 
and  from  undue  negligence.'^  Several  illustrations  are 
placed  in  the  foot-note.' 


*  In  this  country  the  practical  ex- 
amples of  this  rule  would  generallj',  if 
not  always,  be  instances  of  bo7ui  jide 
purchase  for  a  valuable  consideration, 
and  governed  by  the  doctrine  on  that 
subject;  but  the  rule  does  not  require 
such  a  state  of  facts.  In  other  words, 
the  rule  does  not  require  that  the  one 
who  protects  himself  by  getting  the 
legal  estate  should  be  in  all  respects 
a  bona  fide  purchaser  of  that  estate  for 
a  valuable  consideration  and  without 
notice.  Tlie  rights  of  mere  priority 
and  the  rights  of  a  bona  fide  purchase 
are  by  no  means  identical. 

*  The  effects  of  fraud  and  negligence 
in  defeating  the  precedence  which 
would  otherwise  follow  the  legal  title 
are  considered  in  the  subsequent  head 
V.  (S§  731,  732). 

'  Cavev.  Cave,  L.  R.  15  Ch.  Div.  639: 
A  trust  existed  in  favor  of  A.  The 
trustee  used  the  funds  in  purchasing 
an  estate  which  was  conveyed  to  B 
(the  trustee's  brother),  so  that  the  legal 
title  was  vested  in  him.  Afterwards 
money  was  raised  for  or  in  the  name 
of  B,  and  secured  by  a  first  legal 
mortgage  on  the  land  given  to  C,  one 
of  the  lenders,  and  subsequent  equi- 
table mortgages  given  to  D  and  15, 
other  lenders.  All  these  transactions 
were  made  without  any  notice  of  the 
original  trust  given  to  C,  D,  or  E. 
Held,  that  as  between  the  original  ces- 
tui que  trust  A,  and  the  first  mortgagee 


C,  the  latter  was  entitled  to  the  preo{»- 
dence,  since  he  had  a  legal  estate;  but 
as  between  A  and  the  mortgagees  D 
and  E,  A  was  prior  in  right,  since  all 
their  interests  were  equitable  and  he 
was  prior  in  time.  This  case  well 
illustrates  both  rules.  Hunter  v.  Wal- 
ters, L.  R.  7  Ch.  75:  There  were  two 
outstanding  mortgages  upon  a  piece  of 
land,  of  which  .the  first  alone  was 
legal,  and  both  mortgagees  employed 
tlie  same  solicitor,  A.  By  his  procure- 
ment both  mortgagees  united  in  a 
deed  of  conveyance  to  their  solicitor, 
A.  This  deed  was  given  voluntarily, 
and  intending  to  vest  the  legal  title 
in  A,  but  was  in  fact  grossly  fraud- 
ulent as  against  the  mortgagees.  Still 
the  apparent  legal  title  was  held  by 
A,  although  liable  to  be  set  aside. 
He  took  possession  of  the  land,  and, 
claiming  to  be  owner,  gave  an  equita- 
ble mortgage  on  it  to  B,  to  secure 
payment  of  money  borrowed  from  B, 
he  acting  in  good  faith  and  without 
notice.  B's  equitable  mortgage  was 
held  entitled  to  priority  over  the  two 
original  mortgagees,  because  he  held 
under  the  legal  title  in  A,  and  through 
the  laches  of  the  original  mortgagees, 
which  made  the  fraud  possible,  h« 
obtained  a  higher  right  as  against 
them.  See  also  Katcliffe  v.  Barnard, 
L.  R.  6  Ch.  652.  and  Hewitt  r.  Loose- 
more,  9  Hare,  449.  Fitzsimmons  r. 
Ogden,  7  Crancb,  2;  Newton  r.  Mo* 


§723 


EQUITY   JURISPRUDENCE. 


1018 


§  728.  Legal  Estate  Obtained  from  a  Trustee.  —  Such 
being  the  general  rule,  there  are  special  circumstances  in 
which  the  acquisition  of  the  legal  estate,  even  without 
notice,  will  not  confer  a  priority.  Thus  it  seems  now  to 
be  settled  by  the  most  recent  English  decisions  that  where 
the  legal  estate  is  vested  in  a  trustee,  and  the  holder  of  a 
subsequent  equitable  interest,  even  without  notice  of  the 
prior  equities,  obtains  a  conveyance  of  the  legal  estate 
from  the  trustee,  which  would  of  itself  be  a  breach  of  the 
trust,  provided  the  conveyance  is  not  so  made  as  to  con- 
stitute himself  a  bona  fide  purchaser  from  the  trustee  for 
a  valuable  consideration  and  without  notice,  he  does  not 
thereby  acquire  a  precedence  over  the  existing  equities 
which  are  prior  in  time,  because  the  act  is  necessarily  a 
breach  of  trust.'     It  is  settled  that  where  the  legal  estate 


Lean,  41  Barb.  285:  Land  was  con- 
veyed to  A  by  a  deed  absolute  on  its 
face,  and  vesting  an  apparently  per- 
fect legal  estate,  but  in  fact  the  land 
was  held  in  trust  for  B,  and  it  was 
not  intended  that  A  should  have  any 
beneficial  interest.  In  this  condition 
A  executed  a  mortgage  on  the  laud  to 
C  for  a  valuable  consideration  and 
without  notice.  Held,  that  C  was 
protected  against  B's  interest,  be- 
cause the  mortgage  clothed  him  with 
the  legal  estate.  This  can  hardly  be 
the  correct  reason  according  to  the 
law  of  New  York,  by  which  a  mort- 
gage never  conveys  the  legal  estate. 
C  would  probably  be  protected  by 
the  recording  acts.  Beall  v.  Butler, 
54  Ga.  43:  The  statutory  lien  of  a 
laborer  on  his  employer's  property  ia 
cut  off  by  a  sale  and  conveyance  to  a 
purchaser  without  notice.  In  Jones 
V.  Lapham,  15  Kan.  540,  it  is  held 
that,  between  a  prior  lien  upon  an 
equitable  interest,  and  a  subsequent 
lien  upon  the  full  legal  estate,  the 
latter  is  preferred,  if  the  holder  ac- 
quired without  notice;  but  not  if  at 
the  time  of  obtaining  his  lien  he  knew 
of  the  outstanding  equity  and  the 
prior  lien  thereon.  Fox  v.  Palmer, 
25  N.  J.  Eq.  416:  A  mortgage  signed 
in  blank  and  given  to  an  agent,  by 
whom  it  is  afterwards  filled  up  and 
delivered,  is  not  a  valid  and  legal 
mortgage.     At  most,  it   only  creates 


an  equitable  lien  which  can  be  en- 
forced between  proper  parties.  As 
such,  it  will  not  prevail  over  the  sub- 
sequent equitable  interest  of  another, 
who  has  also  the  legal  title.  Straus 
V.  Kerngood,  21  Gratt.  584.  Between 
two  equal  equitable  liens,  the  holder 
who  obtains  the  legal  advantage  of  a 
judgment  will  prevail  over  the  other. 
[As  further  illustrations  of  the  rule, 
see  Hill  v.  Moore,  62  Tex.  610;  Swep- 
son  V.  Johnston,  84  N.  C.  449;  Carlisle 
V.  Jumper,  81  Ky.  282;  Hoult  v.  Don- 
ahue, 21  W.  Va.  294;  Warren  v.  Wil- 
der, 114  N.  Y.  215.  In  Georgia,  a 
purchaser  of  land  who  has  paid  the 
consideration  and  taken  possession  has 
a  "perfect  equity,"  on  which  he  can 
either  maintain  or  defend  ejectment, 
and  is  entitled  to  priority  over  a  prior 
equitable  estate  of  which  he  had  no  no- 
tice: Temples  v.  Temples,  70  Ga.  480.] 
'  It  must  be  carefully  borne  in  mind, 
or  else  confusion  will  be  inevitable, 
that  the  question  under  examination 
is  one  of  -priority  merely,  and  not  ot 
the  rights  obtained  through  a  bona 
fide  purchase  for  value:  Mumford  v. 
Stohwasser,  L.  R.  18  Eq.  556,  562, 
563.  Sir  George  Jessel,  M.  R.,  after 
quoting  with  approval  the  language 
of  James,  L.  J.,  in  Pilcher  v.  Raw- 
lins, L.  R.  7  Ch.  259,  adds:  "This 
would  be  the  case  of  a  trustee  know- 
ing that  he  was  a  trustee  assigning 
over  the  legal  estate  to  a  person  who 


1019  CONCERNING    PRIORITIES.  §  729 

is  vested  in  a  trustee  for  a  prior  encumbrancer,  a  subse- 
quent equitable  encumbrancer  gains  no  priority  by  ob- 
taining a  conveyance  of  it  from  such  trustee.*  Also  where 
there  are  successive  equitable  mortgages,  the  legal  estate 
remaining  in  the  mortgagor,  the  mortgagor  cannot  him- 
self give  priority  to  a  subsequent  encumbrancer  by  con- 
veying the  legal  estate  to  him.  Here,  also,  it  must  be 
understood  that  the  second  encumbrancer  getting  the 
legal  title  is  not  a  bona  fide  purchaser  for  a  valuable  con- 
sideration.* 

§  729.  Legal  Estate  Obtained  after  Notice  of  a  Prior 
Equity.  —  One  further  question  remains  to  be  examined. 
It  has  already  been  stated  as  an  essential- part  of  the  gen- 
eral rule  that  the  subsequent  equitable  lien  or  other  in- 
terest must  be  completely  acquired,  and  of  course  the 
consideration  upon  which  it  is  founded  fully  parted  with, 
without  notice  of  any  prior  equity,  in  order  that  the 
holder  may  be  protected  by  getting  the  legal  estate.  The 
question  is,  whether  the  legal  estate  must  also  be  obtained 
before  any  notice  is  received  of  the  prior  equity.  One 
particular  case  involving  this  question,  but  depending 
upon  special  reasons,  is  well  settled.  If  a  person  becomes 
holder  in  good  faith  of  an  equitable  interest  without  no- 
tice of  an  existing  trust,  and  afterwards,  upon  receiving 
notice  of  the  trust,  he  obtains  a  conveyance  of  the  legal 
estate  from  the  trustee,  he  cannot  protect  himself  against, 

did  not  know  he  was  a  trustee,  that  Div.  674.    In  the  latter  case,  a  trustee, 

person  having  previously  acquired  an  holding   the   legal   estate,  who   takes 

equitable  interest;  and  I  should  hold,  from  his  cestui  que  trust  an  assignment 

if  that  point  came  for  decision,  which  of  the  equitable  interest  as  security  for 

I  think  does  not  in  this  case,  that  the  money  aileanced  to  the  cestiii  qxie  trust, 

eecond  equitable  encumbrancer  or  the  was  held  entitled  to  avail  himself  of 

purchaser  of  the  equity  did  not  thereby  the  legal  estate  as  a  protection  against 

gain  any  priority;  in  other  words,  that  a  prior  encumbrance  of  which  he  had 

a  person,  knowing  he  is  a  trustee,  can-  no  notice.] 

not,  without  receiving  value  at  the  time,         '  Allen  v.  Knight,  6  Hare,  272,  af« 

by  committing  a  breach  of  trust,  de-  firmed  in  11  Jur.  527;  and  see  Wilmot 

prive   hia   own  cesttd  que  trust  of   his  v.  Pike,  5  Hare,  22. 
rights."     See  aho  Pilclier  v.  Rawlins,         '  Sharpies  v,  Adams,  32  Beav.  213, 

L.  Pt.  7  Ch.  259,  268,  per  James,  L.  J.  216.     The  reason  undoubtedly  ia,  that 

[Additional  recent  cases  are  Harpham  under   such  circumstances   the  mort- 

V.  Shacklock,  L.  R.  19  Ch.   Div.  207;  pagor  is  regarded  as  a  trustee  for  all 

Newman  v.  Newman,  L.  R.   28  Ch.  the  equitable  mortgagees. 


§  729  EQUITY   JURISPRUDENCE.  1020 

nor  even  assert  priority  over,  the  right  of  the  cestui  que 
trust,  for  his  act  has  necessarily  made  him  a  party  to  a 
breach  of  trust.*  Does  the  same  rule  extend  to  all  in- 
stances of  a  legal  estate  procured  by  the  holders  of  sub- 
sequent equitable  mortgages,  liens,  and  other  equitable 
interests?  There  is  some  conflict,  or  apparent  conflict,  of 
opinion  upon  this  point,  but  it  all  arises,  I  think,  from 
the  failure  to  distinguish  mere  rights  of  priority  from 
the  more  complete  rights  of  defense  belonging  to  the 
bona  fide  purchaser  for  a  valuable  consideration.  The 
confounding  of  these  two  entirely  distinct  and  separate 
matters  can  only  lead  to  a  confusion  of  decisions  and 
rules.^  The  very  object  of  the  rule  is,  that  a  person  who 
has  in  good  faith  become  holder  of  an  equitable  lien  or 
interest,  on  discovering  his  danger  of  being  postponed  to 
an  outstanding  equity  already  in  the  hands  of  another, 
may  protect  himself  and  secure  his  priority  by  procuring 
the  legal  title.  Principle  and  authority  seem  to  be  agreed 
that  such  a  holder  of  a  subsequent  equity,  who  obtained 
it  for  value  and  without  notice,  may,  even  after  notice  of 
an  earlier  equity  in  favor  of  a  third  person,  secure  the 
advantage  given  by  a  conveyance  of  the  legal  estate,  and 
thus  establish  his  own  priority.  By  this  act  the  subse- 
quent holder  would  become  entitled  to  priority.  The  de- 
cisions and  dicta  which  conflict  with  this  conclusion  will 
be  found,  upon  examinaion,  to  be  dealing  with  the  alleged 
rights  of  a  bona  fide  purchaser  for  value,  and  not  with  a 
mere  question  of  priority.' 

»  Mamford  v.  Stohwaaser,  L.  R.  18  in  the  other  case  it  refnsea  any  relief 

Eq.  556,  563;  Saunders  v.  Dehew,  2  to  the  plaintiff  attempting  to  establish 

Vern.  271;  Allen  v.  Knight,  5  Hare,  his  title  or  claim  against  the  bona  fide 

272;  Sharpies  v.  Adams,  32  Beav.  213;  purchaser.     This  most  important  dia- 

Carter  V.  Carter,  3Kay&  J.  617;  [Harp-  tinction  is  not  always  sufficiently  ob- 

ham  V.  Shacklock,  L.  R.  19  Ch.  Div.  served  in   the   exhaustive    American 

207.]     In  fact,  it  seems  that  the  mere  notes  to  Basset  v.   Nosworthy,    and 

obtaining   the  legal  estate  from  the  Le  Neve  v.  Le  Neve,  in  2  Leading 

trustee  without  notice  would  not  give  Cases  in  Equity, 

him  •priority.  *  While  the  proposition  of  the  text 

*  In  a  case  of  priorities  merely,  the  is  implied  by  many  text- writers,  it  is 

court  in  a  proper  proceeding  awards  expressly  announced  by   Mr.  Adams 

the    subject-matter    to    the    various  as  a  settled  rule  in  the  adjustment  of 

olaimanto  in  tbo  order  of  j^ecedence;  priorities!  Adams's  Eqai^,  161f  162; 


1021  CONCERNING   PRIORITIES.  §  730 

§  730.  IV.  Notice  of  Existing  Equities.  —  The  doc- 
trine is  universally  settled,  and  has  already  been  fully  ex- 
amined, that,  among  successive  interests  wholly  equitable, 
and  between  an  earlier  equity  and  a  subsequent  legal  es- 
tate, even  when  purchased  for  a  valuable  consideration, 
the  one  who  acquires  the  subsequent  estate  or  interest 
with  notice  of  the  earlier  equity  in  favor  of  another  per- 
son will  hold  his  acquisition  subject  and  subordinate  to 
such  outstanding  interest  or  right;  in  the  contest  for 
priority  between  the  two  claimants,  he  must  be  postponed; 
he  takes  his  interest  burdened  with  the  obligation  of  rec- 
ognizing, providing  for,  and  carrying  out  the  previous 
equity  according  to  its  nature.  This  subordinating  effect 
is  produced  alike  by  every  species  of  notice;  actual  notice 
proved  by  director  inferred  from  circumstantial  evidence, 
and  constructive  notice  arising  from  information  suffi- 
cient to  put  the  prudent  man  upon  an  inquiry,  —  from  pos- 
session, from  the  contents  of  title  deeds,  from  lis  pendens, 
from  registration,  from  information  given  to  an  agent, 
or  from  any  other  cause,  — when  once  established,  are  fol- 
lowed by  the  same  consequences  upon  the  rights  of  the 
subsequent  holder  or  purchaser.  The  doctrine  applies  to 
all  successive  equities  in  the  same  subject-matter,  even 
where  they  are  equal  and  governed  by  the  order  of  time, 
and  in  such  a  case  it  does  not  disturb  the  priority  already 
existing.     Its  special  and  more  important  application  is 

6th  Am  ed.,  339.     See  also  Brace  v.  carried  too  far,  and  applied  to  a  party 

Duchess  of  Marlborough,  2  P.  Wms,  who  was  asserting  the  rights  to  a  bona 

491;  Belchier  v.  Butler,  1  Eden,  523;  Jide  purchaser.     The   cases  of  Grim- 

Wortley  v.  Birkhead,  2  Yes.  Sr.  571;  stone  v.  Carter.  3  Paige,  421,  437,  24 

Ex   parte   Knott.   11    Ves.    609,    619;  Am.  Dec.  230,  and  Fash  v.  Ravesies, 

Leach   v.  Ansbacher,   55   Pa.  St.  85;  32  Ala.  451,  appear  to  be  opposed  to 

Baggerly  v.  Gaither,  2  Jones  Eq.  80;  this  rule,  but  they  are  really  dealing 

Carroll  v.  Johnston,  2  Jones  Eq.  120,  with  the  bona  fide  purchaser,  and  not 

123;  Fitzsimmons  V.  Ogden,  7  Cranch,  with  priorities.     In  the  first,  thechan- 

2,  18;  Siter  v.  McClanachan,  2  Gratt.  cellor  says  that  *Ho  enable  a  party  to 

280,  283;  Zollman  v.  Moore,  21  Gratt.  deftnd  himself  as  a  bona  fide  purchaser, 

313;   Osborn   v.  Carr,   12   Conn.   195,  he  must  state,  not  only  that  there  Wcis 

208;  Gibler  v.  Trimble,  14  Ohio,  323;  equal  equity  in  himself  by  reason  of 

Campbell  v.  Brackenridge,  8  Blackf.  his  having  paid  the  purchase-money, 

471.     In  some  of  these  American  de-  but  also  that  he  had  clothed  his  equity 

cisions  the  rule  may,  under  a  mistaken  with  the  legal  title  before  he  baa  no- 

view   of  the   English   authorities,  be  tice  of  the  prior  equity." 


§  730  EQUITY   JURISPRUDENCB.  1022 

where  the  subsequent  equitable  interest  is  superior  in  its 
intrinsic  nature  or  from  some  incident,  or  where  the 
subsequent  interest  is  a  legal  estate,  or  where  it  possesses 
the  advantage  resulting  from  the  compliance  with  som& 
statutary  requirement,  so  that  the  holder  thereof  would, 
in  the  absence  of  notice,  be  entitled  to  the  preference;  and 
its  effect  is  then  to  defeat  the  precedence  which  would 
otherwise  have  existed,  and  to  restore  the  priority  from 
order  of  time  among  the  successive  claimants.  By  far 
the  most  frequent  application  of  the  doctrine  in  this 
country  has  been  in  connection  with  the  recording  acts, 
where  the  superiority  of  title  or  of  lien  otherwise  acquired 
by  the  recording  of  a  conveyance,  mortgage,  or  other  in- 
strument has  been  held  to  be  lost  by  reason  of  a  notice 
of  some  outstanding  unrecorded  estate,  title,  mortgage, 
lien,  or  other  equitable  interest.  As  the  doctrine  of  no- 
tice, both  with  respect  to  its  nature  and  its  effects,  has 
already  been  discussed  as  fully  as  ray  limits  will  permit, 
I  shall  add  nothing  further  here  except  a  few  cases  placed 
in  the  foot-note  by  way  of  illustration.* 

I  Bradley  v.  Riches,  L.  R.  9  Ch.  Div.  v.  Cherry,  2  Vern.  383;  Mertins  v. 
189;  Greaves  V.  Tofield,  L.  R.  14  Ch.  Jolliffe,  Amb.  313;  Lowther  v.  Carl- 
Div.  563;  Baker  v.  Gray,  L.  R.  1  Ch.  ton,  2  Atk.  242;  Kennedy  v,  Daly,  1 
Div.  491;  Maxfield  v.  Burton,  L.  R.  17  Schoales  &  L.  355,  379;  Merry  v.  Ab- 
Eq.  15;  Dryden  V.  Frost,  3  Mylne&C.  ney,  1  Cas.  Ch.  38;  Earl  Brook  v. 
670;  Whitbread  v.  Jordan,  1  Younge  Bulkeley,  2  Ves.  Sen.  498;  Taylor  v. 
&  C.  303;  Holmes  v.  Powell,  8  De  Gex,  Stibbert,  2  Ves.  437;  Daniels  v.  DaCvi- 
M.  &  G.  572;  Atterbury  v.  Wallis,  8  son,  16  Ves.  249;  Van  Meter  v.  Mc- 
De  Gex,  M.  &G.  454:  Penny  v.  Watts,  Faddiu,  8  B.  Mon.  435;  School  District 
1  Macn.  &  G.  150;  Jones  v.  Smith,  1  v.  Taylor,  19  Kan.  287  (recorded  mort- 
Hare,  43,  55;  Ware  v.  Lord  Ei^mont,  gage  held  subject  to  a  prior  unrecorded 
4  De  Gex,  M.  &  G.  460,  473;  Green-  deed  by  reason  of  the  absolute  con- 
field  V.  Edwards,  2  De  Gex,  J.  &  S.  structive  notice  from,  the  open  pos- 
5S2;  Mouteliore  v.  Browne,  7  H.  L.  session  by  the  grantee,  although  the 
Cas.  241,  269;  Wason  v.  Wareing,  15  mortgagee  had  no  actual  knowledge 
Beav.  151;  Hipkins  v.  Amery,  2  Giff.  of  such  possession);  In  re  Sands  Brew- 
292;  Prosser  v.  Rice,  28  Beav.  68,  74;  ing  Co.,  3  Biss.  175  (effect  of  notice  of 
Barnhart  v.  Greeushields,  9  Moore  P.  a  covenant  in  prior  conveyance  to  a 
C.  C.  18;  Birch  v.  EUames,  2  Anstr.  subsequent  purchaser).  [See  also 
427;  Gibson  v.  Ingo,  6  Hare,  112,  124;  Woodall  v.  Kelly, 85  Ala.  368;  7  Am. 
Jones  V.  Williams,  24  Beav.  47;  Mack-  St.  Rep.  57;  Boyd  v.  McCullough,  )37 
reth  v.  Symmons,  15  Ves.  329,  350;  Pa.  St.  7;  Poe  v.  Paxton,  26  W.  Va. 
Tourville  v.  Naish,  3  P.  Wms.  307;  607;  Miller  v.  Merine,  43  Fed.  Rep. 
Maundrell  v.  Maundrell,  10  Ves.  246,  261;  Durant  v.  Crowell,  97  N.  C.  367; 
271;  Tildesley  v.  Lodge,  3  Smale  &  Stokes  v.  Riley,  121111.  166;  Garland 
G.  543;  Wigg  v.  Wigg.  1  Atk.  382,  v.  Plummer,  72  Me.  397;  Boyle  Ice 
384;  Raytie  v." Baker,  1  Giff.  241;  Har-  M.  Co.  v.  Gould,  73  Cal.  153;  Shuey 
risou  V.  Forth,  i'rec.  Ch.  51;  Ferrara  v.  Latta,  90  lud.  136.] 


1023  CONCERNING    PRIORITIES.  §  731 

§  731.     V.  Effect  of  Fraud  or  Negligence  upon  Prior- 
ities.—  A  priority  which  would  otherwise  have   existed 
may  also  be  disturbed  and  defeated  by  fraud   or  negli- 
gence in  obtaining  the  interest  or  in  failing  to  secure  it 
properly.     It  is  therefore  a  settled  doctrine,  that  among 
successive  equities  otherwise  equal,  and  also  between  a 
legal  title  or  superior  equitable  interest  earlier  in  time 
and  a  subsequent  equity,  the  holder  of  the  interest  which 
is  prior  in  time  and  would  be  prior  in  right  may  lose  his 
precedence,  and  be  postponed  to  the  subsequent  one  by 
his  own  fraud  or  negligence,  or  that  of  his  agent.     The 
same  rule  applies  to  the  holder  of  a  subsequent  legal  es- 
tate who  would  otherwise  have   the   precedence  over  a 
prior  equitable  interest;  he  may  be  postponed  by  reason 
of  his  neglect  or  fraud.     While  the  general  rule  has  been 
fully  adopted  by  the  American  courts,  the  cases  involving 
it  are  much  less  frequent  in  this  country  than  in  Eng- 
land, because  almost  every  kind   of  interest  in  land   is 
within  the  operation  of  the  recording  acts,  and   may  be 
protected  by  a  record.     Most  instances  of  laches,  therefore, 
coming  before  our  courts  have  arisen  from  a  neglect  to 
record  an  instrument,  or  to  comply  with  the  provisions 
of  some  statute  analogous    to  that  of  recording.'     The 
effects  of  negligence  and  want  of  diligence  in  postponing 
or  even  defeating  the  rights  of  an  assignee  of  a  thing  in 
action,  earlier  in  point  of  time,  have  already  been  de- 
scribed.'    One   instance  which    may  be  regarded  as  an 
-example  of  fraud,  although  no  actual  fraudulent  intent  is 
essential,  is,  where  a  prior  encumbrancer,  upon  inquiry 
being  made  by  a  person  interested,  denies  the  existence 
of  his  lien,  or  wh«re  the  owner  of  the  legal  estate  denies 
his  title  under  like  circumstances,  or  even  keeps  silent 
and  does  not  announce  his  title  to  an  innocent  person 

'  See,    as  examples   of    fraud   in   a  24  Pa.   St.  363;  Rider  v.  Johnson,  20 

prior  mortgage,  Kelly  v.  Lenihan,  5fi  Pa.  St.    190,  193;  Campbell's  Appeal, 

lad.    448;    Eggeman  v.  Eggeman,    .37  29  Pa.  St.  401;  72  Am.  Dec.  641;  Gar- 

Mich.  436.     For  examples  of  neglect,  land  v.  Harrison,  17  Mo.  282. 
Fisher  v.  Knox,   13  Pa.    St.    622;  53        »  See  ante,  §§  698-702. 
Am.  Dec  503;  Hendricksou's  Appeal, 


§732 


EQUITY   JURISPRUDENCB. 


1024 


who  IS  making  expenditures,  or  advancing  money  upon 
the  supposed  security  of  the  property.' 

§  732.  Effect  of  Gross  Negligence.  —  It  is  now  settled 
by  the  English  decisions,  after  some  fluctuation,  that  where 
a  person  has  become  entitled  to  the  precedence  because 
he  has  acquired  the  prior  legal  estate,  or  because,  being 
subsequent  in  time,  he  has  fortified  his  equity  by  obtain- 
ing the  legal  estate,  he  cannot  lose  such  precedence  and 
be  postponed,  unless  by  himself  or  by  his  agent  he  is 
chargeable  with  fraud  or  with  gross  negligence;  mere  ne- 
glect will  not  suffice.'     Whether  the  same  requirement  of 


^  These  instances  may  undoubtedly 
be  referred  to  the  doctrine  of  equitable 
estoppel;  but  the  notion  of  construct- 
ive fraud  lies  at  the  foundation  of 
that  doctrine.  Examples  of  prior 
mortgagee  losing  his  priority,  by  deny- 
ing his  own  security,  to  an  intended 
mortgagee,  who  makes  inquiry  and 
states  that  ho  is  about  to  lend  money 
on  the  same  property:  Ibboteson  v. 
Rhodes,  2  Vern.  554;  Berrisford  v. 
Milward,  2  Atk.  49;  see  Stronge  v. 
Hawkes,  4  De  Gex,  M.  &  G.  186;  4 
De  Gex  &  J.  632;  Beckett  v.  Cordley, 
1  Brown  Ch.  353,  357;  Pearson  v. 
Morgan,  2  Brown  Ch.  385,  388;  Evana 
V.  Bicknell,  6  Ves.  173,  182;  Lee  v. 
Munroe,  7  Cranch,  366,  368;  Brinck- 
erhoff  V.  Lansing,  4  Johns.  Ch.  65;  8 
Am.  Dec.  538.  Examples  of  legal 
owner  concealing  his  title,  and  suffer- 
ing others  to  expend  money,  etc.: 
Storrs  V.  Barker,  6  Johns.  Ch.  166, 
168;  10  Am.  Dec.  316;  Wendell  v. 
Van  Rensselaer,  1  Johns.  Ch,  344; 
Bright  V.  Boyd,  1  Story,  478;  see  Eld- 
ridge  V.  Walker,  80  111.  270;  see  also 
Piatt  V.  Squire,  12  Met.  494;  Fay  v. 
Valentine,  12  Pick.  40;  22  Am.  Dec. 
397;  Marstoa  v.  Brackett,  9  N.  H. 
336;  Miller  v.  Bingham,  29  Vt.  82; 
Stafford  v.  Ballon,  17  Vt.  329;  Broome 
V.  Beers,  6  Conn.  198;  Rice  v.  Dewey, 
54  Barb.  455;  L'Amoreux  v.  Vanden- 
bergh,  7  Paige,  316;  Paine  v.  French. 
4  Ohio,  318;  Chester  v.  Greer,  5 
Humph.  26. 

'  The  cases  furnish  a  great  variety 
of  instances  and  forms  of  fraud  or 
neglect.  The  leading  case  is  Hewitt 
V.  Loosemore,  9  Hare,  449.  See  also 
Tourle  v.  Rand,  2  Brown  Ch.  650; 
Baruett  v.  Weston,  12  Ves.  129;  Col- 


yer  v.  Finch,  5  H.  L.  Cas.  905;  Espin 
V.  Pemberton,  4  Drew.  333;  3  De  Gex 
&  J.  547;  Hopgood  v.  Ernest,  3  De 
Gex,  J.  &  S.  116;  Ratcliffe  v.  Barnard, 
L.  R.  6  Ch.  652;  [Clarke  v.  Palmer, 
L.  R.  21  Ch.  Div.  124;  Heyder  v.  Ex- 
celsior B.  L.  Ass'n,  42  N,  J.  Eq.  403; 
Lloyd's  Bank.  Co.  v.  Jones,  L.  R.  29 
Ch.  Div.  227;  Nat.  Prov.  Bank  v. 
Jackson,  L.  R.  33  Ch.  Div.  1;  Farrand 
V.  Yorkshire  Bank.  Co.,  L.  R.  40  Ch. 
Div.  182.]  The  following  cases  are 
illustrations  of  negligence  insufficient 
to  affect  the  priority  acquired  by 
means  of  the  legal  estate:  Dixon  v. 
Muckleston,  L.  R.  8  Ch.  155;  Ratcliffe 
V.  Barnard,  L.  R.  6  Ch.  652;  Cory  v. 
Eyre,  1  DeGex,  J.  &  S.  149,  163;  Hunt 
V.  Elmes,  2  De  Gex,  F.  &  J.  578;. Rob- 
erts v.  Crofts,  2  De  Gex  &  J.  1;  Hewitt 
v.  Loosemore,  9  Hare,  449.  [See  also 
Manners  v.  Mew,  L.  R.  29  Ch.  Div. 
725;  Northern  Counties  etc.  Co.  v. 
Whipp,  L.  R.  26  Ch.  Div.  482.  In 
these  two  cases  the  question  of  what 
degree  of  negligence  is  sufficient  to 
postpone  a  prior  legal  mortgage  to 
a  subsequent  equitable  mortgage  is 
elaborately  discussed,  and  the  prior 
authorities  reviewed.  The  conclusions 
reached  were  summed  up  as  follows: 
"That  the  court  will  postpone  the  prior 
legal  estate  to  a  subsequent  equitable 
estate,  —  1.  Where  the  owner  of  the 
legal  estate  has  assisted  in  or  connived 
at  the  fraud  which  has  led  to  the  crea- 
tion of  a  subsequent  equitable  estate, 
without  notice  of  the  prior  legal  estate, 
of  which  assistance  or  connivance  the 
omission  to  use  ordinary  care  in  in- 
quiry after  or  keeping  may  be,  and  in 
some  cases  has  been,  held  to  be  suffi- 
cient  evideucA.   where   such   conduct 


1025 


CONCERNING   PRIORITIES. 


§  733 


gross  negligence  applies  to  successive  interests  which  are 
all  purely  equitable,  or  whether  mere  negligence  is  suffi- 
cient to  affect  the  priority,  must  be  regarded  as  still  un- 
settled by  the  decisions.* 

§  733.  Assignments  of  Mortgages  — Rights  of  Priority 
Depending  upon.  —  An  assignment  of  a  mortgage  is, 
throughout  this  country,  with  the  exception,  perhaps,  of 
a  very  few  states,  a  mere  transfer  of  a  thing  in  action, 
and  the  assignee  can  acquire  no  higher  rights  as  against 
the  mortgagor  than  those  possessed  by  the  original  mort- 
gagee.^ Such  assignments  are  generally  within  the  opera- 
tion of  the  recording  statutes,  either  in  express  terms,  or 
by  a  judicial  interpretation  of  the  statutory  language, 
holding  that  an  assignment  is  a  species  of  conveyance.' 


caanot  otherwise  be  explained;  2. 
Where  the  owner  of  the  legal  estate 
has  coDstitnted  the  mortgagor  hia 
agent  with  authority  to  raise  money, 
and  the  estate  thus  created  haa  by  the 
fraud  or  misconduct  of  the  agent  been 
represented  as  being  the  first  estate. 
But  that  the  court  will  not  postpone 
the  prior  legal  estate  to  the  subse- 
quent equitable  estate  on  the  ground 
of  any  mere  carelessness  or  want  of 
prudence  on  the  part  of  the  legal 
owner."  In  the  case  of  Manners  v. 
Mew,  L.  R.  29  Ch.  Div.  730,  North,  J., 
in  quoting  the  foregoing,  said:  "  Mere 
carelessness  there  includes,  in  my 
opinion,  gross  carelessness,  if  there  is 
any  distinction."  In  the  opinions  in 
these  two  cases  the  court  was  careful 
to  say  that  the  question  there  discussed 
referred  to  what  conduct  would  post- 
pone a  prior  legal  estate,  and  not  the 
question  as  to  what  circumstances 
would  give  priority  as  between  two 
equitable  estates.  In  the  subsequent 
case  of  Farrand  v.  Yorkshire  Banking 
Co.,  L.  R.  40  Ch.  Div.  182,  the  lat- 
ter question  was  determined,  and  it 
was  there  held  that  negligence  amount- 
ing to  fraud  on  the  part  of  the  holder 
of  th«  prior  equitable  estate  was  not 
necessary  to  be  shown,  in  order  to  work 
a  postponement.]  Examples  of  neglect 
sufficient  to  destroy  a  precedent  other- 
wise existing:  Worthington  v.  Mor- 
gan, 16  Sim.  547;  Rice  v.  Rice,  2 
Drew.  73;  Brigga  v.  Jones,  L.  R.  10 
Eq.  92;  Hopgood  v.  Ernest,  3  De 
2  Ey.  JuE.  — CS 


Gex,  J.  &  S.  116;  Perry  Herrick  v. 
Attwood,  2  De  Gex  &  J.  21;  Waldron 
V.  Sloper,  1  Drew.  193;  Carter  v.  Car- 
ter, 3  Kay  &  J.  617.  Examples  of 
fraud:  Hunter  v.  Walters,  L.  R.  7  Ch. 
75;  Sharpe  v.  Foy,  L.  R.  4  Ch.  35; 
Lloyd  V.  Attwood,  3  De  Gex  &  J.  614. 
See  further,  as  to  the  neglect  in  making 
proper  inquiry,  and  the  notice  result- 
ing therefrom,  ante,  §  612. 

'  See  supra,  note  under  §  687,  where 
the  recent  English  cases  upon  this 
question  are  cited.  [The  recent  case 
of  Farrand  v.  Yorkshire  Banking  Co., 
L.  R.  40  Ch.  Div.  182,  has  settled 
this  question  in  England.  It  is  there 
held  that  gross  negligence  amounting 
to  fraud  is  not  necessary,  but  that 
negligence  such  as  an  omission  to  ob- 
tain possession  of  or  to  make  inquires 
concerning  the  title  deeds  may  be 
sufficient.] 

^  See  a7ite,  %  704;  Wanzer  v.  Gary, 
73  N.  Y.  .526.  [See  also  Yerger  v. 
Barz,  56  Iowa,  77;  Vreden  burgh  v. 
Burnet,  31  N.  J.  Eq.  229;  Earnest  v. 
Hoskins,  100  Pa.  St.  551;  Theyken  v. 
Howe  Machine  Co.,  109  Pa.  St.  95.] 

*  See  1  Jones  on  Mortgages,  sees.. 
472-478,  where  the  subject  is  fully 
discussed,  and  from  which  I  have  bor- 
rowed. In  the  recent  and  very  care- 
fully considered  case  of  Westbrook  v. 
Gleason,  79  N.  Y.  23,  it  is  held  that 
an  assignment  is  a  "conveyance" 
within  the  general  requirements  of 
the  recording  act,  and  therefore  wheu 
a  second  mortgagee,  with  notice  of  a 


§  733 


EQUITY    JURISPRUDENCE. 


1026 


The  record  of  an  assignment,  like  that  of  any  other 
instrument,  does  not  operate  as  a  notice  retrospectively; 
it  is  not  therefore  a  constructive  notice  of  the  assignee's 
interest  to  the  mortgagor,  so  as  to  destroy  the  effect  of 
payments  made  by  him,  without  actual  notice  to  the 
mortgagee;  but  a  mortgagor  who  obtains  a  discharge 
from  the  mortgagee  without  any  payment  is  not  protected 
as  against  the  assignee.* 


prior  unrecorded  mortgage,  assigns 
his  mortgage  to  a  boiia  Jide  purchaser 
for  value,  who  has  no  notice,  such  as- 
eignee  is  entitled  to  preference  only 
in  case  he  records  his  assignment  be- 
fore the  first  mortgage  is  recorded;  if 
the  first  mortgage  is  recorded  before 
the  assignment  is  put  on  record,  that 
operates  as  a  constructive  notice  to 
the  assignee,  and  cuts  off  his  priority. 
From  this  it  appears  that  the  effects 
of  recording  an  assignment  are  not 
confined,  as  has  sometimes  been  sup- 
posed, to  the  rights  of  successive  as- 
si<j;nee3  of  the  same  mortgage.  In 
illustration  of  the  text,  see  Belden  v. 
Meeker,  47  N.  Y.  307;  2  Lans.  470; 
Campbell  v.  Vedder,  1  Abb.  App.  295; 
Fort  V.  Burch,  5  Denio,  187;  Vander- 
kemp  V.  Shelton,  11  Paige,  28;  James 
V.  Johnson,  6  Johns.  Ch.  417;  St. 
John  V.  Spalding,  1  Thomp.  &  C. 
483;  Byles  v.  Tome,  39  Md.  461; 
Bowling  V.  Cook,  39  Iowa,  200;  Bank 
of  State  of  Indiana  v.  Anderson,  14 
Iowa,  544;  83  Am.  Dec.  390;  Cornog 
V.  Fuller,  30  Iowa,  212;  McClure  v. 
Burris,  16  Iowa,  591;  Henderson  v. 
Pilgrim,  22  Tex.  464.  In  Pennsyl- 
vania  it  is  held,  under  a  construction 
of  the  general  statute,  that  a  record  of 
an  assignment  is  notice  to  subsequent 
assignees,  and  also  to  subsequent  mort- 
gagees and  purchasers  of  the  same 
premises:  Pepper's  Appeal,  77  Pa.  St. 
373;  Neide  v.  Pennypacker,  9  Phila. 
86;  Leech  v.  Bonsall,  9  Phila.  204; 
Philips  v.  Bank  of  Lewiston,  18  Pa. 
St.  394,  401.  In  Indiana  it  is  held, 
upon  a  construction  of  the  statute, 
that  no  provision  is  made  for  recording 
assignments,  and  therefore  a  record  of 
them  is  not  notice:  Hasselman  v. 
McKernan,  50  Ind.  441.  It  necessa- 
rily follows  that  when  a  mortgage  is 
assigned,  and  the  assignment  is  not 


recorded,  and  the  mortgagee  after- 
wards  satisfies  the  mortgage  of  record, 
the  lien  is  thereby  destroyed  as  against 
a  bona  fide  purchaser  or  encumbrancer 
without  notice  of  the  premises:  Bowl- 
ing V.  Cook,  39  Iowa,  200;  Henderson 
v.  Pilgrim,  22  Tex.  464;  and  see 
Warner  v.  Winslow,  1  Sand.  Ch.  430; 
St.  John  V.  Spalding,  1  Thomp.  &  C. 
483. 

'  New  York  Life  Ins.  &  T.  Co.  v. 
Smith,  2  Barb.  Ch.  82;  Ely  v.  Scofield, 
35  Barb.  330.  This  rule  is  held  not  to 
apply  to  a  mortgage  given  to  secure  a 
negotiable  note  which  is  assigned  be- 
fore maturity:  Jones  v.  Smith,  22 
Mich.  360.  The  record  of  an  assign- 
ment is,  however,  a  constructive  notice 
to  a  subsequent  grantee  of  the  mort- 
gagor, and  a  subsequent  discharge 
given  to  him  by  the  mortgagee  would 
be  inoperative  as  against  the  assignee. 
Also  a  discharge  obtained  by  the  mort- 
gagor without  any  payment  is  inef- 
fectual: Belden  v.  Meeker,  47  N.  Y. 
307;  2  Lans.  470;  and  see  Westbrook 
V.  Gleason,  79  N.  Y.  23. 

The  rule  given  in  the  text  as  to  the 
efl'ect  of  the  record  as  notice  to  the 
mortgagor  is  expressly  enacted  by  the 
statutes  of  several  states. 

California.  —  Civ,  Code,  sees.  2934, 
2935. 

Indiana.  —  2  Gavin  and  Hord's 
Stats.  356. 

Kansas.  —  Dassler's  Stats.,  e.  68, 
sec.  3. 

Michigan. — Comp.  Laws,  1347. 

Minneitota.  —  Rev.  Stats.  1866,  p. 
331. 

Nebraska.  — Gen.  Stats.,  c.  61,  sea 
39. 

New  York.  —  1  Fay's  Dig.  of  Laws, 
585. 

Oregon.  — Gen.  Laws,  651. 
Wisconsin.  —  Rev.  Stats.  1149. 


1027  CONCERNING   PRIORITIES.  §  734 

§  734.  Unrecorded  Assignment  —  Rights  of  the  As- 
signee. —  When  a  mortgage  duly  recorded  is  assigned, 
that  original  record  continues  to  be  constructive  notice 
of  the  existence  of  the  lien  to  all  subsequent  purchasers 
and  encumbrancers  of  the  same  premises,  and  the  as- 
signee does  not  lose  his  precedence  over  such  parties  by 
a  failure  to  record  the  assignment.^  A  conveyance  of 
the  mortgaged  premises  to  the  mortgagee  after  he  had 
assigned  the  mortgage  would  not  work  a  merger,  but  the 
rights  of  the  assignee  would  remain  unaffected.'  If  the 
mortgagee,  having  thus  acquired  title  after  the  assign- 
ment, should  in  turn  convey  the  mortgaged  premises  to 
a  third  person  without  knowledge  nor  actual  notice  of 
the  assignment,  it  is  held  that  such  grantee  would  be 
charged  with  constructive  notice  and  would  take  subject 
to  the  rights  of  the  assignee,  because  the  records  would 
give  him  notice  of  the  facts  sufficient  to  put  a  reasonable 
man  upon  an  inquiry,  and  a  due  inquiry  would  neces- 
sarily lead  to  a  discovery  of  the  real  situation.'  If  a 
second  mortgagee,  with  notice  of  a  prior  unrecorded 
mortgage,  assigns  to  a  bona  fide  purchaser  without  notice, 
but  the  prior  mortgage  is  recorded  before  the  assignment, 
the  assignee  would  fail  to  secure  a  precedence.*  Since  a 
mortgage  is  a  thing  in  action,  an  assignee,  even  without 
notice,  will  be  subject  to  all  outstanding  equities  and 
claims  in  favor  of  third  persons  which  were  existing  and 
available  against  the  assignor,  wherever  the  general  doc- 
trine prevails  that  all  assignments  of  things  in  action 
are  subject  to  such   latent  equities.*     Questions  of  pri- 

*  Campbell  ▼.  Vedder,  3  Keyes,  174;  same  would  be  tme  where,  a  junior 
1  Al)b.  App.  295.  mortgage    being   assigned,    the   elder 

*  Purdy  V.  Huntington,  42  N.  Y.  mortgage  was  recorded  before  the  as- 
334;  1  Am.  Rep.  532;  Campbell  v.  signment  was  given,  although  after 
Vedder,  3  Keyes,  174;  1  Abb.  App.  the  recording  of  the  junior  mortgage 
295.  assigned:  Ibid. 

3  Purdy   T.  Huntington,  42  N.  Y.  *  See  ante,   §§  708,   709,    714,    and 

334;    1  Am.  Rep.    532;  overruling  46  cases  cited;   Conover  v.  Van   Mater, 

Barb.  389;  Gillig  v.  Maass,  28  N.  Y.  18  N.  J.  Eq.  481;  per  contra,  see  ante, 

191;  Warren  V.  Winslow,  1  Sand.  Ch.  §   715,    and   cases   cited;    Sumner   v. 

4.30;  Van  Keuren  v.  Corkins,  4  Hun,  Waugh,  56   111.    531.      [Reineman  v. 

1J9;  6  Thomo.  &  C.  355.  Robb,  98  Pa.  St.  474;  Appeal  of  Mif- 

*  Westbrook  v.  Gleason,  79  N.  Y.  tiin  Co.  Bank,  98  Pa.  St.  150;  Vredea- 
83;  Fort  v.  Burch.  5  Denio,  187.     The  burgh  v.  Burnet,  31  N.  J.  Eq.  229.] 


§  735  EQUITY   JURISPRUDENCE.  1028 

ority  might  arise  between  successive  assignees  of  the 
same  mortgage  from  the  same  assignor.  If  an  assign- 
ment is  perfected  by  an  actual  delivery  of  the  mortgage 
itself  and  of  the  bond,  note,  or  other  evidence  of  debt 
secured,  even  though  it  be  not  recorded,  a  subsequent 
assignee  would  necessarily  be  put  upon  an  inquiry,  and 
chargeable  with  constructive  notice,  and  could  obtain  no 
precedence  even  by  a  first  record.'  In  other  instances 
where  the  assignments  are  equal,  made  for  a  valuable 
consideration  and  without  notice,  if  all  were  unrecorded, 
the  earliest  in  order  of  time  prevails;  the  assignee  for 
value  and  without  notice  who  first  obtains  a  record 
secures  thereby  the  title;  a  record  when  made  is  a  con- 
structive notice  to  all  subsequent  assignees  of  the  same 
mortgage.' 

SECTION  VII. 

CONCERNING   BONA  FIDE    PURCHASE  FOR  A  VALUABLE  CON- 
SIDERATION  AND  WITHOUT  NOTICE. 


§  735.  General  meaning  and  scope  of  the  doctrine. 

§  736.  General  effect  of  the  recording  acta. 

§§  737-744.  First.     Rationale  of  the  doctrine. 

§  738.  Its  purely  equitable  origin,  nature,  and  operation. 

§  739.  It  is  not  a  rule  of  property  or  of  title. 

§§  740,  741.  General  extent  and  limits;  kinds  of  estates  protected. 

§§  742,  743.  Phillips  v.  Phillips;  formula  of  Lord  Westbury. 

§§  745-762.  Second.     What  constitutes  a  bonajide  purchase. 

§§  746-751.  I.    The  valuable  consideration. 

§  747.  1.  What  is  a  valuable  consideration;  illustrations. 

§§  748,  749.  Antecedent  debts,  securing  or  satisfying;  giving  time,  eta 

§§  750,  751.  2.  Payment;  effect  of  part  payment;  giving  security, 

§§  752-761.  II.    Absence  of  notice. 

§  753.  1.  Effects  of  notice  in  general. 

§  754.  Second  purchase  without  notice  from  first  purchaser  unlh,  also^ 
second  purchaser  with  from  first  purchaser  without  notice. 

§  755.  2.  Time  of  giving  notice;  English  and  American  rules. 

»  Kellogg  y.   Smith,  26  N.   Y.  18;  Westbrook  v.  Gleason,  79  N.  Y,  fe3; 

Brown  v.   Blydenburgh,  7  N.  Y.  141;  Campbell  v.  Vedder,  3  Keyes,  174;  1 

57  Am.  Dec.  506.  Abb.  App.  295;  Pickett  v.  Barron,  23 

«Purdy  V.   Huntington,   42   N.    Y.  Barb.  505. 
334;  1  Am.  Rep.  532;  46  Barb.  389; 


1029  CONCERNING    BONA    FIDE    PURCHASE.  §  735 

I  756.     Effect  of  notice  to  a  bona  fide  purchaser  of  an  equitable  interest 
before  he  obtains  a  deed  of  the  legal  estate. 
§§  757-761.     3.  Recording  in  connection  with  notice. 

§  758.     Interest  under  a  prior  unrecorded  instrument. 

§  759.     Requisites  to  protection  from  the  first  record  by  a  mbseqnent 

purchaser. 
§  760.     Purchaser  in  good   faith   with  apparent    record    title    from   a 
grantor  charged  with  notice  of  a  prior  unrecorded  convey- 
ance. 
§  761.     Break  in  the  record  title;  when  pnrchaser  is  still  charged  with 

notice  of  a  prior  instrument. 
§762.     III.   Good  faith. 
S§  763-778.     Third.     Effects  of  a  bona  fide  purchase  as  a  defense. 

§  764.     I.    Suits  by  holder  of  legal  estate  under  the  auxiliary  juris<K©. 

tion  of  equity,  discovery,  etc. 
§  765.     Same:  exceptions  and  limitations. 
§§  766-774.     XL   Suits  by  holder  of  an  equitable  estate  or  interest  against  a 
purchaser  of  the  legal  estate. 
§  767.     Legal  estate  acquired  by  the  original  purchase. 
§  768.     Purchaser  first  of  an  equitable  interest  subsequently  acquires 

the  legal  estate;  tabula  in  nau/ragio. 
S  769.     Extent  and  limits  of  this  rule. 
§  770.     Purchaser  acquires  the  legal  estate  from  a  trustee. 
§§  771-773.     This  rule  is  applied  in  the  United  States. 

§  774.     Other  instances;  purchase  at  execution  sale;  purchase  of  things 
in  action. 
§§  775-778.     nL    Suits  by  holders  of  an  "equity." 
§  776.     For  relief  against  accident  or  mistake. 
§§  777,  778.     For  relief  from  fraud,  upon  creditors,  or  between  parties. 
§§  779-783.     Fourth.     Afi&rmative  relief  to  a  bona  fide  purchaser. 

§  779.     General  rule. 
§§  780-782.     Illustrations. 

§  783.     Removing  a  cloud  from  title. 
§§  784,  785.     Fifth.     Mode  and  form  of  the  defense. 
§  784.     The  pleadings. 
§  785.     Necessary  allegations  and  proofs. 

§  735.  General  Meaning,  Scope,  and  Limitations  of  the 
Doctrine.  —  This  section  will  deal  with  the  equitable  doc- 
trine of  bona  fide  purchase  for  a  valuable  consideration 
and  without  notice.  The  doctrine  in  its  original  form 
was  exclusively  equitable.  Questions  of  priority  cannot, 
as  has  already  been  stated,  arise  between  successive  ad- 
verse estates  which  are  purely  legal,  and  therefore  cannot, 
independently  of  statutory  permission,  come  before  courts 
of  law  for  settlement;  such  estates  must  stand  or  fall  upon 


§  735  EQUITY    JUEISPEUDENCE.  1030 

their  own  intrinsic  merits  and  validity.*  A  contest  con- 
cerning priority  or  precedence  properly  so  called  can 
only  exist  where  one  of  the  two  claimants  holds  a  legal 
and  the  other  an  equitable  title,  or  where  both  hold  equi- 
table titles,  and  must  therefore  belong  to  the  original  ex- 
clusive jurisdiction  of  equity.  Courts  of  equity  do  not 
have  jurisdiction  of  suits  brought  merely  to  establish  one 
purely  legal  title  against  another  and  conflicting  legal 
title.^  In  the  United  States  these  elementary  notions 
seem  to  have  been  sometimes  overlooked,  and  the  courts 
sometimes  seem  to  have  extended  the  doctrine  of  bona 
fide  purchase  farther  than  the  acknowledged  principles 
of  equity  would  warrant.  The  tendency  is  marked  and 
strong  in  the  courts  of  many  states,  even  when  acting  as 
tribunals  of  law,  to  make  the  doctrine  a  legal  rule  of  prop- 
erty, and  to  apply  it  alike  to  persons  who  have  acquired 
either  a  legal  or  an  equitable  title  to  chattels  and  things 
in  action,  aa  well  as  to  those  who  have  acquired  any  legal 
or  equitable  interest  in  land.  A  subsequent  holder,  even 
for  a  valuable  consideration  and  without  notice,  has 
certainly  no  higher  right  than  a  prior  holder  equally 
innocent  and  with  an  equally  meritorious  ownership. 
American  courts  seem  sometimes  to  have  acted  upon 
exactly  the  opposite  notion,  and  to  have  assumed  that  a 
subsequent  title  was  necessarily  the  better  one.  When  the 
original  legal  owner  has  done  or  t»mitted  something  by 
which  it  was  made  possible  that  his  ^^^operty  should  come 
into  the  hands  of  a  bona  fide  holder  by  an  apparently  valid 
title,  it  may  be  just  to  regard  him  as  estopped  from  assert- 
ing his  ownership,  and  thus  to  protect  the  subsequent 
purchaser.  But  when  the  prior  legal  owner  is  wholly 
innocent,  has  done  and  omitted  nothing,  it  certainly 
transcends,  even  if  it  does  not  violate,  the  principles  of 

'  See  mpra,  §  679.  legal  titles  alone,  as  suits  for  dower. 

*  Such  suits  are  often  called  "eject-  In  regard  to  them  the  doctrine  of  bona 

tnent  bills."    See  vol.  1,  §§  176-178.  ^cte  purchase  is  applied  in  a  special  and 

Equity  has  concurrent  jurisdiction  in  peculiar  manner, 
certain  classes  of  suits   dealing  with 


1031       CONCERNING  BONA  FIDE  PURCHASE.      §  736 

equity  to  sustain  the  claims  of  a  subsequent  and  even 
bona  fide  purchaser. 

§  736.  Effects  of  the  Recording  Acts. — The  most  ex- 
tensive and  important  change,  however,  in  the  United 
States  has  been  produced  by  the  recording  acts.  They 
have  extended  the  doctrine  of  bona  fide  purchase  to  all 
conveyances  and  mortgages,  and  often  to  executory  con- 
tracts, and  to  every  instrument  which  can  create,  transfer, 
or  affect  legal  estates  or  equitable  interests,  liens,  and  en- 
cumbrances, and  have  therefore  brought  it  within  the  cog- 
nizance of  the  courts  of  law  as  a  rule  for  determining  the 
validity  of  legal  titles.  The  greatest  diversity  is  found  in 
the  statutory  provisions  of  the  various  states,  and  a  con- 
sequent diversity  prevails  among  the  local  rules  which 
define  the  resulting  rights  of  the  bona  fide  purchaser.  In 
some  they  are  conferred  upon  judgment  creditors,  upon 
all  purchasers  at  execution  sales,  and  even  upon  those 
who  have  secured  the  first  record  although  charged  with 
notice.  It  would  be  impossible,  within  any  reasonable 
limits,  to  state  all  the  results  of  these  statutes,  and  to 
formulate  all  the  special  rules  which  have  been  derived 
from  them  in  the  different  states.  So  far  as  the  doctrine 
of  bona  fide  purchase  has  been  made  a  rule  of  laiv,  either 
by  the  operation  of  the  recording  acts  or  by  the  indepen- 
dent action  of  the  courts,  it  does  not  properly  come  within 
the  scope  of  a  treatise  upon  equity  jurisprudence.  I  shall 
therefore  explain  the  principles  of  the  equitable  doctrine 
as  established  in  the  United  States  and  in  England,  and 
describe  the  general  applications  and  modifications  made 
necessary  by  the  common  American  system  of  registra- 
tion. The  minute  effects  growing  out  of  the  differing 
types  of  legislation  must  be  passed  over,  except  so  far  as 
they  have  been  mentioned  in  the  foregoing  sections  upon 
notice  and  priorities.  The  subject  will  be  discussed  under 
the  following  heads:  1.  Rationale  of  the  doctrine;  2.  What 
constitutes  a  6onaj?cZe  purchase;  3.  Effects  of  the  doctrine 
as  a  defense;  4.  Cases  in  which  courts  of  equity  give  af- 


§  737  EQUITY   JURISPRUDENCE.  1032 

firmative  relief;   5.  How  the  bona  fide  purchaser   must 
avail  himself  of  his  position, 

§  737.  First.  Rationale  of  the  Doctrine.  —  I  purpose 
to  explain,  in  this  division,  the  essential  nature,  founda- 
tion, and  reasons  of  the  doctrine,  the  general  extent  and 
limits  of  its  operation,  and  the  kinds  of  relief  which 
it  furnishes.  A  correct  notion  concerning  this  funda- 
mental theory  is  necessary  to  any  proper  understanding 
of  the  practical  rules  which  flow  from  it.  It  is  sometimes 
said,  in  the  most  unlimited  terms,  that  a  purchase  for  a 
valuable  consideration  and  without  notice  of  any  kind  of 
interest  is  a  defense  under  all  circumstances,  which  con- 
stitutes a  complete  and  absolute  bar  to  every  proceeding 
in  which  it  is  sought  to  establish  any  species  of  adverse 
claim,  legal  or  equitable,  or  to  obtain  any  species  of  relief. 
There  are  dicta  of  the  ablest  judges,  which,  taken  literally, 
without  limitation,  would  go  far  to  sustain  this  view.* 
These  citations  well  show  how  misleading  general  state- 
ments may  be  when  separated  from  their  context.  Such 
modes  of  declaring  the  doctrine  plainly  need  some  limita- 
tion and  restriction.  Taken  in  their  literal  and  unquali- 
fied form,  they  are  opposed  to  conclusions  established  by 
an  overwhelming  weight  of  judicial  authority,  and  to  the 
settled  practice  of  the  courts  of  equity. 

'  The  following  are  examples  of  Verney,  2  Eden,  81,  85:  "A  purchase 
Buch  judicial  language:  In  Attorney-  without  notice  for  a  valuable  consid- 
General  v.  Wilkins,  17  Beav.  285,  293,  eration  is  a  bar  to  the  jurisdiction  of 
Lord  Romilly  said:  "My  opinion  is,  the  court."  Lord  Loughborough  said, 
that  when  once  you  establish  that  a  in  the  often-quoted  case  of  Jerrard  v. 
person  is  a  purchaser  for  value  without  Saunders,  2  Ves.  454,458:  "I  think 
notice,  this  court  will  give,  no  assistance  it  has  been  decided  that  against  a 
against  him,  but  the  right  must  be  en-  purchaser  for  valuable  consideration 
forced  at  law."  In  Bowen  v.  Evans,  without  notice  the  court  will  not  take 
1  Jones &L.  178,  264,  Chancellor  Sug-  the  least  step  imaginable."  In  other 
den  (Lord  St.  Leonards)  said:  "In  my  cases  the  same  judge  used  more 
opinion,  whether  the  purchaser  has  the  guarded  language,  in  Strode  v.  Black- 
legal  estate,  or  only  an  equitable  in-  burne,  3  Ves.  2"J2.  In  the  celebrated 
terest,  he  may,  by  way  of  defense,  case  of  Wallwyn  v.  Lee,  9  Ves.  24, 
avail  himself  of  the  character  of  a  34,  Lord  Eldon  expressed  himself  in 
purchaser  without  notice,  and  is  enti-  the  following  cautious  terms:  "I  am 
tied  to  have  the  bill  dismissed  against  not  sure  that  follows  as  a  principle  of 
him,  though  the  next  hour  he  may  be  sound  equity;  i/  the  principle  of  the 
turned  out  of  possession  by  the  legal  court  is,  that  against  a  purchaser  for 
title"  (i.  e.,  by  ejectment).  An  ear-  valuable  consideration  without  notice, 
lier  and  most  able  chancellor,  Lord  this  court  aives  no  assistance," 
Northington,  said,  in  Stanhope  v.  Earl 


1033  CONCERNING    BONA   FIDE    PURCHASE.  §  738 

§  738.  Equitable  Origin,  Nature,  and  Operation  of  the 
Doctrine,  —  The  protection  given  to  the  bona  fide  pur- 
chaser had  its  origin  exclusively  in  equity,  and  is  based 
entirely  upon  the  fact  that  the  jurisdiction  of  equity  is 
ancillary  and  supplemental  to  that  of  the  law,  and  upon 
the  conception  that  a  court  of  chancery  acts  solely  upon 
the  conscience  of  litigant  parties,  by  compelling  the  de- 
fendant to  do  what,  and  only  what,  in  foro  conscientise 
he  is  bound  to  do.  If  the  relations  between  the  two  con- 
testants standing  before  the  court  of  chancery  are  such 
that,  in  equity  and  good  conscience,  the  plaintiff  ought  to 
obtain  the  aid  which  he  asks,  and  the  defendant  ought  to 
do  or  suffer  what  is  demanded  of  him,  then  the  court  will 
interfere  and  grant  the  relief;  if  the  relations  are  not  of 
this  character,  then  the  court  will  withhold  its  hand,  and 
will  leave  the  parties  to  the  operation  of  strict  legal  rules, 
and  to  the  remedies  conferred  by  the  legal  tribunals.  All 
equitable  principles  and  doctrines  had  their  origin  in  this 
conception,  however  much  it  may  sometimes  be  overlooked 
by  courts  at  present  in  the  administration  of  the  doctrines 
which  have  been  thus  established.  The  protection  given 
to  the  bona  fide  purchaser  simply  means,  therefore,  that 
from  the  relations  subsisting  between  the  two  parties,  es- 
pecially that  which  is  involved  in  the  innocent  position 
of  the  purchaser,  equity  refuses  to'  interfere  and  to  aid  the 
plaintiff  in  what  he  is  seeking  to  obtain,  because  it  would 
be  unconscientious  and  inequitable  to  do  so,  and  the  par- 
ties must  be  left  to  their  pure  legal  rights,  liabilities,  and 
remedies;  the  court  will  not  aid  either  against  the  other. 
That  this  is  the  true  rationale  is  shown  by  an  overwhelm- 
ing weight  of  authority.^     In  the  vast  majority  of  cases 

'  Thus  in  Boone  v.  Chiles,  10  Pet.  Sannders,  2  Ves.  454,  457,  Lord  Longh- 
177,  210,  the  supreme  court,  adopt-  borough  said:  "  Against  a  purchaser 
ing  the  language  of  Lord  St.  Leon-  for  a  valuable  consideration  this  court 
ards  in  his  treatise  on  vendors,  said:  has  no  jurisdiction.  You  cannot  attach 
"  A  court  of  equity  acts  only  on  the  upon  the  conscience  of  the  party  any  de- 
conscience  of  the  party;  and  if  he  has  mand  whatever,  where  he  stands  as  a 
done  nothing  that  taints  it,  no  demand  purchaser  having  paid  his  money,  and 
can  attach  upon  it  so  as  to  give  juris-  denies  all  notice  of  the  circumstances 
diction."    In   the  case  of  Jerrard  v,  set  up  by  the  bilL"    I  would  remark. 


§  739  EQUITY    JURISPRUDENCE.  1034 

the  protection  is  only  given  to  a  defendant,  and  as  a  con- 
sequence the  doctrine  itself  is  commonly  spoken  of,  and 
ordinarily  treated,  as  essentially  a  matter  of  defense.  The 
very  few  instances  in  which  affirmative  relief  is  granted 
to  the  bona  fide  purchaser  are  exceptional;  they  rest  upon 
their  special  facts,  and  arise  from  the  fraud  of  the  defend- 
ant against  whom  the  relief  is  awarded.* 

§  739.  The  Doctrine  is  not  a  Rule  of  Property  or  of 
Title.  —  In  applying  the  doctrine  of  bona  fide  purchase  — 
and  this  is  the  very  essence  of  the  doctrine  —  equity  does 
not  intend  to  pass  upon  and  decide  the  merits  of  the  two  liti' 
gant  parties;  it  does  not  decide  that  the  title  of  the  de- 
fendant is  valid,  and  therefore  intrinsically  the  better 
and  superior  to  that  of  the  plaintiff.  On  the  contrary,  the 
protection  given  by  way  of  defense  theoretically  assumes 
that  the  title  of  the  purchaser  is  really  defective  as  against 
that  of  his  opponent;  at  all  events,  the  court  of  equity 
wholly  ignores  the  question  of  validity,  declines  to  ex- 
amine into  the  intrinsic  merits  of  the  two  claims,  and 
bases  its  action  upon  entirely  different  considerations.^' 

in  passing,  that  the  expression  above,  cient  ground   for  saying  a  man  who 

"the  court  has  no  jurisdiction,"  like  has  honestly  dealt  for  valuable  consid- 

BO  many  similar  modes  of  statement,  eration  without   notice   shall   not   be 

is  open  to  criticism.     The  court  cer-  called    upon,    by    confessions    wrung 

tainlyAas  jurisdiction  in  all  such  cases,  from    his   conscience,   to   say   he   has 

since  the  interest  of  one,  or  perhaps  of  missed    his   object   in   the   extent   in 

both,    of  the  litigants    is    equitable,  which  he  meant  to  acquire  it."    Every 

The  real  meaning  is,  that  the  court,  one  who  is  familiar  with  Lord  Eldon'a 

under  these  circumstances*  and  accord-  judgments  knows  that  it  was  his  in- 

ing  to  its  settled  principlei,,  «;«7Z  wo<  ex-  variable  practice  to  express  his  most 

ercise  its  jurisdiction.  settled  opinions  in  the  form  of  inqui- 

'  See  infra,  §§  779-783,  ries,  or  suggestion,  or  suppositions.    In 

*  This   truth,  so   fundamental,  and  another  passage,  while  speaking  of  the 

yet    so    often    overlooked,    was   well  plaintifif 's  legal  rights  and  the  defend- 

Btated    by  Lord   Eldon   in   the   cele-  ants  corresponding  legal  liabilities,  ho 

brated  case  of  VVallwyn  v.  Lee,  9  Ves.  doubts  "  whether,  upon  the  argument 

24, 33,  34.     The  suit  was  by  the  holder  of  this  plea,  the  court  has  any  right  to 

of  the  legal  title,  who  was  in  actual  discuss  that  question,"  and  adds:  "la 

possession  of  the  land,  and  who  was  it   not   worth   consideration,  whether 

seeking  discovery  and  a  delivery  up  of  the  very  principle  of  the  plea  is  not 

the  title  deeds   against  a  mortgagee,  this:   I   have   honestly  and   bona   fide 

who   set  up  the  defense  of  bona  fide  paid  for  this,  in  order  to  make  myself 

purchaser.     The  chancellor  said:  "Is  the  owner  of  it,  and  you  shall  have  no 

it    not   worth    consideration,    whether  information  from  me  as  to  the  perfec- 

every  plea  of  purchase  for  a  valuable  tion  or  imperfection  of  my  title,  until 

consideration  without  notice  does  not  you  deliver  me  from  the  peril  in  which 

admit  that  the  defendant   has   no   title,  you  state  I  have  placed  myself  ia  the 

If  he   has  a  good  title,  why  not  dis-  article  of  purchasing  6ona^(ie/" 
cover?    I   apprehend  there  is  a  suffi- 


1035  CONCERNING    BONA    FIDE    PURCHASE.  §  740 

If  a  plaintifr,  holding  some  equitable  interest  of  right, 
sues  to  enforce  it  against  a  defendant  who  has  in  good 
faith  obtained  the  legal  estate,  the  court  simply  refuses  to 
interfere  and  do  an  unconscientious  act  by  depriving  him 
of  the  advantage  accompanying  such  an  innocent  acquisi- 
tion of  the  legal  title.  On  the  other  hand,  if  the  plaintiff 
is  the  legal  owner,  and  sues  to  obtain  some  equitable 
relief  against  a  defendant  who  is  the  innocent  holder  of 
some  equitable  estate  or  interest,  the  court  in  like  manner 
simply  refuses  to  do  an  unconscientious  act  by  giving 
any  aid  to  the  plaintifif,  but,  without  at  all  deciding  or 
even  examining  the  intrinsic  merits  of  their  claims, 
leaves  him  to  whatever  rights  would  be  recognized  and 
whatever  reliefs  granted  by  a  court  of  law.  It  is  thus 
seen  that  the  doctrine  of  bona  fide  purchaser  as  admin- 
istered by  equity  is  not  in  any  sense  a  rule  of  property. 
Whenever  the  relations  between  the  litigants  are  of  such 
a  nature,  and  the  suit  is  of  such  a  kind,  that  a  court  of 
equity  is  called  upon  to  decide,  and  must  decide,  the 
merits  of  the  controversy,  and  determine  the  validity  and 
sufficiency  of  the  opposing  titles  or  claims,  then  it  does 
not  admit  the  defense  of  bona  fide  purchase  as  effectual 
and  conclusive.  The  foregoing  description  shows  that  it 
is  wholly  unwarranted  by  the  settled  principles  of  equity 
for  a  court  to  sustain  and  enforce  the  subsequent  legal 
estate  acquired  by  A  in  any  kind  of  property  or  thing  in 
action,  merel}'"  because  he  is  a  bona  fide  purchaser  for  a 
valuable  consideration  without  notice,  against  the  prior 
legal  and  equally  innocent  owner,  B,  or  even  to  sustain 
A's  defense  as  a  bona  fide  purchaser  in  a  suit  brought 
byB. 

§  740.  General  Extent  and  Limits  —  Kinds  of  Estates 
Protected.  —  Such  being  the  rationale  of  the  doctrine,  it 
remains  to  consider  the  general  extent  and  limits  of  its 
operation;  and  this  chiefly  involves  the  question,  To  what 
kinds  of  estates  held  by  the  bona  fide  purchaser  will  it  be 
applied?     It  has  never  been  doubted  that  the  protection 


§  740  EQUITY  JURISPRUDENCE.  1036 

will  be  extended  to  the  defendant  in  a  suit  brought  by 
the  holder  of  a  prior  equitable  estate  or  interest  against 
the  subsequent  bona  fide  purchaser  of  a  legal  estate,  who 
acquired  such  estate  at  the  time  of  and  by  means  of  his 
original  purchase.'  It  is  also  generally  extended,  in  the 
similar  suit  by  the  holder  of  a  prior  equitable  interest,  to 
a  defendant  who,  having  originally  been  the  bona  fide  pur- 
chaser of  a  subsequent  equity,  has  afterwards  obtained  an 
outstanding  legal  estate.'*  The  vital  question  is,  whether 
the  defense  will  also  avail  on  behalf  of  a  defendant  who 
has  acquired  an  equitable  interest  merely,  against  a  plain- 
tiff who  holds  a  prior  legal  estate;  and  upon  this  question, 
decisions  and  judicial  dicta,  especially  the  earlier  ones, 
are  in  direct  conflict.  Some  cases  have  expressly  held, 
and  dicta  have  stated,  that  the  protection  of  bona  fide  pur- 
chase is  confined  to  defendants  who  have  obtained  and 
hold  a  legal  title  against  plaintiffs  who  have  only  a  prior 
equitable  interest,  and  that  it  is  never  granted,  where  the 
situation  of  the  parties  is  reversed,  to  bona  fide  purchas- 
ers of  a  mere  equitable  interest  defending  against  relief 
sought  by  plaintiffs  holding  a  prior  legal  estate.'  It  is 
proper  to  remark  here,  although  somewhat  in  anticipa- 
tion, that  there  are  certain  kinds  of  suits  by  the  holder 
of  a  prior  legal  estate  seeking  certain  special  reliefs,  in 
which  it  is  settled  that  the  defendant  having  only  an 
equitable  interest  cannot  rely  upon  his  position  as  a  bona 

*  See  post,  §§  767,  774,  and    cases  Lambe,  3  Brown   Ch,  264,  per  Lord 

there  cited;  Demarest  v.  Wynkoop,  3  Thurlow;  Strode  v.  Blackburne,  3  Ves. 

Johns.  Ch.  129,  147;  8   A.m.  Dec.  467;  222,    per    Lord    Rosslyn;    Collins    v. 

Varick  v.  Brigga,  6  Paige,  323;  Dick-  Archer,   1    Russ.  &    M.    284,  per   Sir 

erson  v.  Tillinghast,  4  Paige,   215;  25  John  Leach;  Snelgrove  v.  Snelgrove, 

Am.  Dec.  528;  Woodruff  v.  Cook,  2  4  Desaus.  Eq.  274;  Blake  v.  Heyward, 

Edw.  Ch.  259;  ZoUman  v.  Moore,   21  1    Bail.    Eq.   208;  Brown  v.    Wood,  6 

Gratt.  311;  Carter  v.  Allan,  21  Gratt.  Rich.   Eq.    155;  Jenkins  v.  Bodley,  1 

241;    Mundine  v.    Pitts,   14   Ala.    84;  Smedea   &    M.     Eq.    338;    Wailes   v. 

Boyd  V.  Beck,   29   Ala.  703;  Wells  v.  Cooper,    24    Miss.    208;    Larrowe   v. 

Morrow,    38    Ala^     125;    Sumner    v.  Beam,  10  Ohio,  498.     [See  also  Sweat- 

Waugh,  56  111.  531;  [Robbins  v.  Moore,  man  v.  Edmunds,  28  S.  C.  58;  Soudley 

129  111.  30.]  V.  Caldwell,  28  S.  C.  583;  Morehead 

»  See    post,  §§  768-773,    and    cases  v.  Horner,  30  W.  Va.  548;  Vattier  v. 

cited.  Hinde,  7  Pet.  252;  Butler  v.  Douglas, 

»  Rogers  r.  Seale,  Freem.    Ch.  84,  3  Fed.  Rep.  612.] 
per  Lord  Nottingham;   Williams    v. 


1037 


CONCERNING   BONA   FIDE   PURCHASE. 


§740 


fide  purchaser,  by  way  of  defense.*  On  the  other  hand, 
there  are  numerous  cases,  early  and  recent,  English  and 
American,  in  which  the  defense  has  been  permitted  to 
prevail  in  favor  of  one  holding  a  mere  equitable  interest 
against  a  plaintifif  suing  for  some  equitable  relief  upon 
his  legal  title,  sometimes  even  when  such  plaintiff  was  in 
possession,  and  this  conclusion  must  be  regarded  as  set- 
tled by  the  great  weight  of  authority.^  In  some  of  these 
cases,  the  judicial  expressions  of  opinion  have  been  so 
broad  and  unlimited,  that,  taken  literally,  they  would  allow 
the  protection  of  bona  fide  purchase  by  way  of  defense  to 
one  having  only  an  equitable  interest,  in  every  kind  of 
suit  brought  to  obtain  any  species  of  relief,  and  against 
any  plaintiff,  whether  holding  a  legal  or  an  equitable  es- 
tate.'    Relying  upon  these  dicta,  some  writers  and  judges 


*  Williams  v.  Lambe,  3  Brown  Ch. 
264  (a  suit  for  dower);  Collins  v. 
Archer,  1  Russ.  &  M.  284  (a  suit  con- 
cerning tithes).  [In  Mitchell  v.  Far- 
rish,  69  Md.  235,  it  was  held  that  the 
defense  of  a  bona  fide  purchase  for 
value  and  without  notice  was  no  de- 
fense, even  in  equity,  as  against  a  legal 
claim  to  dower.] 

2  Basset  v.  Nosworthy,  Cas.  t. 
Finch,  102;  2  Lead.  Cas.  Eq.  1;  Bur- 
lace  V.  Cooke,  Freem.  Ch.  24,  per 
Lord  Nottingham;  Parker  v,  Blyth- 
more,  Free.  Ch.  58,  per  Sir  John 
Trevor,  M.  R. ;  Jerrard  v.  Saunders, 
2  Vea.  454,  per  Lord  Rosslyn;  Wall- 
wyn  V.  Lee,  9  Ves.  24,  per  Lord  Eklon; 
Joyce  V.  De  Moleyns,  2  Jones  &  L. 
374,  per  Chancellor  Sugden;  Bowen  v. 
Evans,  1  Jones  &  L.  178,  264,  per 
Chancellor  iSugdeu;  Finch  v.  Shaw,  19 
Beav.  500,  per  Lord  Romilly;  CoUyer 
v.  Finch,  5  H.  L.  Cas.  905,  per  Lord 
Cranworth;  Attorney-General  v.  Wil- 
kins,  17  Beav.  285;  Lane  v.  Jackson, 
20  Beav.  535;  Hope  v.  Lyddell,  21 
Beav.  183;  Penny  v.  Watts,  1  Macn. 
&  G.  150;  Flagg  v.  Mann,  2  Sura. 
486,  per  Story,  J.;  Union  Canal  Co. 
v.  Young,  1  Whart.  410,  431;  30  Am. 
Dec.  212,  per  Rogers,  J.;  fBausman  v. 
Kelley,  38  Minn.  197;  8  Am.  St.  Kep. 
661 ;  and  see  post,  §§  769-771,  and  cases 
cited.] 

'  As  illustrations,  in  Joyce  v.  De 
Moleyns,  2  Jones  &  L.  374,  Chancellor 


Sugden  said:  "I  apprehend  that  the 
purcliase  for  value  without  notice  is  a 
shield  as  well  against  a  legal  as  an  equi- 
table title.  There  has  been  a  consider- 
able difference  of  opinion  upon  the 
subject  among  judges.  I  have  always 
considered  the  true  rule  to  be  that 
which  I  have  stated.  Therefore,  I 
think  that  the  mere  circumstance  that 
this  is  a  legal  right  is  not  a  bar  to  the 
defense  set  up,  if  in  other  respects  it 
is  a  good  defense.  That  it  is  a  good 
defense  cannot  be  denied."  The  same 
learned  judge,  in  Bowen  v.  Evans,  I 
Jones  &  L.  178,  264,  said:  "  In  my 
opinion,  whether  the  purchaser  has  the 
legal  estate  or  only  an  equitable  inter- 
est, he  may  by  way  of  defense  avail 
himself  of  the  character  of  a  pur- 
chaser without  notice,  and  is  entitled 
to  have  the  bill  dismissed  against  him, 
though  the  next  hour  he  may  be  turned 
out  of  possession  by  the  legal  title " 
(i.  e.,  by  an  action  of  ejectment).  In 
Colyer  v.  Finch,  5  H.  L.  Cas.  905,  921, 
Lord  Chancellor  Cranworth  said: 
"The  principle  on  which  the  court 
protects  a  purchaser  for  valuable  con- 
sideration without  notice  is  wholly  re- 
gardless  of  what  estate  he  has.  It  may 
be  that  he  has  not  the  legal  estate,  but 
that  will  be  quite  unimportant  as  to  a 
court  of  equity  interfering  or  refusing 
to  interfere.  His  equity  depends  on 
this,  that  he  stands  equitably  in  at 
least  as  favorable   a   position   aa  hia 


§§  741,  742  EQUITY    JURISPRUDENCE.  1038 

have  announced  the  doctrine  in  a  form  wholly  unlimited 
and  universal. 

§  741.    Same — When  the  Doctrine  does  not  Apply. — 

Such  a  method  of  statement  is  clearly  inaccurate.  Not- 
withstanding the  numerous  authorities  referred  to  in.  the 
preceding  paragraph,  and  the  sweeping  expressions  of 
judicial  opinion,  it  is  certain  that  the  doctrine  is  subject 
to  limitation;  it  is  settled  that  in  some  classes  of  suits  a 
defendant  having  only  an  equitable  interest  cannot  be 
protected  by  his  position  as  a  bona  fide  purchaser.  Thus 
in  an  action  for  foreclosure  brought  by  a  prior  legal 
mortgagee,  holding,  of  course,  the  legal  estate,  against  a 
subsequent  equitable  mortgagee,  the  fact  that  the  latter 
acquired  his  equitable  interest  in  good  faith  for  a  valuable 
consideration  and  without  notice  is  no  defense.*  It  is 
also  a  well-established  and  even  familiar  rule  that  in  the 
numerous  cases  between  the  holders  of  successive  and 
equal  equities,  where  the  holder  of  a  prior  equitable  inter- 
est is  seeking  to  establish  or  enforce  his  right,  the  defense 
of  bona  fide  purchase  will  not  avail  for  the  holder  of  a 
subsequent  equity  against  whom  the  suit  is  brought.' 

§  742.  Phillips  v.  Phillips  —  Formula  of  Lord  West- 
bury.  —  Amidst  this  apparent  conflict  and  real  uncer- 
tainty, various  judges  had  attempted  to  find  a  mode  of 
reconcilement,  and  to  formulate  a  rule  which  should  fur- 
nish a  universal  criterion.'     It  remained,  however,  for 

opponent,  and  therefore  the  court  will  '  Phillips  v.  Phillips,  4  De  Gex,  F.  & 
not  interfere  agaiust  him."  This  Ian-  J.  208,  215,  216,  per  Lord  Westhury. 
guage,  especially  of  Lord  Cranworth,  See  ante,  §§  414,  note,  682. 
has  been  relied  upon  as  sustaining  the  '  For  example,  in  Finch  v.  Shaw,  19 
doctrine  in  the  bioadest  manner,  that  Beav.  500,  Sir  John  Romilly,  M.  R., 
bona  fide  purchasers  of  mere  equities  after  remarking  that  there  were  cases 
will  always  be  protected.  And  yet  requiring  nice  distinctions  in  order  to 
the  chancellor  and  house  of  lords  reconcile  them,  and  mentioning  in  par- 
decided  in  that  very  case  that  the  ticular  Williams  v.  Lambe,  3  Brown 
defendant  before  them,  who  held  an  Ch.  264,  and  Collins  v.  Archer,  1  Russ. 
equitable  interest,  could  not  maintain  &  M.  284,  said:  "The  distinction  I 
the  defense  of  a  bona  fide  purchase  apprehend  to  be  this:  if  the  suit  be 
against  the  plaintiff  who  had  the  legal  for  the  enforcement  of  a  legal  claim 
estate.  for  the  establishment  of  a  legal  right, 
'  Finch  V.  Shaw,  19  Beav.  500;  af-  then,  although  this  court  may  have 
firmed  sub  nom.  Colyer  v.  Finch,  5  jurisdiction  in  the  matter,  it  will  not 
H.  L.  Caa.  905.  interfere  against  a  purchaiaer  for  valu- 


1039 


CONCERNING    BONA    FIDE    PURCHASE. 


§742 


Lord  Westbury  to  bring  order  out  of  the  confusion,  and 
by  his  remarkable  grasp  of  principles  and  wonderful 
power  of  generalization  to  reduce  the  doctrine  into  a 
universal  formula,  so  accurate  and  comprehensive  that 
it  has  been  taken  by  most  subsequent  text-writers  as  the 
basis  of  their  discussions,  and  has  been  accepted  by  sub- 
sequent judges  almost  without  exception.*     This  formula 


able  consideration  without  notice,  but 
will  leave  tlie  parties  to  the  law.  If, 
on  the  other  hand,  the  legal  title  is 
perfectly  clear,  and  attached  to  that 
legal  title  there  is  an  equitable  remedy, 
or  an  equitable  right,  which  can  only  be 
enforced  in  this  court,  I  have  not  found 
any  case,  nor  am  I  aware  of  any, 
where  this  court  will  refuse  to  enforce 
the  equitable  remedy  which  is  inci- 
dental to  the  legal  title."  Tliia  was 
applied,  as  has  been  stated,  to  a  legal 
mortgagee  foreclosing  his  mortgage 
against  a  subsequent  bona  Jide  equi- 
table mortgagee  without  notice.  The 
learned  master  of  rolls  plainly  appre- 
hended the  true  distinction,  and  came 
very  near  to  a  full  and  sufficient  state- 
ment of  it. 

1  Phillips  V.  Phillips,  4De  Gex,  F.  & 
J.  208.  Lord  Westbury's  opinion  is 
80  concise  as  well  as  clear  that  I  quote 
that  part  of  it  entire  which  deals  with 
the  matters  contained  in  the  text. 
After  showing  (pp.  215,  216)  that  the 
doctrine  does  not  apply  as  between 
successive  holders  of  purely  equitable 
estates  or  interests  which  are  equal  in 
their  nature,  in  the  passage  quoted 
ante,  vol.  1,  §414,  note,  he  proceeds  (p. 
216):  "The  defense  of  a  purchaser  for 
valuable  consideration  is  a  creature  of 
a  court  of  equity,  and  it  can  never  be 
used  in  any  manner  in  variance  with 
the  elementary  rules  which  have  al- 
ready been  stated.  There  appear  to 
be  three  cases  in  which  the  use  of  this 
defense  is  most  familiar:  1.  Where  an 
application  is  made  to  an  auxiliary 
jurisdiction  of  the  court  by  the  posses- 
sor of  a  legal  title,  as  by  an  heir  at  law 
for  a  discovery  (which  was  the  case  in 
Basset  v.  Nosworthy,  Cas,  t.  Finch, 
102),  or  by  a  tenant  for  life  for  the  de- 
livery of  title  deeds  (which  was  the 
case  of  Wallwyn  v.  Lee,  9  Ves.  24), 
and  the  defendant  pleads  that  he  is  a 
bona  Jide  purchaser  for  valuable  con- 
sideration without  notice.     In  such  a 


case  the  defense  is  good,  and  the  rea- 
son given  is,  that  as  against  a  purchaser 
for  valuable  consideration  without  no- 
tice the  court  gives  no  assistance,  — 
that  is,  no  assistance  to  the  legal  title. 
But  this  rule  does  not  apply  where  the 
court  exercises  a  legal  jurisdiction  con- 
currently with  courts  of  law.  Thus  it 
was  decided  by  Lord  Thurlow,  in  Wil- 
liams v.  Lambe,  3  Brown  Ch.  264,  that 
the  defense  could  not  be  pleaded  to  a 
bill  for  dower;  and  by  Sir  John  Leach, 
in  Collins  v.  Archer,  1  Russ.  &  M.  284, 
that  it  was  no  answer  to  a  bill  for 
tithes.  In  those  cases  the  court  of 
equity  was  not  asked  to  give  the 
plaintiff  any  equitable  as  distinguished 
from  legal  relief.  2.  The  second  class 
of  cases  is  the  ordinary  one  of  several 
purchasers  or  encumbrancers,  each 
claiming  in  equity,  and  one  who  is 
later  and  last  in  time  succeeds  in  ob- 
taining an  outstanding  legal  estate  not 
held  upon  existing  trusts,  or  a  judg- 
ment, or  any  other  legal  advantage 
the  possession  of  which  may  be  a  pro- 
tection to  himself  or  an  embarrassment 
to  other  claimants.  He  will  not  be 
deprived  of  this  advantage  by  a 
court  of  equity.  To  a  bill  filed  against 
him  for  this  purpose  by  a  prior  pur- 
chaser or  encumbrancer,  the  defendant 
may  maintain  the  plea  of  purchase  for 
valuable  consideration  without  notice; 
for  the  principle  is,  that  a  court  of 
equity  will  not  disarm  a  purchaser,  — 
that  is,  will  not  take  from  him  the 
shield  of  any  legal  advantage.  This  is 
the  common  doctrine  of  the  tabula  in 
naufragio.  3.  Where  there  are  cir- 
cumstances which  give  rise  to  an 
equity  as  distinguished  from  an  equi- 
table estate,  —  as,  for  example,  an 
equity  to  set  aside  a  deed  for  frauil, 
or  to  correct  it  for  mistake,  —  and  the 
purchaser  under  the  instrument  main- 
tains the  plea  of  purchase  for  valualjle 
consideration  without  notice,  the  court 
will   not   interfere."    The   chancelloi 


§742 


EQUITY    JURISPRUDENCB. 


1040 


groups  the  cases  in  which  the  protection  of  a  bona  fide 
purchaser  is  given  to  defendants  into  the  three  following 
classes:  1.  Where  an  application  is  made  to  the  auxiliary 
jurisdiction  of  the  court  by  the  possessor  of  a  legal  title; 
as  against  a  purchaser  for  value  without  notice,  a  court 
of  equity  gives  no  assistance  to  the  legal  title.  The  term 
"auxiliary  jurisdiction"  is  here  used  in  a  sense  somewhat 
broader  than  that  commonly  given  to  it  by  text-writers. 
To  this  first  rule  there  are,  however,  certain  most  impor- 
tant exceptions.  It  does  not  apply  to  suits  in  which 
the  court  exercises  a  legal  jurisdiction  concurrently  with 
courts  of  law,  nor  to  suits  in  which  the  court  gives  to  a 
holder  of  the  legal  title  some  equitable  remedy  belonging 
to  its  exclusive  ^'eneraZ  jurisdiction.  2.  Where  the  plaintiff, 
holding  an  equitable  estate  or  interest,  is  seeking  to  enforce 
it  against  a  purchaser  of  the  legal  title,  including  those 
cases  where  there  are  several  successive  purchasers  or 


concludes  by  referring  to  some  recent 
decisions  (p.  219).  He  does  not  agree 
with  some  remarks  of  Sir  John  Romilly 
in  Attorney-General  v.  Wilkins,  17 
Beav.  285,  but  entirely  concurs  in  and 
accepts  the  views  as  stated  by  the 
same  judge  in  Finch  v.  Shaw,  19  Bea\r. 
500.  Lord  St.  Leonards  has  dissented 
from  some  portions  of  this  celebrated 
judgment,  in  a  late  edition  of  his  work 
on  vendors.  It  is  proper  to  say,  in 
explanation,  and  the  same  observation 
has  often  been  made,  that  Lord  St. 
Leonards  always  appeared  extremely 
unwilling  to  accept  any  opinion,  or 
even  any  decision,  which  differed  from 
what  had  been  before  stated  in  his 
treatises,  and  he  exhibited  a  marked 
prejudice  against  certain  judges  who, 
like  Lord  Brougham  and  Lord  West- 
bury,  were  distinguished  for  their 
advocacy  of  legal  reforms.  I  will  add 
that  the  exception  so  distinctly  made 
by  Lord  Westbury  of  successive 
holders  of  purely  equitable  interests 
which  are  equal  in  their  nature  is 
most  clearly  in  harmony  with  the  ele- 
mentary principles  and  maxims  of 
equity.  If  the  legal  owner  of  land  has 
executed  a  contract  for  its  sale  and 
conveyance  to  A,  who  has  paid  the 
stipulated   price,    and    he   afterwards 


gives  a  similar  contract  to  B,  who 
takes  it  and  pays  the  price  in  full 
without  any  notice  of  the  prior  agree- 
ment, there  is  no  reason  why  B  should 
be  preferred  to  A,  and  should  be  al- 
lowed to  compel  a  conveyance  to  him- 
self. On  the  contrary,  between  two 
such  equal  claimants,  A's  priority  in 
time  clearly  gives  him  a  priority  of 
right:  See  Peabody  v.  Fenton,  .S 
Barb.  Ch.  451,  464.  The  same  would 
be  true  of  successive  mortgages  given 
on  the  same  land  to  dififerent  mort- 
gagees, if  they  were  regarded  as  creat- 
ing equitable  interests  only,  and  there 
was  no  recording  statute  to  modify 
the  application  of  equitable  doctrines. 
Where  both  mortgagees  were  equally 
meritorious,  each  having  advanced 
money,  the  first,  of  course,  without  any 
notice  of  the  second,  and  the  second 
without  any  notice  of  the  first,  the 
second  would  not  obtain  any  intrinsic 
superiority  to  the  first,  and  conse- 
quently the  maxim  would  control,  and 
the  priority  in  time  would  turn  the 
scale  in  equity  as  well  as  it  would  at 
law  between  successive  legal  interests. 
These  examples  will  serve  to  explain  a 
principle  which  has  been  fully  dis- 
cussed in  the  preceding  section. 


1041       CONCERNING  BONA  FIDE  PURCHASB.      §  743 

encumbrancers,  all  equitable,  and  the  defendant  who  is 
later  in  time  has  obtained  an  outstanding  legal  estate,  or 
some  other  legal  advantage,  often  called  the  "  tabula  in 
naufragio."  3,  Where  the  plaintiff  is  seeking  to  enforce 
some  "equity"  as  distinguished  from  an  equitable  estate, 
as  the  reformation  of  a  deed  on  account  of  mistake,  or  the 
setting  it  aside  on  the  ground  of  fraud. 

§  743.  Summary  of  Conclusions.  —  The  following  con- 
clusions must  be  drawn  from  the  foregoing  discussion: 
Wherever  one  or  the  other  of  the  parties  has  a  legal  estate 
over  which  a  court  of  law  can  exercise  jurisdiction,  then 
in  an  equity  suit  between  them,  as  a  general  rule,  the  de- 
fense  of  a  bona  fide  purchase  for  valuable  consideration 
will  avail  as  against  the  plaintiff,  whether  he  has  a  legal 
or  an  equitable  estate,  in  either  case  the  court  of  equity 
simply  withholding  its  hand  and  remitting  the  parties  to 
a  court  of  law.  If  the  plaintiff  has  a  legal  estate,  he  is 
left  to  the  remedies  which  a  court  of  law  can  give,  with- 
out any  aid  from  equity;  if  the  defendant  has  a  legal  es- 
tate, the  court  does  not  deprive  him,  even  as  against  a 
plaintiff  clothed  with  an  equitable  interest,  of  the  advan- 
tage which  the  law  confers  upon  the  holder  of  such  estate, 
and  which  it  secures  through  the  instrumentality  of  a 
legal  tribunal.  If  the  suit  concerns  legal  interests,  and 
is  one  of  which  a  court  of  equity  has  jurisdiction  concur- 
rently with  the  courts  of  law,  the  defense  M'ill  not  prevail. 
For  even  stronger  reasons  must  this  be  true  where  the 
suit  belongs  to  the  exclusive  general  jurisdiction  of  equity, 
and  not  only  is  the  defendant's  interest  equitable,  but  the 
plaintifTs  right  or  remedy  is  also  equitable,  and  must  be 
administered,  if  at  all,  by  a  court  of  equity.  Bearing  in 
mind  that,  independently  of  statute,  the  doctrine  of  pro- 
tection to  a  borm  fide  purchaser  is  confined  to  courts  of 
equity,  and  the  most  important  truth  that  it  is  in  no  re- 
spect a  rule  of  property,  but  merely  a  ride  of  inaction,  these 
conclusions  are  seen  to  be  equally  plain  and  just.  In  the 
first-mentioned  class  of  cases,  where  equity  has  concurrent 

2  Eq.  Jue.— 66 


§§  744,  745  EQUITY   JURISPRUDENCE.  1042 

jurisdiction,  the  defense  is  not  allowed,  for  otherwise  the 
parties  would  be  put  to  unnecessary  delay  and  expense, 
since  the  plaintiff  would  be  driven  to  a  second  action  at 
law,  in  which  he  would,  of  course,  obtain  the  relief.  In 
the  second  class  of  cases,  where  equity  has  an  exclusive 
jurisdiction,  to  allow  the  defense  would  simply  be  a  com- 
plete denial  of  justice,  since  no  other  tribunal  could  ad- 
judicate upon  the  conflicting  claims,  and  the  plaintiff 
might  thus  be  deprived  of  prior  and  vested  rights  without 
any  act  or  default  on  his  own  part.^ 

§  744.  The  explanation  which  I  have  thus  endeavored 
to  give  of  the  true  theory  of  the  doctrine  concerning  bona 
fide  purchase  seemed  to  be  necessary  to  any  accurate  un- 
derstanding of  its  applications  and  effects.  This  origi- 
nal equitable  theory  has,  however,  been  modified  in  some 
important  features  by  the  statutory  system  of  registra- 
tion which  prevails  in  all  the  American  states.  Before 
proceeding  to  describe  the  applications  and  effects  of  the 
doctrine,  it  is  proper  to  ascertain  who  the  bona  fide  pur- 
chaser for  valuable  consideration  is. 

§  745.  Second.  What  Constitutes  a  Bona  Fide  Pur- 
chase. —  Under  this  head  I  shall  state  those  essential 
elements  which  enter  into  the  equitable  conception  and 
determine  the  peculiar  position  of  a  bona  fide  purchaser, 
so  that  he  may  come  within  the  operation  of  the  doctrine. 
The  nature  of  the  thing  purchased,  whether  land,  chattels, 
or  securities,  and  of  the  estate  acquired,  whether  absolute 
or  qualified,  legal  or  equitable,  is  not  a  part  of  this  con- 
ception; it  belongs  wholly  to  the  effects  —  the  protection 
—  produced  by  the  purchase.  The  doctrine  in  its  most 
general  form  is,  that  a  purchaser  in  good  faith  for  a  valu- 
able consideration  and  without  notice  of  the  prior  adverse 
claims  is  protected  against  certain  suits  brought  by  the 
holders  of  such  claims.^     The  essential  elements  which 

*  See   2   Lead.    Cas.  Eq.,  4th   Am.  '  For  a  statement  of   what   consti- 

ed.,  22,  notes  to  Basset  v.  Nosworthy,  tutes  a  bona  Jide  purchase  in  general, 

where     these    conclusions    are    fully  see  Willoughby  v.  Willoughby,  1  Term 

adopted  by  the  English  editor.  Rep.  763,  767,  per  Lord  Hardwicke; 


1043  CONCERNING    BONA    FIDE    PURCHASE.       §§  746,  747 

constitute  a  bona  fide  purchase  are  therefore  three,  —  a 
valuable  consideration,  the  absence  of  notice,  and  the 
presence  of  good  faith.  It  will  be  practically  the  more 
convenient  and  advantageous  to  examine  these  three  ele- 
ments separately  and  in  the  order  named,  although  in 
strict  theory  the  presence  of  notice  may  perhaps  be  re- 
garded as  only  an  indication  of  the  want  of  good  faith. 
If  a  person  goes  on  and  purchases  after  notice  of  another's 
rights,  he  may  be  considered  as  acting  in  bad  faith,  and 
this  is  undoubtedly  the  basis  upon  which  the  whole  doc- 
trine of  notice  and  its  effects  was  rested  by  the  early  de- 
cisions.* Practically,  however,  notice,  especially  as  affected 
by  the  recording  acts,  is  an  independent  element,  and 
should  be  discussed  by  itself. 

§  746.  I.  The  Valuable  Consideration.  —  The  discus- 
sion of  this  subject  involves  two  inquiries,  which  are 
entirely  distinct,  and  which  should  not  be  confounded: 
1.  What  is  a  valuable  consideration;  and  2.  Its  payment. 
These  two  questions  are  to  be  examined,  not  at  all  in  their 
general  and  abstract  meaning,  but  wholly  as  they  affect 
the  condition  of  a  bona  fide  purchaser.  The  first  has  no 
relation  to  the  general  law  of  contracts  and  binding  prom- 
ises; the  second,  in  like  manner,  deals  with  the  act  and 
time  of  payment  only  in  connection  with  the  doctrine  of 
6onaj?cZe  purchase. 

§  747.  1.  What  is  Valuable  Consideration.  —  What 
constitutes  a  valuable  consideration  within  the  meaning 
of  the  doctrine  which  gives  protection  to  a  bona  fide  pur- 
chaser? No  person  who  has  acquired  title  as  a  mere  vol- 
unteer, whether  by  gift,  devise,  inheritance,  post-nuptial 
settlement  on  wife  or  child,  or  otherwise,  can  thereby  be 
a  bona  fide  purchaser.^    Valuable  consideration  means,  and 

also  ante,  vol.  1,  cases  cited  in  notes  '  See  avtf,  §  592. 

under  §   200;   Basset   v.    Nosworthy,  » Roseman   v.    Miller,    84   111.    297; 

2  Lead.  Cas.  Eq.,  4th  Am.  ed.,  33-42,  Bowen  v,  Prout,    52   111.  354  (inheri- 

73-96;   Kinney   v.    Consolidated   etc.  tance);  Everts  v.  Agnes,  4  Wis.  343; 

Min.  Co.,  4  Saw.  382;  Hardin  v.  Har-  65  Am.  Dec.  314;  Upsliawv.  Hargrove, 

rington,    11    Bush,    367;    Briscoe    v.  6   Smedes   &   M.    286,    292;   Boon   v. 

Ashby,    24   Gratt.    454;   Hamman   v.  Barnes,  23  Miss.   136;  Swan  v.  Ligan, 

Keigwin,  39  Tex.  34.  1  McCord  Eq.  227;  Patten  v.  Moore, 


§747 


EQUITY    JURISPRUDENCE. 


1044 


necessarily  requires  under  every  form  and  kind  of  pur- 
chase, something  of  actual  value,  capable,  in  estimation  of 
the  law,  of  pecuniary  measurement,  —  parting  with  money 
or  money's  worth,  or  an  actual  change  of  the  purchaser's 
legal  position  for  the  worse.^  The  amount  of  the  purchase, 
if  otherwise  in  good  faith,  is  not  generally  material.^  As 
examples  of  what  clearly  amount  to  valuable  considera- 
tion are  the  following:  A  contemporaneous  advance  or 
loan  of  money,  or  a  sale,  transfer,  or  exchange  of  property, 
made  at  the  time  of  the  purchase  or  execution  of  the  in- 
strument;* the  surrender  or  relinquishment  of  an  exist- 
ing legal  right,  or  the  assumption  of  a  new  legal  obligation 


32  N.  H.  3S2;  Frost  v.  Beekman,  1 
Johng.  Ch.  288;  Aubuchon  v.  Bender, 
44  Mo.  560;  Bishop  v.  Schneider,  46 
Mo.  472;  2  Am.  Rep.  533.  [See  also 
Petry  v.  Ambrosher,  100  Ind.  510; 
Christopher  v.  Christopher,  64  Md. 
583;  Brown  v.  Texas  Cactus  Hedge 
Co.,  64  Tex.  396;  Swift  v.  Williams, 
68  Md.  236;  Hughes  v.  Berrien,  70  Ga, 
273;  Bird  v.  Jones,  37  Ark.  195.] 

»Id.;  Tourville  v.  Naish,  3  P. 
Wms.  316;  Story  v.  Lord  Windsor,  2 
Atk,  630;  Hardingham  v.  Nicholls.  3 
Atk.  304;  Webster  v.  Van  Steenbergh, 
46  Barb.  211;  Pickett  v.  Barron,  29 
Barb.  505;  Dickerson  v.  Tillinghast,  4 
Paige,  215;  25  Am.  Dec.  528;  Penfield 
V.  Dunbar,  64  Barb.  239;  Weaver 
V.  Barden,  49  N.  Y.  286;  Delancey  v, 
Stearns,  66  N.  Y.  157;  Westbrook  v. 
Gleason,  79  N.  Y.  23,  28;  Williams  v. 
Shelly,  37  N.  Y.  375;  Lawrence  v. 
Clark,  36  N.  Y.  128;  Reed  v.  Gannon, 
3  Daly,  414;  Munu  v.  McDonald,  10 
Watts,  270;  Union  Canal  Co.  v. 
Young,  I  Whart,  410,  432;  30  Am. 
Dec.  212;  Roxborough  v.  Messick,  6 
Ohio  St.  448;  67  Am.  Dec.  346;  Palmer 
V.  Williams,  24  Micli.  328;  Brown  v. 
Welch,  18  111.  343;  68  Am.  Dec.  549; 
Keys  V.  Test,  33  111.  316;  McLeod  v. 
Nat.  Bank,  42  Miss.  99;  Haughwout  v. 
Murphy,2lN.  J.  Eq.  118;  Aubuchon  v. 
Bender.  44  Mo.  5W;  Spurlock  v.  Sulli- 
van,  3(3  Tex.  5 1 1 .  [No  merely  moral  con- 
sideration is  suflacient:  Peek  v.  Peek, 
77  Cal.  106;  11  Am.  St.  Rep.  244.] 

*  If  there  is  an  actual  value  prop- 
erly paid,  the  amount  is  not  material 
if  the  transaction  is  otherwise  in  good 
faith:   Wood  v.  Chapin,  13  N.  Y.^509; 


67  Am.  Dec.  62;  Cary  v.  White,  52 
N.  Y.  138,  142;  Pickett  v.  Barron,  29 
Barb.  505;  Seward  v.  Jackson,  8  Cow. 
406,  430;  Westbrook  v.  Gleason,  79 
N.  Y.  23,  36,  per  Rapallo,  J.  [See  also 
Skerrett  v.  Presbyterian  Society,  41 
Ohio  St.  606  (where  a  consideration 
of  one  dollar,  that  being  the  value  of 
the  premises,  was  held  to  constitute 
the  grantee  a  purchaser  for  value); 
Emonds  v.  Termehr,  60  Iowa,  92;  Two 
Rivers  Mfg.  Co.  v.  Beyer,  74  Wis.  210; 
17  Am.  St.  Rep.  131.]  The  amount 
if  grossly  small  and  inedequate  would 
not  be  a  valuable  consideration  so  as 
to  protect  the  purchaser,  because  it 
•would  show  bad  faith:  Worthy  v. 
Caddell,  76  N.  C.  82.  It  has  been 
held  that  paying  a  purchase  price  in 
confederate  money  was  not  valuable 
consideration  within  the  rule:  Sut- 
ton V.  Sutton,  39  Tex.  549;  Willis  v. 
Johnson,  38  Tex.  303. 

*  Gerson  v.  Pool,  31  Ark.  85  (loan- 
ing money  on  the  security  of  a  trust 
deed);  Bowen  v.  Prout,  52  111.  354 
(exchange  of  lands);  Munn  v.  McDon- 
ald, 10  Watts,  270;  Martin  v.  Jackson, 
27  Pa.  St.  504,  509;  67  Am.  Dec.  489; 
Roxborough  v.  Messick,  6  Ohio  St. 
448;  67  Am.  Dec.  346;  Keirsted  v. 
Avery,  4  Paige,  9;  Conard  v.  Atlantic 
Ins.  Co.,  1  Pet.  386.  And  where  the 
price  of  a  conveyance  consisted  in  part 
of  money  actually  paid,  and  the  resi- 
due of  antecedent  debt  satisfied,  the 
whole  has  been  held  to  constitute  a 
valuable  consideration:  Curtis  v.  Leav- 
itt,  15  N.  Y.  11,  179;  Glidden  v.  Hunt, 
24  Pick.  221;  Baggarly  v.  Gaither,  2 
Jones  Eq.  80. 


1045       CONCERNING  BONA  FIDE  PURCHASE,      §  748 

which  is  in  its  nature  irrevocable.*  Whether  this  species 
of  valuable  consideration  embraces  the  discharge,  or  the 
extention  of  the  time  of  payment,  of  an  antecedent  debt, 
is  a  question  upon  which  the  authorities  are  conflicting, 
and  its  examination  is  postponed  to  the  succeeding  para- 
graphs. In  general,  however,  it  is  requisite  that  the 
money  be  paid  or  advanced,  the  property  transferred,  the 
right  surrendered,  or  the  obligation  assumed,  at  the  time 
of  the  conveyance,  and  as  a  part  of  the  transaction,  in 
order  that  it  may  be  the  valuable  consideration  which 
can  protect  the  purchaser. 

§  748.  Antecedent  Debts. — "Whether  an  antecedent 
debt  can  ever  be  a  valuable  consideration  has  been  denied 
by  able  courts;  but  this  general  subject  has  been  further 
complicated  by  the  various  modes  in  which  such  a  debt 
may  be  dealt  with,  —  secured,  discharged,  postponed,  and 
the  like,  —  and  the  various  questions  thence  arising  which 
have  caused  the  greatest  conflict  of  judicial  opinion.  In 
very  many,  and  perhaps  a  majority,  of  the  states  it  is  set- 
tled that  the  transferee  of  negotiable  paper  as  security  for 
an  antecedent  debt  may  be  a  bona  fide  holder  by  the  law 
merchant;  but  this  rule  cannot  be  a  precedent  in  deter- 
mining the  meaning  of  valuable  consideration  within  the 
equitable  doctrine  of  lona  fide  purchase.* 

'  In  Westbrook  v.  Oleason,  79  N.  Y.  had  precedence  of  the  plaintiff's  mort- 

23,  36,  a  vendee  under  a  land  contract  gage  [and  thereby  lost  the  priority], 

wa3  in  open  possession,  having  made  and  with   his  right  to   the   improve- 

iniprovemeuts.      While   he  was   thus  ments,  etc.,  then  he  was,  within  all 

in  possession   a  mortgage  was  given  the  cases,  a  purchaser  for  value."     See 

upon  the  land  by  his  vendor,  which  Williams   v.    Shelly,    37   N.    Y.    375; 

was    unrecorded.       Afterwards,     and  Reed  v,  Gannon,    3   Daly,    414;   Mc- 

before   this    mortgage   was   recorded,  Leod  v.  Nat.  Bank,  42  Miss.  99.     For 

he  took  a  deed  of  conveyance  of  the  examples  of  giving  up  or  canceling  a 

land  from   his  vendor  and  gave  back  security,  see  Youngs  v.  Lee,  12  N.  Y. 

a    bond  and  mortgage    to   secure    the  551;    Aleads  v.    Merchants'  Bank,    25 

whole    price.     This   deed   he  put   on  N.  Y.  143;  82  Am.  Dec.  .331;  Padgett 

record   before   the   first-named   mort-  v.  Lawrence,   10  Paige,    170;  40  Am. 

gage   was   recorded.     The  only  ques-  Dec.    232;    Struthers   v.    Kendall,    41 

tion  was,  whether  he  could  claim  the  Pa.  St.    214,  218;   80  Am.  Dec.  610; 

benefit  of  his  earliest  record,  by  being  Goodman  v.  Simonds,    20  How.  343, 

a  purchaser  for  a  valuable  considera-  371. 

tion,  although  he  had  not  paid  any  of         *  The  rule  concerning  the  transfer  of 

the   price.     The  court   said    "  that  if  negotiable  instruments  has  been  thas 

by  accepting  the  deed  he  parted  with  settled  avowedly  in  the  interests  of 

bis  equitable  title  to  the  laud,  which  commerce    and  mercantile    busineas; 


§749 


EQUITY   JURISPEUDENCB. 


1046 


§  749.  Security  for  or  Satisfaction  of  an  Antecedent 
Debt. —  A  conveyance  of  real  or  personal  property  as  se- 
curity for  an  antecedent  debt  does  not,  upon  principle, 
render  the  transferee  a  bona  fide  purchaser,  since  the  cred- 
itor parts  with  no  value,  surrenders  no  right,  and  places 
himself  in  no  worse  legal  position  than  before.  The  rule 
has  been  settled,  therefore,  in  very  many  of  the  states, 
that  such  a  transfer  is  not  made  upon  a  valuable  consid- 
eration, within  the  meaning  of  the  doctrine  of  bona  fide 
purchase.^  In  some  states,  on  the  contrary,  even  the 
securing  a  pre-existing  debt  is  held  to  be  a  valuable  con- 
sideration.^ Whether  the  complete  satisfaction  or  dis- 
charge or  the  definite  forbearance  of  an  antecedent  debt, 
without  the  surrender  or  cancellation  of  any  written  se- 


these  reasons  do  not  apply  to  the  pur- 
chase of  land  and  chattels  and  non- 
negotiable  securities.  In  some  of  the 
states,  therefore,  where  it  has  been 
applied  to  negotiable  paper,  it  has 
been  rejected  with  respect  to  other 
conveyances  and  transfers,  [Thus  in 
Massachusetts,  the  extinguishment  of 
a  pre-existing  debt  is  a  valuable 
consideration  within  the  rule  protect- 
ing a  transferee  of  negotiable  paper 
against  prior  equities:  Mayer  v.  Hei- 
delbach,  123  N.  Y.  332.] 

'  Alexander  v.  Caldwell,  55  Ala. 
517  (mortgage  for  a  pre-existing  debt); 
Short  V.  Battle,  52  Ala.  456;  Gafford 
V.  Stearns,  51  Ala.  434;  Johnson  v. 
Graves,  27  Ark.  557;  Gary  v.  White, 
52  N.  Y.  138;  Hart  v.  Bank,  33  Vt. 
252:  Poor  v.  Woodburn,  25  Vt.  235; 
Hodgeden  v.  Hubbard,  18  Vt.  504;  46 
Am.  Dec.  167;  Clark  v.  Flint,  22  Pick. 
231;  33  Am.  Dec.  733;  Buffington  v. 
Gerrish,  15  Mass.  156;  8  Am.  Dec.  97; 
Mingus  V.  Condit,  23  N.  J.  Eq.  313; 
Wheeler  v.  Kirtland,  24  N,  J.  Eq.  552; 
Ashton's  Appeal,  73  Pa.  St.  153.  162; 
Garrard  v.  Pittsburgh  etc.  R.  R.,  29 
Pa.  St.  154,  159;  Prentice  v.  Zane,  2 
Gratt.  262;  Halstead  v.  Bank  of  Ky., 
4  J.  J.  Marsh.  554:  Manning  v.  Mc- 
Clure,  36  111.  490;  Boon  v.  Barnes,  23 
Miss.  136;  Upshaw  v.  Hargrove,  6 
Smedea  &  M.  286,  292;  Haynsworth 
V.  Bischoflf,  6  Rich.  159;  Spurlock  v. 
Sullivan,  36  Tex.  511;  Pancoast  v. 
Duval,  26  N.  J.  Eq.  445;  Van  Heusen 


V.  Radcliff,  17  N.  Y.  580;  72  Am.  Dec. 
4S0;  Weaver  v.  Barden,  49  N.  Y.  286; 
Manhattan  Co.  v.  Evertson,  6  Paige, 
457;  Padgett  v.  Lawrence,  10  Paige, 
170;  40  Am.  Dec.  232;  Dickerson  v. 
TiUinghast,  4  Paige,  215;  25  Am. 
Dec.  528;  Zorn  v.  R.  R.  Co.,  5  S,  C. 
90;  Morse  v.  Godfrey,  3  Story, 
364,  389;  Metropolitan  Bank  v.  God- 
frey, 23  111.  579;  but  see  Doolittle 
V.  Cook,  75  111.  354.  [See  also  Pearce 
V.  Jackson,  61  Tex.  642;  Robinson  v. 
Pebworth,  71  Ala.  240;  Gest  v.  Pack- 
wood,  34  Fed.  Rep.  368;  Seymour  v. 
McKinstry,  106  N.  Y.  230;  Young  v. 
Guy,  87  N.  Y.  462;  People's  Savings 
Bank  v.  Bates,  120  U.  S.  567;  Funk  v. 
Paul,  64  Wis.  35;  54  Am.  Rep.  562; 
Banks  v.  Long,  79  Ala.  319;  Wells  v. 
Morrow,  38  Ala.  125;  Appeal  of  Lig- 
gett Spring  and  Axle  Co.,  Ill  Pa.  St. 
291;  Goodwin  v.  Massachusetts  L.  etc. 
Co.,  152  Mass.  189;  Loeb  v.  Peters, 
63  Ala.  243;  Wert  v.  Naylor,  93  Ind. 
431;  Sleeper  v.  Davis,  64  N.  H.  59; 
10  Am.  St.  Rep.  377;  Merchants'  Ins. 
Co.  V.  Abbott,  131  Mass.  397;  Lesas- 
sier  V.  S.  W.,  2  Woods,  35;  Currie  v. 
Misa,  L.  R.  10  Ex.  153;  Leask  v.  Scott, 
L.  R.  2  Q.  B.  376;  Rodger  v.  Composite 
etc.,  L.  R.  2  P.  C.  393;  Chartered  Bank 
of  India  v.  Henderson,  L.  R.  5  P.  C. 
501.] 

*  Babcock  v.  Jordan,  24  Ind.  14j 
Frey  v.  Clifford,  44  Cal.  335.  [Saunder- 
son  V.  Broad  well,  82  Cal.  132;  Brem 
V.  Lockhart,  93  N.  C.  191.] 


1047 


CONCERNING    BONA    FIDS    PUHCHASB. 


§749 


curity  by  the  creditor,  will  be  a  valuable  consideration  is  a 
question  to  which  the  courts  of  different  states  have  given 
conflicting  answers;  but  the  affirmative  seems  to  be  sup- 
ported by  the  numerical  weight  of  authority.*  Some 
legal  rules  ought  to  be  settled  in  accordance  with  the  re- 
sults of  experience  and  the  dictates  of  policy,  rather  than 
by  a  compliance  with  the  deductions  of  a  strict  logic. 
To  hold  that  a  conveyance  as  security  for  an  antecedent 
debt  is  made  without,  but  that  one  in  satisfaction  of  such 
a  debt  is  made  with,  a  valuable  consideration,  when  the 
fact  of  satisfaction  is  not  evidenced  by  any  act  of  the 
creditor,  but  depends  upon  mere  verbal  testimony,  is 
opening  the  door  wide  for  the  easy  admission  of  fraud. 
It  leaves  the  rights  of  third  persons  to  depend  upon  the 
coloring  given  to  a  past  transaction  by  the  verbal  testi- 
mony of  witnesses,  after  the  event  has  disclosed  to  the 


'  Satisfaction  and  discharge  merely 
of  an  antecedent  debt  is  a  valuable  con- 
sideration: Soule  V.  Shotwell,  52  Miss. 
236  (the  settled  rule  in  Mississippi); 
Ruth  V.  Ford,  9  Kan.  17;  Love  v.  Tay- 
lor,  26  Miss.  567;  Saffold  v.  Wade's 
Ex'r,  51  Ala.  214;  Ohio  Life  Ins.  etc. 
Co.  V.  Ledyard,  8  Ala.  866;  Bank  v. 
Godfrey,  23  111.  579,  606;  Donaldson 
V.  Bank  of  Cape  Fear,  1  Dev.  Eq.  103; 
18  Am.  Dec.  577;  [Schluterv.  Harvey, 
65  Cal.  158;  Foorman  v.  Wallace,  75 
Cal.  552;  Christopher  v.  Christopher, 
64  Md.  583;  Mayer  v.  Heidelbach,  123 
N.  Y.  332.]  Whether  and  how  far, 
a  definite  forbearance,  or  agreement 
to  extend  the  time  of  payment  of  an 
antecedent  debt  for  a  definite  time,  is 
a-  sufficient  consideration  within  the 
doctrine,  see  cases  last  cited,  and  also 
Atkinson  v.  Brooks,  26  Vt.  569;  62 
Am.  Dec.  592;  Griswold  v.  Davis,  31 
Vt.  390,  394;  Railroad  Co.  v.  Barker, 
29  Pa.  St.  160,  162;  Lonsdale  v.  Brown, 
4  Wash.  C.  C.  148,  151;  [Davis  v. 
Lutkeiweiz,  72  Iowa,  254.]  It  has 
been  decided  in  New  York  that  ex- 
tending time  by  a  valid  agreement  is 
a  valuable  consideration  sufficient  to 
support  a  mortgage;  but  that  the  mere 
taking  collateral  security  on  time  with- 
out any  additional  agreement  is  not: 
Gary  v.  White,  52  N.  Y.  138;  revers- 
ing  7  Lans.  1,  and  disapproving  of  dic- 


tum in  Pratt  v.  Coman,  37  N.  Y.  440. 
See  also  Wood  v.  Robinson,  22  N.  Y. 
564.  See  also,  on  the  effect  of  satisfac- 
tion or  giving  time.  Van  Heusen  v.Rad- 
cliff.  17  N.  Y.  580;  72  Am.  Dec.  480; 
Lawrence  v.  Clark,  36  N.  Y.  128;  Dick- 
erson  v.  Tillinghast,  4  Paige,  215;  25 
Am.  Dec.  528;  Evertson  v.  Evertson, 
5  Paige,  644;  Bay  v.  Coddington,  20 
Johns.  637;  5  Johns,  Ch.  54;  9  Am. 
Dec.  268;  Minf;u3  v.  Condit,  23 
N.  J.  Eq.  313;  Pancoast  v.  Duval,  26 
N.  J.  Eq.  445;  Ingram  v.  Morgan,  4 
Humph.  66;  40  Am.  Dec.  626;  Worm- 
ley  V.  Lowry,  1  Humph.  468;  Clark  v» 
Flint,  22  Pick.  231;  33  Am.  Dec.  733; 
Sargent  v.  Sturm,  23  Cal.  359;  83  Am. 
Dec.  118;  [Overstreet  v.  Manning,  67 
Tex.  657.]  If,  however,  the  creditor 
actually  surrenders  up  or  cancels  some 
written  security,  such  act  becomes  a 
valuable  consideration,  and  makes  him 
a  6ona^d«  purchaser:  Youngs  v.  Lee, 
12  N.  Y.  551;  Meads  v.  Merchants' 
Bank,  25  N.  Y.  143;  82  Am.  Dec.  331;. 
Padgett  v.  Lawrence,  10  Paige,  170;, 
40  Am.  Dec.  232;  Struthers  v.  Ken- 
dall, 41  Pa.  St.  214,  218;  80  Am.  Dec. 
610;  Goodman  v.  Simonds,  20  How, 
343,  371;  and  see  Thompson  v.  Blanch- 
ard,  4N.  Y.  303;  Penfield  v.  Dunbar, 
64  Barb.  239.  [See  also  Mobile  Life 
Ins.  Co.  V.  Randall,  71  Ala.  220;  Lane 
V.  Logue,  12  Lea,  681.] 


§  750  EQUITY   JURISPRUDENCE.  1048 

creditor  the  form  and  nature  in  which  it  is  for  his  inter- 
est to  picture  the  transaction.  A  rule  which  renders  it 
so  easy  for  an  interested  party  to  defeat  the  rights  of  oth- 
ers is  clearly  impolitic.  It  sometimes  happens  that  rules 
which  are  the  most  logically  correct  are  the  ones  which 
most  readily  admit  the  possibility  of  fraud  and  injustice. 
It  is  very  generally  settled,  in  accordance  with  principle, 
that  an  assignment  made  by  a  debtor  in  trust  for  the  ben- 
efit of  his  creditors  is  not  a  conveyance  upon  valuable 
consideration,  and  neither  the  assignee  nor  the  creditors 
thereby  become  bona  fide  purchasers.^  The  questions  con- 
cerning judgment  creditors  and  purchasers  at  execution 
sales  upon  judgments  have  already  been  examined  in  the 
preceding  section.'^ 

§  750.  2.  Payment  of  the  Consideration.  —  Not  only 
must  there  be  a  valuable  consideration  in  fact,  but  it  must 
be  paid  before  notice  of  the  prior  claim.  Notice  after  the 
agreement  for  the  purchase  is  made,  but  before  any  pay- 
ment, will   destroy  the  character  of  bona  fide  purchaser.^ 

»  Clark  V.  Flint,  22  Pick.  231 ;  33  Am.  "  See  supra,  §§  721-724. 
Dec.  733;  Holland  v.  Craft,  20  Pick.  »  Hardingham  v.  Nicholls.  3  Atk. 
321;  Griffin  v.  Marquardt,  17  N.  Y.  .304;  Maitland  v.  Wilson,  3  Atk.  814; 
28;  Van  Heusen  v.  Radcliflf,  17  N.  Y,  Molony  v.  Kernan,  2  Dru.  &  War.  31; 
580;  72  Am.  Dec.  480;  Joslin  V.  Cowee,  Wood  v.  Mann,  1  Sum.  506,  578; 
60  Barb.  48;  Hatrcrerty  v.  Palmer,  6  Flagg  v.  Maun,  2  Sum.  486;  PenHeld 
Johns.  Ch.  437;  Mellon's  Appeal,  32  v.  Dunbar,  64  Barb.  239;  Palmer  v. 
Pa.  St.  121;  Spackmau  v.  Ott,  65  Pa,  Williams,  24  Mich.  .328;  Kitteridge  v. 
St.  131;  In  re  Fulton's  Estate,  51  Pa.  Chapman,  36  Iowa,  348;  Baldwin  v. 
St.  204,  211;  Twelves  v.  Williams,  3  Sager,  70  111.  503.  See  further,  sKjora. 
Whart.  485;  31  Am.  Dec.  542;  Ludwig  §  691.  [See  also  Hardin  v.  Melton, 
V.  Highley,  5  Pa.  St.  132,  140:  Willis  28  S.  C.  38;  Lakin  v.  Sierra  B.  G.  M. 
V.  Henderson,  4  Scam.  13;  38  Am.  Co.,  25  Fed.  Rep.  337;  Key ser  v.  Angle, 
Dec.  120.  [Seay  v.  Bank  of  Rome,  40  N.  J.  Eq.  481;  Dean  v.  Anderson, 
66  Ga.  615;  Simpson  v,  Mathis,  79  34N.J.  Eq.  496;  Steffian  v.  MilmoNat. 
Ga.  161.  See  also  Jack  v.  Weien-  Bank,  69  Tex.  513;  Evans  v.  Temple- 
nett,  115  111.  105;  56  Am.  Rep.  129;  ton,  69  Tex.  375;  5  Am.  St.  Rep.  71; 
Bridgford  v.  Barbour,  80  Ky.  529;  Pearce  v.  Jackson,  61  Tex.  642; 
Bank  of  Commerce  v.  Payne,  86  Ky.  Bremer  v.  Case,  60  Tex.  151;  Hous- 
466;  Wilson  v.  Esten,  14  R.  I.  621;  ton  etc.  R.  R.  Co.  v.  Chaffin,  60  Tex. 
Tyler  V.  Abergh,  65  Md.  18;  Bridge-  555;  Morton  v.  Lowell,  56  Tex.  643; 
ford  V.  Adams,  45  Ark.  136;  and  the  Ellis  v.  Young,  31  S.  C.  322;  March- 
same  rule  applies  to  assignees  in  bank-  banks  v.  Banks,  44  Ark.  48;  Lamar  v. 
ruptcy:  Brown  v.  Brabb,  67  Mich.  17;  Hale,  79  Va.  147:  Withers  v.  Little, 
Exchange  etc.  Bank  v.  Stone,  80  Ky.  56  Cal.  370;  Eversdon  v.  Mayhew,  65 
109;  and  this  result  follows,  although  Cal.  163;  Sargent  v.  Eureka  Bung  etc. 
the  creditors,  in  consideration  of  the  Co.,  11  N.  Y.  St.  Rep.  68;  Richards 
assignment,  have  executed  a  general  re-  v.  Snyder,  11  Or.  501;  Wood  v.  Ray- 
lease  of  all  claims  and  demands  against  burn,  IS  Or.  3.] 
the  debtor:  Tyler  v.  Abergh,  65  Md.  18.] 


1049  CONCERNING    BONA    FIDE    PUKCHASE.  §  750 

The  rule  is  settled  in  England  that  the  entire  price  or 
consideration  must  have  been  paid  before  any  notice,  and 
the  same  completeness  of  payment  is  required  by  some 
American  decisions.*  Since  the  modes  of  transferring 
and  dealing  with  real  property  in  this  country  are  so 
different  from  those  which  prevail  in  England,  the  same 
equitable  principles  which  guided  the  English  judges 
have  led  the  courts  in  many  of  the  states,  under  a  change 
of  circumstances,  to  adopt  a  necessary  modification  of  this 
rule;  otherwise  great  injustice  might  be  wrought.  These 
courts  have  held  that  where  a  part  only  of  the  price  or 
consideration  has  been  paid  before  notice,  either  the  de- 
fendant should  be  entitled  to  the  position  and  protection 
of  a  bona  fide  purchaser  pro  tanto;  or  that  the  plaintiff 
should  be  permitted  to  enforce  his  claim  to  the  whole  land 
only  upon  condition  of  his  doing  equity  by  refunding  to 
the  defendant  the  amount  already  paid  before  receiving 
the  notice;  or  even,  when  the  plaintiff  has  been  guilty  of 
laches,  or  the  defendant  has  perhaps  made  valuable  im- 
provements, that  the  land  itself  should  remain  free  from 
any  claim  on  the  plaintiff's  part,  and  his  remedy  should  be 
confined  to  a  recovery  of  the  portion  of  purchase-money 
which  was  still  unpaid  when  notice  was  given.* 

'  See  cases  in  last  note;  also  Tour-  equities  of  the  second  vendee,  B,  have 

villev.  Naish,  3  P.  Wms.   307;  Story  been  regarded  by  the  courts  as  very 

V.  Lord  Windsor,  2  Atk.  630;   More  strong,  even  if  not  absolutely  the  su- 

V.   Mayhow,  1  Cas.  Ch.   34;  Wood  v.  perior:     Baldwin  v.  Sager,  70  111.  503 

Mann,    1    Sum.    50'),    578;    Flagg   v.  (where  a  part  of   the   price  has  been 

Mann,  2  Sum.  486;  Jewett  v.  Palmer,  paid  before  notice  of  a  prior  lien,  such 

7   Johns.   Ch.   65;    11  Am.  Dec.    401;  lien  can  be  enforced  to  the  extent  of 

Losey  V.  Simpson,  II  N.  J.  Eq.  246.  the   unpaid    portion);    Kitteridge    v. 

*  In  many  of   the  cases  where  this  Chapman,  36  Iowa,  348  (protection  pro 

American  rule  has  been  applied,  the  tanto);  Haughwout  v.  Murphy,  21  N. 

land  was  contracted  to  be  sold  by  its  J.   Eq.   118;   Paul  v.   Fulton,  25   Mo. 

owner  to  a  first  vendee.  A,  who  did  156;  Fraim  v.  Frederick,  32  Tex.  294; 

not   take   possession,  and   was   after-  Frost  v.  Beekman,  1  Johns.   Ch.  288; 

wards    contracted    to    be    sold    to   a  Farmers'  Loan  Co.  v.  Maltby,  8  Paige, 

second  vendee,    B,  who  took   posses-  361;    Doswell  v.  Buchanan's  Ex'rs,  3 

sion,  made  improvements,  and  paid  a  Leigh,  365;  23  Am.   Dec.  280;  Everts 

part  of  the  price  before  notice  of  A's  v.  Agnes,  4  Wis.  343;   65  Am.    Dec. 

right,  and  who  took  a  deed  from  his  314;   Youst  v.  Martin,  3  Serg.  &  R. 

vendor  after  such  notice.     If   A  had  423;    Union    etc.    Co.    v.    Young,    1 

delayed   in  enforcing   his  rights,  and  Whart.  410,  431;   30  Am.    Dec.    212; 

especially  if  he  had  neglected  to  record  Juvenal  v.  Jackson,   14   Pa.  St.  519, 

his  contract   in  states  where    he  was  524;  Beck  v.  Uhrich,  13  Pa.  St.  636, 

permitted   by   statute   so   to   do,'  the  639;  53  Aui,  Dec.  507;  16  Pa.  St.  499; 


§751 


EQUITY   JURISPRUDENCE. 


1050 


§  751.  Payment  must  be  Actual.  —  It  is  further  set- 
tled that  there  must  be  actual  payment  before  any  notice, 
or,  what  in  law  is  tantamount  to  actual  payment,  a 
transfer  of  property  or  things  in  action,  or  an  absolute 
change  of  the  purchaser's  legal  position  for  the  worse,  or 
the  assumption  by  him  of  some  new,  irrevocable  legal 
obligation.  It  follows,  therefore,  that  his  own  promise, 
contract,  bond,  covenant,  bond  and  mortgage,  or  other 
non-negotiable  security  for  the  price,  will  not  render  the 
party  a  bona  fide  purchaser,  nor  entitle  him  to  protection; 
for  upon  failure  of  the  consideration  he  can  be  relieved 
from  such  obligations  in  equity  even  if  not  at  law.^  Pay- 
ment of  actual  cash,  however,  is  not  indispensable.  The 
assumption  of  an  irrevocable  obligation,  from  which  the 
purchaser  could  not  be  relieved  even  by  a  failure  of  the 
consideration  arising  from  the  title  being  invalid,  may  be 
sufficient.^     The   absolute  transfer   of   notes,   bonds,    or 


Kunkle  v,  Wolfersberger,  6  Watts, 
126;  Bellas  v.  McCarty,  10  Watts,  13; 
Boggs  V.  Varner,  6  VVatts  &  S.  469, 
472;  Dufphey  v.  Frenaye,  5  Stew.  & 
P.  215;  [Marchbanks  v.  Banks,  44  Ark. 
4S.]  In  Haughwout  v.  Murphy,  21 
N.  J.  Eq.  lis,  the  court,  while  rec- 
ognizing the  general  rule  that  a  pur- 
chaser claiming  to  be  bona  Jide  must 
have  paid  the  full  price  before  notice, 
held  that  a  plaintiff  who  by  his  owa 
laches  had  misled  the  purchaser 
would  not  be  permitted  to  enforce  this 
rule,  but  would  be  confined  to  a  re- 
covery of  the  price  which  remained 
unpaid  when  notice  of  his  claim  was 
received.  In  Youst  v.  Martin,  3  Serg. 
&  R.  423,  the  reasons  of  the  Ameri- 
can modification  are  clearly  stated  by 
Tilghman,  C.  J.  [In  Mitchell  v.  Daw- 
son, 23  W.  Va.  86,  a  purchaser  of  the 
legal  title  of  a  tract  of  land,  who  had 
no  notice  of  a  prior  vendor's  lien  un- 
til he  had  paid  all  the  purchase-money 
except  twenty-five  dollars,  was  held 
to  take  the  land  discharged  of  the  lien, 
but  to  be  liable  to  the  holder  of  the 
lien  for  the  twenty-five  dollars.  See 
also  Sheldon  v.  Holmes,  58  Mich.  138.] 
'  See  English  cases  cited  under  last 

Paragraph.      Roseman   v.    Miller,    84 
11.  297;   Kitteridge  v.  Chapman,  36 


Iowa,  348;  Hutchins  v.  Chapman,  37 
Tex.  612;  Spicer  v.  Waters,  65  Barb. 
227;  Haughwout  v.  Murphy,  21  N.  J. 
Eq.  118;  Dickerson  v.  Tillinghast,  4 
Paige,  215;  25  Am.  Dec.  528;  Ells  v. 
Tousley,  1  Paige,  280;  Whittick  v. 
Kane,  1  Paige,  200,  208;  Jewett  v. 
Palmer,  7  Johns.  Ch.  65,  68;  11  Am. 
Dec.  401;  De  Mott  v.  Starkey,  3  Barb. 
Ch.  403;  Webster  v.  Van  Steenbergh. 
46  Barb.  211;  Weaver  v.  Barden,  49 
N.  Y.  286;  Cary  v.  White,  52  N.  Y. 
138;  Delancey  v.  Stearns,  66  N.  Y. 
157:  Westbrook  v.  Gleason,  79  N.  Y. 
2.-?,  28;  Beck  V.  Uhrich,  13  Pa.  St.  636, 
639;  53  Am.  Dec.  507;  16  Pa.  St.  499; 
Kunkle  v.  Wolfersberger,  6  Watts, 
126;  [Marchbanks  v.  Banks,  44  Ark. 
48;  Storrs  v.  Wallace,  61  Mich.  437.] 
*  There  are  many  forms  of  such  ob- 
ligation: 1.  One  of  these  occurs  where 
the  purchaser  has  given  his  own  nego- 
tiable notes  for  the  whole  or  a  part 
of  the  price.  Some  of  the  cases  seem 
to  require  that  the  note  so  given  to 
the  vendor  should  have  been  actually 
negotiated  by  him  so  as  to  cut  off  the 
maker's  defense  of  a  failure  of  the 
consideration;  by  others,  it  seems  to 
be  sufficient  that  such  notes  are  given 
by  the  purchaser  to  the  vendor,  so 
that  they  may  be  negotiated  and  the 


1051  CONCERNING    BONA    FIDE    PURCHASE.       §§  752,  753 

other  securities  made  by  a  third  person  will  have  the 
same  effect.' 

§  752.  II.  Absence  of  Notice.  —  The  nature  of  notice, 
its  various  forms,  and  its  general  effects  have  been  con- 
sidered in  the  preceding  sections.  The  present  inquiry- 
only  concerns  its  special  effects  upon  a  bona  fide  purcliase, 
the  time  when  it  must  be  received  in  order  that  these 
effects  may  be  produced,  and  the  modifications  and  addi- 
tions introduced  by  the  recording  acts.  Since  the  doc- 
trine of  bona  fide  purchase  requires  the  absence  of  notice, 
—  a  purchase  for  a  valuable  consideration  and  without 
notice,  —  the  discussion  of  this  negative  element  must 
chiefly  consist  of  an  affirmative  statement  of  the  conse- 
quences flowing  from  the  presence  of  notice. 

§  753.  1.  Effects  of  Notice.  —  The  rule  is  universal 
and  elementary,  that  if  a  purchaser  in  any  form  receives 
notice  of  prior  adverse  rights  in  and  to  the  same  subject- 
matter,  before  he  has  completely  acquired  or  perfected  his 
own  interests  under  the  purchase,  his  position  as  bona  fide 
purchaser  is  thereby  destroyed,  even  though  he  may  have 
paid  a  valuable  consideration;  on  the  other  hand,  notice 
given  after  his  interests  have  been  completely  acquired 
or  perfected  produces  no  injurious  effect.^     Notice  suffi- 

defense  cut  off:  Baldwin  v.  Sager,  70  Am.  Dec.  401;  Christie  v.  Bishop,  1 
111.  503  (uotea  giveu  and  negotiated);  Barb.  Ch.  105;  Harris  v.  Norton,  16 
Partridge  v.  Chapman,  81  111.  137  Barb.  264;  Patten  v.  Moore,  32  N.  H. 
(note  given  for  a  part  of  the  price  and  382;  High  v.  Batte,  10  Yerg.  186; 
negotiated  by  the  payee);  Williams  v.  McBee  v.  Loftis,  1  Strob.  Eq.  90. 
Beard,  1  S.  C.  309  (a  note  of  a  third  *  See  cases  cited  ante,  vol.  1 ,  under 
person  guaranteed  by  the  purchaser,  §  200;  also  under  §  740;  Virgin  v. 
given  for  a  part  of  the  price);  Free-  Wingfield,  54  Ga.  451;  Hardin  v.  Har- 
inau  V.  Deming,  3  Sand.  Ch.  327;  rington,  11  Bush,  367;  Hull  v.  Swarth- 
Frost  V.  Beekman,  1  Johns.  Ch.  288.  out,  29  Mich.  249  (when  a  purchaser 
2.  Another  form  would  be  the  under-  is  not  bound  to  make  inquiries  from 
taking  by  the  purchaser  to  pay  a  debt  his  own  vendor);  Hamman  v.  Keig- 
due  from  the  vendor  to  a  third  person,  win,  39  Tex.  34;  Batts  v.  Scott,  37 
in  such  a  manner  that  he  was  abso-  Tex.  59  (in  Texas,  under  the  record- 
lutely  substitiited  as  the  debtor  in  the  ing  acts,  one  who  intentionally  pur- 
place  of  his  vendor:  Jackson  v.  Wins-  chases  an  equitable  title  may  be  a  bona 
low,  9  Cow.  13;  Frost  v.  Beekman,  1  Jide  purchaser,  as  much  as  one  who 
Johns.  Ch.  288.  purchases  the  legal  estate);  Kearney 
1  Williams  v.  Beard,  1  S.  C.  309;  v.  Vaughan,  50  Mo.  284  (information 
Murray  v.  Ballon,  1  Johns.  Ch.  566;  obtained  by  a  grantee  from  his  own 
Heatley  v.  Finster,  2  Johns.  Ch.  159;  grantor);  Hoyt  v.  Jones,  31  Wis.  389; 
Jewett  V.  Palmer,  7  Johns.  Ch.  65;  11  Wormley  v.  Wormley,  8  Wheat.  421; 


§753 


EQUITY    JURISPRUDENCE. 


1052 


cient  to  prevent  the  purchase  from  being  hona  fide  may 
inhere  in  the  very  form  and  kind  of  the  conveyance 
itself.  On  this  ground  it  is  held  by  one  group  of  author- 
ities that  a  grantee  taking  or  holding  under  a  quitclaim 
deed  cannot  be  a  bona  fide  purchaser;  but  this  conclusion 
is  rejected  by  other  decisions. 

Frost  V.  Beekman,  1  Johns.  Ch.  288; 
Murray  v.  Finster,  2  Johns.  Ch.  155; 
Losey  v.  Simpson,  11  N.  J.  Eq.  246; 
Beck  V.  Ullrich,  13  Pa.  St.  630;  53 
Am.  Dec.  507;  Jewett  v.  Palmer,  7 
Johns.  Ch.  64;  11  Am.  Dec.  401.  [See 
also  McDonald  v.  Gault,  30  Kan.  693; 
GoUaber  v.  Martin,  33  Kan.  252; 
Browu  V.  West,  70  Ga.  201;  Green- 
leve  V.  Blum,  59  Tex.  124;  Bird  v. 
Jones,  37  Ark.  195;  Carmicliael  v. 
Foster,  69  Ga.  372;  Tankard  v.  Tank- 
ard, 84  N.  C.  786;  McNair  v.  Pope, 
100  N.  C.  408;  Whitehorn  v.  Cranz, 
20  Neb.  392;  Veitte  v.  McMurtry,  26 
Neb.  341;  Kellar  v.  Stanley,  86  Ky. 
240;  Shuey  v.  Latta,  90  Ind,  136; 
Thompson  v.  Henry,  85  Mo.  451; 
Sleeper  V.  Iselin,  62  Iowa,  583;  Board- 
manV.  Willard,  73  Iowa,  22;  Drake  v. 
Thyng,  37  Ark.  228;  Hobson  v.  Whit- 
low,  80  Va.  784;  Cobb  v.  Knight,  74 
Me.  253;  Zimmerman  v,  Kinkle,  108 
N.  Y.  287;  Dodge  v.  Stevens,  94  N.  Y. 
209;  Wetmore  v.  Porter,  92  N.  Y.  77; 
Cavagnaro  V.  Don,  63  Cal.  227;  North- 
ern  Pac.  R'y  v.  Mc Alpine,  129  U.  S. 
314;  Gilbert  v.  Sleeper,  71  Cal.  290; 
Bath  Paper  Co.  v.  Longley,  23  S.  C. 
129;  McNee  v.  Donahue,  76  Cal.  499; 
Shaw  V,  R.  R.  Co.,  101  U.  S.  557; 
Ferguson  v.  Glassford,  68  Mich.  36; 
Wimbish  v.  Montgomery  etc.  Ass'n, 
69  Ala.  575;  McCone  v.  Courser,  64 
N.  H.  506;  Nicholson  v.  Condon,  71 
Md.  620;  Brown  v.  Hanauer,  48  Ark. 
277;  Laraway  v.  Larue,  63  Iowa,  407; 
Steele  v.  Sioux  Valley  Bank,  79  Iowa, 
343.] 

^  Cases  which  hold  that  a  grantee 
taking  or  deriving  title  under  a  quit- 
claim deed  cannot  be  bo7ia  Jide  pur- 
chasers; that  such  a  deed  is  ipso  facto 
notice  of  all  defects  m  the  title:  Munn 
V.  Best,  62  Mo.  491;  Kearney  v. 
Vaughan,  50  Mo.  284;  Ridgeway  v. 
HoUiday,  59  Mo.  444;  Oliver  v.  Piatt, 
3  How.  333;  May  v.  Le  Claire,  11 
Wall.  217;  Bragg  v.  Paulk,  42  Me. 
502;  Smith  v.  Dutton,  42  Iowa,  48; 
Watson  V.  Phelps,  40  Iowa,  482.     [Sec 


also  O'Neal  v.  Seixas,  85  Ala.  80; 
Peters  v.  Cartier,  SO  Mich.  124;  20 
Am.  St.  Rep.  508;  Cain  v.  Woodward, 
74  Tex.  549;  Richardson  v.  Levi,  67 
Tex.  359;  Lumber  Co.  v.  Hancock,  70 
Tex.  314;  Garrett  v.  Christopher,  74 
Tex.  454;  15  Am.  St.  Rep.  850;  Baker 
V.  Woodward,  12  Or.  3;  Derrick  v. 
Brown,  66  Ala.  162;  McMillan  v.  Busk- 
ing, 80  Ala.  402;  Postel  v.  Palmer,  71 
Iowa,  157;  Wrigtnian  v.  Spofford,  56 
Iowa,  145;  Fogg  v.  Holcomb,  64  Iowa, 
627;  Hastings  v.  Nissen,  31  Fed.  Rep. 
597;  Dodge  v.  Briggs,  27  Fed.  Rep. 
161;  Thorn  v.  Newsom,  64  Tex.  161; 
53  Am.  Rep.  747;  Gest  v.  Pack  wood, 
34  Fed.  Rep.  368.  In  Iowa,  although 
the  general  rule  is  as  above  stated,  it 
is  held  that  a  subsequent  purchaser 
from  the  quitclaim  grantee  in  good 
faith  and  without  notice  will  be  pro- 
tected: Raymond  v.  Morrison,  59 
Iowa,  371.  To  the  same  eflfect,  sea 
Sherwood  v.  Moelle,  36  Fed.  Rep. 
478.]  Cases  which  hold  the  contrary, 
viz.,  that  there  is  no  difference  between 
holding  a  quitclaim  deed  and  any 
other  species  of  conveyance:  Chap- 
man V.  Sims,  53  Miss.  154;  Corbin  v. 
Sullivan,  47  Ind.  356;  and  see  Hutch- 
inson V.  Harttmann,  15  Kan.  133. 
Cases  involving  the  more  general  rule 
that  the  form  of  conveyance  or  the 
nature  of  the  interest  acquired  may 
ipso  facto  be  notice:  Bertram  v.  Cook, 
32  Mich.  518  (assignee  of  the  vendee 
in  a  land  contract);  Stout  v.  Hyatt, 
13  Kan.  232  (purchaser  of  a  mere  equi- 
table title);  Edmonds  v.  Torrence,  48 
Ala.  38  (assignee  from  vendee  under  a 
land  contract);  Lewis  v.  Boskins,  27 
Ark.  61;  Peay  v.  Capps,  27  Ark.  160 
(vendee  in  possession  under  a  land 
contract  buying  a  better  title  than 
his  vendors  cannot  become  thereby  a 
bona  fide  purchaser  as  against  his  ven- 
dor); McNary  v.  Southworth,  58  111. 
473;  [Branch  v.  Griffin,  99  N.  C.  173;] 
(where  a  trustee  purchased  at  his  own 
trust  sale,  a  remote  purchaser  deriv- 
ing title  under  him  may  be  a  hona  fide 


1053  CONCERNING    BONA    FIDE    PURCHASE.  §  754 

§  754.  Second  Purchaser  without  Notice  from  First 
Purchaser  with  Notice — Second  Purchaser  with  Notice 
from  First  Purchaser  without. — There  are  two  special 
rules  oil  the  subject  which  have  been  settled  since  an 
early  day;  one  being  a  mere  application  of  the  general 
doctrine,  and  the  other  a  necessary  inference  from  it. 
The  first  is,  that  if  a  second  purchaser  for  value  and  with- 
out notice  purchases  from  a  first  purchaser  who  is  charged 
with  notice,  he  thereby  becomes  a  bona  fide  purchaser, 
and  is  entitled  to  protection.  This  statement  may  be 
generalized.  If  the  title  to  land,  having  passed  through 
successive  grantees,  and  subject  in  the  hands  of  each  to 
prior  outstanding  equities,  comes  to  a  purchaser  for  value 
and  without  notice,  it  is  at  once  freed  from  these  equities; 
he  obtains  a  valid  title,  and,  with  a  single  exception,  the 
full  power  of  disposition.^  This  exception  is,  that  such  a 
title  cannot  be  conveyed,  free  from  the  prior  equities* 
back  to  a  former  owner  who  was  charged  with  notice.     If 

purchaser);  [Lamar  v.  Hale,  79  Va.  son,  23  S.  C.  49i;  London  v.  Yonmans, 
147  (a  case  of  a  purchase  from  part-  31  S.  C.  150;  Branch  v.  GrifBu,  99  N.  C. 
ners).]  In  Conover  v.  Van  Mater,  18  173;  Saunders  v.  Lee,  101  N.  C.  3; 
N.  J.  Eq;  481,  it  was  held  that  the  Odom  v.  Riddick,  104  N.  C.  515;  17 
assignee  of  a  mortgage,  even  without  Am.  St.  Rep.  G86;  Bergen  v.  Pro- 
notice,  takes  it  subject  to  all  equi-  ducers'  Marble  Yard,  72  Tex.  53;  Hill 
ties,  it  being  only  a  chose  in  action  and  v.  Scotland  Co.,  34  Fed.  Rep.  '208  (pur- 
a  mere  equitable  lien.  The  contrary  chase  of  negotiable  county  bonds).] 
is  held  in  Massachusetts,  where  the  The  same  rule  applies  under  the  re- 
mortgage  creates  a  true  legal  estate:  cording  acts.  If  A,  without  notice 
Welch  V.  Priest,  8  Allen,  1(55.  of  a  prior  unrecorded  deed  or  encum- 
^  Paris  V.  Lewis,  85  111.  597;  Hardin  brance,  purchases  from  B,  who  had 
V.  Harrington,  11  Bush,  367;  Pringle  notice,  his  title  is  free,  and  may  be 
V.  Dunn,  37  Wis.  449;  19  Am.  Rep.  made  perfect  by  an  earlier  record: 
772;  Price  v.  Martin,  46  Miss.  489;  See  Varick  v.  Briggs,  6  Paige,  323; 
Demarest  v.  Wynkoop,  3  Johns.  Ch.  Jackson  v.  Valkenburgh,  8  Cow.  260; 
129,  147;  8  Am.  Dec.  467;  Varick  v.  Knox  v.  Silloway,  10  Me.  201,  221; 
Briggs,  6  Paige,  323;  Glidden  v.  Hunt,  Connecticut  v.  Bradish,  14  Mass.  296; 
24  Pick.  221;  Tompkins  v.  Powell,  6  Fallass  v.  Pierce,  30  Wis.  443;  Mallory 
Leigh,  576.  [See  also  Martin  v.  Rob-  v.  Stodder,  6  Ala.  801;  Truluck  v. 
inson,  67  Tex.  368;  Gray  v.  African  Peeples,  3  Ga.  446. 
M.  E.  Z.  Ch.,  76  Cal.  576;  Fish  v.  For  the  same  reason,  a  purchaser  for 
Benson,  71  Cal.  429;  Hewlett  v.  value  and  without  notice  from  a  ven- 
Pilcher,  85  Cal.  542;  Simpson  v.  Del  dor  who  had  himself  acquired  his  title 
Hoyo,  94  N.  Y.  189;  Zouler  v.  Riley,  through  fraud  becomes  bona  fide  free 
ICON.  Y.  108;  53  Am.  Rep.  157;  from  the  effects  of  the  fraud:  Wood 
Valentine  v.  Lunt,  115  N.  Y.  496;  v.  Mann,  1  Sum.  506;  Galatian  v. 
Halverson  v.  Brown,  75  Iowa,  702;  Erwin,  Hnpk.  Ch.  48;  Somes  v. 
King  V.  Cabaness,  81  Ga.  661;  Neal  v.  Brewer,  2  Pick.  184;  13  Am.  Dec.  406; 
Gregory,  19  Fla.  356;  Jones  v.   Hud-  see  -post,  §  777. 


§754 


EQUITY   JURISPRUDENCE, 


1054 


A,  holding  a  title  affected  witli  notice,  conveys  to  B,  a 
bona  fide  purchaser,  and  afterwards  takes  a  reconveyance 
to  himself,  all  the  equities  revive  and  attach  to  the  land 
in  his  hands,  since  the  doctrine  requires  not  only  valuable 
consideration  and  absence  of  notice,  but  also  good  faiths 
The  second  rule  is,  that  if  a  second  purchaser  with  notice 
acquires  title  from  a  first  purchaser  who  was  without  no- 
tice, and  bona  fide,  he  succeeds  to  all  the  rights  of  his  im- 
mediate grantor.  In  fact,  when  land  once  comes,  freed 
from  equities,  into  the  hands  of  a  bona  fide  purchaser,  he 
obtains  a  complete  jus  disponendi,  with  the  exception  last 
above  mentioned,  and  may  transfer  a  perfect  title  even  to 
volunteers.' 


*  Kennedy  v.  Daly,  1  Schoales  &  L. 
355,  379;  Bumpus  v.  Plainer,  1  Jvohns. 
Ch.  213,  219;  Schutt  v.  Large,  6  Barb, 
373;  Ashton's  Appeal,  73  Pa„  St.  153; 
Church  V.  Rulaud,  64  Pa.  St.  432, 
444;  Church  v.  Church,  25  Pa.  St. 
278;  Troy  City  Bank  v.  Wilcox,  24 
Wis.  671.  [See,  to  the  same  effect, 
Clark  V.  McNeal,  114  N.  Y.  295;  11 
Am.  St.  Rep.  638;  Johnson  v.  Gibson, 
116  111.  294;  Trentman  v.  Eldridge,  98 
Ind.  525;  Brown  v.  Cody,  115  Ind. 
488.] 

=*  Allison  V.  Hagan,  12  Nev.  38; 
Pringle  v.  Dunn,  37  Wis.  449;  19  Am. 
Eep.  772;  McShirley  v.  Birt,  44  Ind. 
382;  Moore  v.  Curry,  36  Tex.  668; 
Fletcher  v.  Peck,  6  Cranch,  87;  Alex- 
ander V.  Pendleton,  8  Cranch,  462; 
Vattier  v,  Hinde,  7  Pet.  252;  Boone 
V.  Chiles,  10  Pet.  177;  Bumpus  v. 
Platner,  1  Johns.  Ch.  213;  Demarest 
V.  Wynkoop,  3  Johns.  Ch.  129,  147; 
8  Am.  Dec.  4(J7;  Galatian  v.  Erwin, 
Hopk.  Ch.  48;  Varick  v.  Briggs,  6 
Paige,  323.  329;  Griffith  v.  Griffith,  9 
Paige,  315;  Webster  v.  Van  Steen- 
bergh,  46  Barb.  211;  Dana  v.  Newhall, 
13  Mass.  498;  Trull  v.  Bigelow,  16 
Mass.  406;  8  Am.  Dec.  144;  Boynton 
V.  Rees,  8  Pick.  329;  19  Am.  Dec.  326; 
Rntgers  v.  Kingsland,  7  N.  J.  Eq. 
178,  658;  Holmes  v.  Stout,  4  N.  J.  Eq. 
492;  Bracken  v.  Miller.  4  Watts  &  S. 
102;  Mott  V.  Clark,  9  Pa,  St.  399;  49 
Am.  Dec.  566;  Church  v.  Church,  25 
Pa.  St.  278;  Filby  v.  Miller,  25  Pa. 
St.  264;  Curtis  v.  Lunn,  6  Munf.  42; 
Lacy  V.   Wilson,  4   Munf.    313;   City 


Council  V.  Page,  Speers  Eq.  159;  Lind> 

sey  V.  Rankin,  4  Bibb,  482;  Halstead 
V.  Bank  of  Kentucky,  4  J.  J.  Marsh. 
554;  Blight's  Heirs  v.  Banks,  6  T.  B, 
Mon.  192,  198;  17  Am.  Dec.  136.  [See 
also  Cox  V.  Wayt,  26  W.  Va.  807;  Funk- 
housen  v.  Lay,  78  Mo.  458;  Craig  v. 
Zimmerman,  87  Mo.  478;  56  Am.  Rep. 
4G6;  Hayes  v.  Nourse,  114  N.  Y. 
606;  11  Am.  St.  Rep.  700;  Scotland 
County  V.  Hill,  132  U.  S.  107;  Mast  v. 
Henry,  65  Iowa,  193;  East  v.  Pugh, 
71  Iowa,  162;  Fargason  v.  Edrington, 
49  Ark.  207;  Hill  v.  McNichoU,  76 
Me.  314;  Gorland  v.  Wells,  15  Neb. 
298.  In  Bergen  v.  Producers'  Marble 
Yard,  72  Tex.  53,  this  rule  was  ap- 
plied for  the  protection  of  a  purchaser 
at  the  foreclosure  sale  under  a  mort- 
gage, who  had  notice  of  the  fraudulent 
intent  of  the  mortgagor,  because  the 
mortgagee  acted  in  good  faith.] 

The  rule  was  first  settled  in  the 
early  ease  of  Harrison  v.  Forth,  Prec 
Ch.  51,  and  followed  in  Brandlyn  v. 
Ord,  1  Atk.  571;  Lowther  v.  Carlton, 
2  Atk.  242;  Sweet  v.  Southcote,  2 
Brown  Ch.  QQ;  Ferrars  v.  Cherry,  2 
Vern.  383;  McQueen  v.  Farquhar,  11 
Ves.  467,  477.  Like  the  first  rule,  it 
also  applies  to  cases  of  unrecorded  in- 
struments under  the  recording  acts: 
Webster  v.  Van  Steenbergh,  46  Barb. 
21 1 ;  Lacy  v.  Wilson,  4  Munf.  313;  Mott 
V.  Clark,  9  Pa.  St.  399;  49  Am.  Dec. 
566;  Boynton  v.  Rees,  8  Pick.  329;  19 
Am.  Dec.  326. 

The  rule,  however,  will  not  apply, 
under  special  circumstances,  where  its 


1055  CONCERNING   BONA   FIDK   rURCHASBJ.  g  755 

§  755.  2.  Time  of  Giving  Notice.  —  "We  have  seen  that 
if  notice  is  not  given  until  after  the  purchaser  has  fully- 
paid  the  consideration,  received  a  conveyance,  and  com- 
pleted his  title,  he  is  not  in  the  least  affected  by  it.  If 
the  notice  is  given  before  any  or  all  of  these  steps  have 
been  taken,  its  consequences  may  be  different,  and  are  to 
be  considered.  The  general  rule  is  settled  in  England, 
that  a  bona  fide  purchase  requires  both  the  payment  of  all 
the  price  and  the  execution  and  delivery  of  the  convey- 
ance before  the  receipt  of  notice  by  the  purchaser.  In 
other  words,  if  the  party  has  received  the  conveyance  be- 
fore notice  and  paid  the  price  after,  or  has  paid  the  price 
before  and  received  the  conveyance  after,  in  either  in- 
stance the  bona  fides  of  the  purchase  is  destroyed.*  The 
American  decisions  are  all  agreed  that  a  notice  received 
before  any  of  the  purchase  price  has  been  paid,  as  well 
after  the  deed  of  conveyance  has  been  delivered  as  be- 
fore, will  destroy  the  bona  fides  of  the  purchase,  and  many 
of  the  decisions,  following  the  English  rule,  attribute  the 
same  effect  to  a  notice  after  a  payment  of  part,  but  before 

enforcement  would  violate  other  set-  or  acquires  in  the  first  instance  an 
tied  doctrines.  In  Johns  v.  Sewell,  3.3  equitable  estate,  the  rule  also  applies, 
Ind.  1,  a  second  purchaser,  B,  bought  so  far  ns  that  furchase  is  concerned. 
with  notice  from  a  first  purchaser.  A,  For  example,  if  A  receives  a  first 
who  had  acquired  without  notice;  mortgage,  which  conveys  the  legal  es- 
bat  since  A  was  a  mere  volunteer,  and  tate,  and  B  takes  a  second  mortgage 
therefore  did  not  hold  the  land  free  of  the  same  form,  purporting  to  con- 
from  equities,  B  took  it  subject  to  the  vey  the  land,  but  which  is,  neverthe- 
same  equities.  In  Blatchley  v.  Os-  less,  only  an  equitable  conveyance, 
born,  33  Conn.  226,  it  was  held  that  a  the  rule  requires  that  B  should  both 
tenant  in  common  with  notice  cannot  have  advanced  the  money  and  ob- 
get  a  clear  title  from  his  co-tenant  tained  the  instrument  before  receiving 
without  notice  by  partition.  notice,  in  order  to  be  a  bona  fide  pur- 
'  Wigg  v.  VA'igg,  1  Atk.  382,  384;  chaser.  This  rule,  however,  does  not 
Story  V.  Lord  Windsor,  2  Atk.  630;  prevent  a  person  who  has  thus  ac- 
Tourville  v.  Naish,  3  P.  Wms.  307;  quired  an  equitable  estate  by  convey- 
Jones  V.  Stanley,  2  Eq.  Cas.  Abr.  685,  ance  in  good  faith,  and  who  afterwards 
pi.  9;  More  v.  Mayhow,  1  Cas.  Ch.  34;  receives  notice  of  a  prior  equity,  from 
Rayne  v.  Baker,  1  Gift'.  241;  Tildesly  ohtaining  a  conveyance  of  the  out- 
V.  Lodee,  3  Smale  &  G.  543;  Collin-  standing  legal  estate  and  tlius  protoct- 
Bon  V.  Lister,  7  De  Gex,  M.  &  G.  634;  ing  himself  from  such  equity.  Tliis 
20  Beav.  356;  Sharpe  v.  Foy,  L.  R.  latter  power  is  recognized  by  an  over- 
4  Ch.  35,  37.  The  true  meaning  of  whelming  array  of  English  authority, 
this  rule  should  not  be  misappre-  and  in  fact  forms  one  of  the  most  fre- 
hended.  If  A  purchases  in  the  first  quent  occasions  for  applying  the  doc- 
instance  a  legal  estate,  the  rule,  of  trine  of  bona  fide  purchase. 
course,  applies  to  him.    If  he  purchases 


§  756 


EQUITY   JURISPRUDENCE. 


1056 


the  whole  is  paid.*  Such  a  payment  is,  by  some  authori- 
ties, a  protection  pro  tanto?  Finally,  the  case  of  notice 
received  after  payment  made,  but  before  the  deed  of  con- 
veyance delivered,  has  given  rise  to  a  direct  conflict  of 
judicial  opinion.  One  group  of  decisions  adopts  and  lays 
down  the  English  rule,  that  the  purchase,  under  these 
circumstances,  is  not  bona  fide.*  Another  line  of  cases 
holds  in  the  most  positive  and  general  manner  that 
where  the  purchaser  has  paid  the  consideration  without 
notice  of  any  prior  claim,  and  after  receiving  notice  he 
obtains  a  conveyance  of  the  legal  estate,  he  becomes  to 
all  intents  a  bona  fide  purchaser,  and  is  entitled  to  all  the 
protection  belonging  to  that  position.  And  this  result 
seems  to  be  applied  without  limitation  to  tiie  acquisition 
of  every  kind  of  equitable  estate,  interest,  or  right.* 

§  756.     Effect  of  Notice  on  the  Bona  Fide  Purchase  of 
Equitable  Interests.  —  An  attempt  to  reconcile  these  con- 


1  Baldwin  v.  Sager,  70  111.  503; 
Palmer  v.  Williams,  24  Mich.  328; 
Penfield  v.  Dunbar,  64  Barb.  239;  and 
see  caies  supra,  under  §  691;  Wormley 
V.  Wormley,  8  Wheat.  421,  449,  450; 
Frost  V.  Beeknian,  1  Johns.  Ch.  288; 
Murray  v.  Finster,  2  Johns.  Ch.  155; 
Jewett  V.  Palmer,  7  Johns.  Oh.  65;  11 
Am.  Dec.  401;  Losey  v.  Simpson,  11 
N.  J.  Eq.  246;  Beck  v.  Uhrich,  13 
Pa.  St.  633,  639;  53  Am.  Dec.  507; 
Bennett  v.  Titherington,  6  Bush,  192; 
Wells  V,  Morrow,  38  Ala.  125  (must 
have  paid  the  whole  price);  Moore  v. 
Clay,  7  Ala.  742;  Duncan  v.  Johnson, 
13  Ark.  190;  Simms  v.  Richardson,  2 
Litt.  274;  Blair  v.  Owles,  1  Munf.  38; 
Doswell  V.  Buchanan,  3  Leigh,  365; 
Blight's  Heirs  v.  Banks,  6  T.  B.  Mon. 
192;  17  Am.  Dec.  136;  Halstead  v. 
Bank  of  Kentucky,  4  J.  J.  Marsh.  554; 
Pillow  V.  Shannon,  3  Yerg.  508;  Zoll- 
man  v.  Moore,  21  Gratt.  313;  and  see 
Wilson  V.  Hunter,  30  Ind.  466,  471; 
[Keyser  v.  Angle.  40  N.  J.  Eq.  481; 
Ellis  V.  Young,  31  S.  C.  322;  Steffian 
V.  Milmo  Nat.  Bank,  69  Tex.  513.] 

»  See  anf^,  §  750. 

»  Peabody  v.  Fenton,  3  Barb.  Ch. 
451,  464,  465;  Orimstone  v.  Carter,  3 
Paige,  421,  437;  24  Am.  Dec.  230; 
Fash  V.  Ravesies,  32  Ala.  451;  Moore 
V.  Clay,  7  Ala.  742;  Wells  v.  Morrow, 


38  Ala.  125;  Duncan  v.  Johnson,  13 
Ark.  190;  Osborn  v.  Carr,  12  Conn. 
195,  198;  Bennett  v.  Titherington,  6 
Bush,  192;  Simms  v.  Richardson,  2 
Litt.  274;  Blair  v.  Owles,  1  Munf.  38; 
Doswell  V.  Buchanan,  3  Leigh,  365; 
23  Am.  Dec.  280;  Blight  v.  Banks,  6 
T.  B.  Mon.  192;  17  Am.  Dec.  136; 
Halstead  v.  Bank  of  Kentucky,  4  J.  J. 
Marsh.  554;  Pillow  v.  Shannon,  3 
Yerg.  508. 

*  Carroll  v.  Johnston,  2  Jonea  Eq. 
120;  Baggarly  v.  Gaither,  2  Jones  Eq. 
§0;  Leach  v.  Ansbacher,  55  Pa.  St.  85; 
Gibler  v.  Trimble,  14  Ohio,  323;  Mut. 
Ass.  Soc.  V.  Stone,  3  Leigh,  218; 
Wheaton  v.  Dyer,  15  Conn.  307,  310; 
and  see  Phelps  v.  Morrison,  24  N.  J. 
Eq.  195.  In  Carroll  v.  Johnston,  2 
Jones  Eq.  120,  the  question  was  pre- 
sented very  sharply.  Plaintiff  held 
under  a  prior  vendee,  A;  defendant 
was  a  subsequent  vendee,  who  had  paid 
part  of  the  price  before  notice  of  A's 
claim;  after  receiving  notice  he  ob- 
tained a  conveyance  from  the  original 
vendor,  and  was  held  to  be  a  bona  fide 
purchaser  and  protected.  Certainly 
there  is  nothing  in  the  settled  prin- 
ciples of  the  doctrine  concerning  bona 
fide  purchase  which  can  sustain  such 
a  conclusion. 


1057       CONCERNING  BONA  FIDE  PURCHASE.      §  756 

flicting  authorities  would  be  vain.  I  can  only  state  what 
seem  to  be  the  necessary  conclusions  from  well-estab- 
lished equitable  principles.  In  the  first  place,  the  rule 
last  stated  cannot  be  extended  to  all  equitable  interests 
without  violating  elementary  principles.  Between  two 
successive  equal  equities,  the  order  of  time  controls, 
without  regard  to  the  fact  of  consideration  or  notice;  the 
one  subsequent  in  time  obtains  no  preference  by  paying 
consideration  without  notice.  Equities  are  thus  equal 
where  both  parties  are  equally  innocent  and  equally  dili- 
gent. If  an  owner  of  land  gives  an  agreement  to  convey 
it  to  A,  who  pays  all  or  part  of  the  price,  and  afterwards 
gives  a  second  agreement  to  convey  to  B,  who  enters 'into 
the  contract  and  pays  all  or  part  of  the  price  without  any 
notice  of  the  prior  claim  of  A,  clearly  B  would  have  ob- 
tained no  equitable  advantage  from  the  fact  of  his  con- 
tract and  payinent  without  notice;  A's  interest  would  be 
of  the  same  character  and  extent,  and  his  priority  of  time 
would  give  him  priority  of  right.  To  say  that  B,  being 
thus  inferior  in  equitable  right,  may,  upon  receiving  no- 
tice of  A's  contract,  obtain  a  conveyance  from  the  owner, 
and  thus  establish  a  precedence  over  A,  is  to  misapply 
the  doctrine  of  bona  fide  purchase,  and  to  ignore  a  famil- 
iar principle  of  equity  that  one  who  acquires  a  title  with 
notice  of  a  prior  equity  takes  it  subject  to  that  equity. 
The  same  is  true  of  all  subsequent  equitable  interests^ 
liens,  and  claims  not  arising  from  conveyances  or  instru- 
ments which  purport  to  be  conveyances  of  the  entire  es- 
tate. This  conclusion  is  fully  sustained  by  the  ablest 
authorities,  English  and  American.*    In  the  second  place, 

'  It  is  one  of  the  fundamental  posi-  with   valne,   although,    as    the    court 

tions  established  by  Lord  Westbury  in  held,  under  suspicious   circumstances, 

the    celebrated    case    of    Phillips    v.  which  ought  to  have  put  him  on  the 

Phillips,    4    De  Gex,    F.    &    J.    208;  inquiry,    and    which     of     themselves. 

ante  §§  414,    note,    742.     In  Peabody  showed    the   absence    of    good   faith. 

V.    Fenton,    3    Barb.     Ch.    451,    464,  Chancellor  Walworth   also  held   that 

405,   A  obtained   an   assignment  of  a  B's  title  was  worthless,  upon  another 

bond  and  mortgage  from  the  owner  by  ground,  as  follows:  "  Again,  to  protect 

gross  fraud,  and  assigned  it  to  B,  who  a  party  as  a  bona  fidt  purchaser  with- 

had  no  actual  notice,  and  who  parted  out  notice,  he  must  have  acquired  the 
2E(tJ0B.  — 67 


§756 


EQUITY    JURISPRUDENCE. 


1058 


the  English  decisions  are  numerous  to  the  effect  that 
when  one  has  purchased  an  equitable  estate,  and  has  re- 
ceived the  instrument  conveying  the  same  and  paid  the 
entire  consideration  without  notice  of  a  prior  conflicting 
claim,  he  may,  upon  receiving  notice  thereof,  procure  a 
transfer  of  the  outstanding  legal  title,  and  thereby  obtain 
protection.  This  mode  of  bo7ia  fide  purchase,  it  will  be 
found,  is  strictly  confined  to  cases  in  which  the  purchaser 
acquires  an  estate,  although  equitable,  and  therefore  ac- 
quires and  holds  through  an  instrument  which  purports 


legal  title,  as  well  as  an  equitable  right 
to  the  property."  He  refers  to  the 
case  of  a  conveyance  of  land  obtained  by 
fraud,  which  is  voidable  at  the  election 
of  the  grantor,  but  where  the  fraudu- 
lent grantee  has  the  power  to  transfer 
a  valid  title  to  a  bona  fide  purchaser 
without  notice  of  the  fraud,  and  con- 
tinues: "But  if  such  bona  fide  pur- 
chaser has  not  obtained  the  legal  title 
by  an  actual  and  valid  conveyance,  he 
cannot  protect  himself  against  the 
prior  equity  of  the  original  owner  to 
rescind  the  conveyance  to  the  fraudu- 
lent grantee,  although  such  bo7ia  fide 
purchaser  has  a  contract  for  conveyance, 
and  has  actually  paid  for  the  land."  If 
A  has,  through  fraudulent  representa- 
tions, conveyed  land  to  B,  so  that  the 
conveyance  might  be  set  aside  at  A's 
suit,  and  while  B  thus  held  the  appar- 
ent legal  title,  he  should  create  an 
equitable  lien  upon  the  land  in  favor 
of  C,  by  means  of  contract  as  security 
for  money  loaned,  the  money  being 
advanced  without  notice  of  the  fraud- 
ulent defect  iu  B's  title;  or  B  should 
give  a  contract  of  sale  of  the  land  to 
C,  the  price  being  paid  without  notice 
of  the  fraud,  —  C's  equitable  interest  in 
either  case  would  be  clearly  subordi- 
nate to  A's  prior,  and  therefore  superior, 
equity.  A  could  in  one  suit  set  aside 
the  conveyance  to  B,  and  cut  ofif  the 
equitable  lien  which  had  attached  in 
favor  of  C.  If  C,  after  learning  of  the 
fraud,  and  A's  right  resulting  from  it, 
should  obtain  a  conveyance  of  tlie  legal 
estate  from  B,  he  would  clearly  be  in 
no  better  position;  he  could  not,  upon 
principle,  claim  the  protection  given  to 
a  bona  fide  purchaser;  he  would  cer- 
tamly  come  under  the  operation  of  the 


doctrine  that  one  who  takes  even  a 
legal  title  with  notice  of  a  prior  equity 
takes  and  holds  subject  to  that  equity, 
and  barred  by  its  obligations.  These 
illustrations  may  appear  trite  and  ele- 
mentary, but  they  will  serve  to  explain 
some  judicial  dicta,  which,  in  all  their 
generality  of  expression,  would  be  mis- 
leading. In  Grimstone  v.  Carter,  3 
Paige,  421,  437,  Chancellor  Walworth 
stated  the  doctrine  most  clearly  and 
accurately:  "This  court  will  not  per- 
mit the  party  having  the  subsequent 
equity  to  protect  himself  by  obtaining 
a  conveyance  of  the  legal  title,  after 
he  has  either  actual  or  constructive 
notice  of  the  prior  equity.  To  protect 
a  party,  therefore,  and  to  enable  him 
to  defend  himself  as  a  bona  fide  pur- 
chaser for  a  valuable  consideration,  he 
must  aver  in  his  plea  or  state  in  his 
answer  not  only  that  there  was  an 
equal  equity  in  himself  by  reason  of 
his  having  actually  paid  the  purchase- 
money,  but  that  he  had  also  clothed 
his  equity  with  the  legal  title  before  he 
had  notice  of  the  prior  equity."  [See  also 
Louisville  &  N.  R.  R.  Co.  v.  Boykin, 
76  Ala.  ."ieO;  Fash  v.  Ravesies,  32  Ala. 
451.]  The  contrary  decisions  illus- 
trate the  very  remarkable  tendency 
exhibited  by  some  of  the-  state  courts 
to  go  far  beyond  the  established  prin- 
ciples of  equity,  and  to  deal  with  mere 
equitable  interests  as  though  they  had 
all  the  features  and  incidents  of  legal 
estates,  while  in  other  matters  the 
same  courts  may  fail  or  refuse  to  adopt 
principles  equally  well  settled,  which 
define  the  equitable  jurisdiction,  or 
which  recognize  the  existence  of  equi- 
table rights. 


1059 


CONCERNING    BONA    FIDE    PURCHASE. 


■5G 


to  be  and  operates  as  a  conveyance  of  the  land.  The 
most  common  example  is  that  of  a  subsequent  mortgagee 
of  land,  through  a  mortgage  in  the  ordinary  form  of  a 
legal  conveyance,  where  his  estate  is  necessarily  equitable, 
since  the  legal  estate  has  been  conveyed  to  and  is  out- 
standing in  the  first  mortgagee.  The  true  force  and  effect 
of  these  English  decisions  have  sometimes,  I  think,  been 
misapprehended   by   American   courts.^     The  only  con- 


^  An  opinion  contrary  to  these  oon- 
elusions  has  been  maintained  by  a  re- 
cent able  text-writer  (see  1  Jones  on 
Mortgages,  sec.  5S1),  and  a  dictum 
of  Lord  Platherley,  in  the  recent  case 
of  Pilcher  v.  Rawlins,  L.  R.  7  Ch. 
259,  267,  is  cited  in  support  of  that 
view.  But  when  the  dictum  is  read 
in  connection  with  its  context,  and  in 
the  light  of  the  facts  and  circum- 
stances of  the  case,  and  of  the  decision 
made,  it  will  be  found  not  only  to  be 
consistent  with  but  to  fully  sustain 
the  distinction  which  I  have  drawn. 
Lord  Hatherley,  after  referring  to 
some  observations  by  Lord  Eldon  in 
Maundrell  v.  Maundrell,  10  Ves.  246, 
and  Ex  parte  Knott,  11  Ves.  609,  said: 
"It  appeared  to  me  then,  as  now,  that 
Lord  Eldon  applied  his  observations 
to  a  case  in  which  the  purchaser  had 
advanced  his  money  in  good  faith,  but 
took  .the  legal  estate  afterwards  from 
one  whom  he  knew  to  be  a  trustee  for 
others,  distinguishing  that  case  from 
the  case  of  a  legal  estate  acquired  by 
■payiny  off  a  mortgage.  In  itself,  it  is 
immaterial  whether  the  purchaser 
knows  or  not  that  another  has  an 
equitable  interest  prior  to  his  own, 
provided  he  did  not  know  that  fact  on 
paying  his  purchase-money.  It  may 
perhaps  be  sufficient  in  all  possible 
cases  for  the  purchaser  to  say,  I  am 
not  to  be  sued  in  equity  at  all.  /  hold 
%vhat  was  conveyed  to  me  hy  one  in  ■pos- 
session, who  tvas,  or  pretended  to  be, 
seised,  and  who  conveyed  to  me  without 
my  having  notice  of  another  equitable 
title;  and  that  the  plaintiff  in  equity 
must  disprove  the  plea  before  he  can 
proceed  any  further  in  his  suit. "  Now, 
it  is  entirely  uncritical  to  take  the 
single  sentence  beginning  "In  itself 
it  is  immaterial,"  etc.,  from  the  above 
passage,  separate  it  from  its  context, 
and  make  it  a  universal  rule  appli- 
cable to  all  kinds  of  subsequent' equi- 


table interests  and  liens  as  well  as 
estates.  The  facts  of  this  case,  the 
opinions  of  Lord  Eldon  referred  to, 
the  language  of  Lord  Hatherley,  and 
especially  the  closing  sentences  of  the 
quotation  show  with  absolute  cer- 
tainty that  he  is  speaking  only  of 
those  cases  in  which  a  subsequent  pur- 
chaser acquires  an  estate  by  means  of 
a  conveyance  purporting  to  convey 
the  title  to  the  land,  supposing  it  to 
be  the  legal  estate,  but  which  turns 
out  to  be  only  an  equitable  estate. 
If  he  acquired  such  estate  in  good 
faith,  he  may  afterwards,  upon  learn- 
ing of  the  prior  right,  get  a  convey- 
ance of  the  legal  title  and  be  protected. 
It  is  demonstrable  that  Lord  Hather- 
ley is  not  referring  to  those  who  ac- 
quire mere  equitable  interests,  liens, 
and  the  like,  and  that  he  is  not  inter- 
fering with  the  settled  doctrines  of 
priority  from  time  among  successive 
equities.  If  there  could  be  a  pcssible 
doubt  as  to  the  meaning  of  Lord  Hath- 
erley's  language,  it  is  completely  put 
at  rest  by  the  opinion  of  James,  L.  J., 
in  the  same  case  (p.  268).  He  be- 
gins his  opinion  as  follows:  "I  do  not 
mean  to  refer  to  a  class  of  cases  which 
appear  to  me  entirely  distinct  in  prin- 
ciple from  the  case  now  before  us.  I 
mean  that  class  of  cases  in  which  a 
person,  finding  himself  in  possession 
under  a  defective  title,  has  cast  about 
to  cure  that  defect  by  procuring  some 
one  else  to  convey  an  outstanding  legal 
estate.  No  doubt  it  has  been  held  in 
this  court  that  a  man  under  those  cir- 
cumstances may  get  in  a  mortgage  and 
tack  his  defective  title  to  the  estate  of 
that  mortgagee."  The  doctrine  of 
"tacking"  has  been  repudiated  by 
the  American  courts,  and  they  have 
thus  rejected  that  application  of  the 
rule  under  discussion  which  has  been 
altogether  the  most  frequent  in  Eng- 
land. 


§§  757,  758  EQUITY    JURISPRUDENCE.  1060 

elusions  consistent  with  settled  principles  are  the  follow- 
ing. It  is  only  where  a  party  has  acquired  an  equitable 
estate  by  means  of  a  conveyance  which  purported  to  con- 
vey the  land  itself,  and  has  received  the  instrument  and 
paid  the  consideration  without  notice  of  a  prior  claim, 
that  he  can,  after  notice,  procure  the  legal  title  and  wiLli 
it  the  protection  of  a  bona  fide  purchaser.  Where  a  party 
has  acquired  only  an  equitable  lien  or  interest,  not  by 
conveyance,  and  has  advanced  the  consideration  without 
notice,  he  cannot,  after  notice,  get  in  the  legal  estate,  and 
thus  obtain  precedence  over  a  prior  equity. 

§  757.  3.  Recording  in  Connection  with  Notice.  —  This 
general  subdivision  involves  two  entirely  distinct  matters: 
1.  The  first  deals  with  the  record  in  its  operation  and 
effects  as  a  constructive  statutory  notice  to  all  subsequent 
purchasers  and  encumbrancers.  This  aspect  of  recording 
has  already  been  examined  in  a  former  section,  and  notli- 
ing  need  here  be  added.^  2.  The  second  deals  with  notice 
in  its  ejffects  upon  the  holder  of  a  subsequent  conveyance 
or  mortgage  who  obtains  the  earliest  record,  how  and 
when  it  defeats  his  bona  fide  character  and  destroys  the 
advantage  of  his  first  record;  or,  to  state  the  same  af- 
firmatively, what  is  necessary  to  make  the  holder  of  a 
subsequent  conveyance,  who  obtains  the  earliest  record, 
a  bona  fide  purchaser,  so  that  he  may  secure  the  precedence 
under  the  statute  by  means  of  his  record.  Although  this 
branch  of  the  subject  has  also  been  considered,^  it  will 
be  convenient  to  recapitulate  the  results  as  a  part  of  the 
present  discussion. 

§  758.  The  Interest  under  a  Prior  Unrecorded  Convey- 
ance. — Although  the  statutes  pronounce  unrecorded  deeds 
and  mortgages  to  be  void  as  against  subsequent  purchasers 
who  have  complied  with  their  provisions,  yet  in  the  prac- 

•  See   snpra,  §§   655-658;   Baker   v.  other   than    those    through   or    from 

GrifSn,    50    Miss.    158.      Subsequent  whom   he   is   compelled   to   trace  his 

purchaser   is   not   charged  with   con-  record  title. 

Btructive  notice  by  the  record  of  an  *  See  supra^  §§  659-664. 
encumbrance    created    by    a    person 


1061  CONCERNING    BONA    FIDK    PURCHASE.  §  759 

tical  operation  of  this  legislation  the  right  created  by  a 
prior  unrecorded  instrument  is  generally  regarded  as 
tantamount  to  an  equitable  interest,  which  may  therefore 
be  cut  ofif  by  a  subsequent  purchaser  or  encumbrancer 
who  is  in  all  respects  bona  fide,  and  who  has  also  obtained 
the  first  record.  The  total  effect  of  the  system  is  thus 
twofold;  it  both  enlarges  the  scope  of  the  doctrine  con- 
cerning bona  fide  purchase,  by  extending  it  to  all  those 
interests,  legal  or  equitable,  which  are  required  or  per- 
mitted to  be  recorded,  and  it  adds  to  the  elements  con- 
stituting a  bona  fide  purchase  the  further  requisite  of  a 
registration. 

§  759.  Requisites  to  the  Protection  from  the  First  Rec- 
ord by  a  Subsequent  Purchaser.  —  It  follows  that,  in  order 
to  obtain  the  benefit  of  the  first  recording,  the  subse- 
quent purchase  or  encumbrance  must  be  for  a  valuable 
consideration  within  the  meaning  of  the  general  doctrine. 
Although  the  subsequent  purchaser  or  encumbrancer  had 
no  notice  of  the  unrecorded  instrument,  still,  if  he  had 
not  paid  a  valuable  consideration,  he  would  not  gain  any 
superior  title  or  lien  by  his  earlier  registration.'     Since 

'  It  is  held  in  some  of  these  cases  3  Dana,  525;  McCormick  v.  Leonard, 
that  in  a  contest  between  the  holder  38  Iowa,  272;  Fort  v.  Burch,  6  Barb, 
of  the  prior  unrecorded  conveyance  60,  78;  Van  Wagenen  v.  Hopper,  8 
and  the  subsequent  grantee  or  mort-  N.  J.  Eq.  684,  707;  Gary  v.  White, 
gagee  who  has  obtained  a  record,  the  52N.  Y.  138;  Dickersonv.  Tillinghast, 
burden  of  proof  is  on  the  latter  of  4  Paige,  215;  25  Am.  Dec.  528;  Har- 
showing  affirmatively  that  he  paid  a  ris  v.  Norton,  16  Barb.  264;  Nice's 
valuable  consideration  and  had  no  Appeal,  54  Pa.  St.  200;  Spackman  v. 
notice;  the  record  itself  isnotenough:  Ott,  65  Pa.  St.  131;  Maupin  v.  Em- 
Landers  V.  Bolton,  26  Cal.  393;  Snod-  mons,  47  Mo.  304;  and  see  cases  cited 
grass  V.  Ricketts,  13  Cal.  359;  Plant  under  §§  747,  750,  751.  [See  also  An- 
V.  Smythe,  45  Cal.  161;  Long  v.  Dol-  thony  v.  Wheeler,  130  111.  128;  17 
larhide,  24  Cal.  218;  [Lupo  v.  True,  Am.  St.  Rep.  281;  Ryderv.  Rush,  102 
16  S.  C.  580;  Simpson  v.  Del  Hoyo,  111.  338;  Lamar  v.  Hale,  79  Va.  147. 
94  N.  Y.  189;  Richards  v.  Snyder,  11  In  Wynn  v.  Rosette,  66  Ala.  517,  it 
Or.  501;  Bremer  v.  Case,  60  Tex.  151;  is  held  that  when  a  defendant  sets  up 
Houston  etc.  R.  R.  Co.  v.  ChafBn,  60  a  purchase  for  a  valuable  consideration 
Tex.  555;  Lakin  v.  Sierra  B.  G.  M.  without  notice  in  defense  to  a  bill  to 
Co.,  25  Fed.  Rep.  337;]  but  the  con-  enforce  a  vendor's  lien,  the  burden 
trary  rule  is  established  by  many  other  of  proof  is  on  him  to  prove  payment 
cases,  which  hold  that  the  burden  of  of  such  consideration;  but  he  is  not 
proof  is  on  him  who  claims  the  prior-  required  to  disprove  notice  of  the 
ity  and  charges  the  other  with  having  non-payment  by  his  grantor  of  the 
had  notice:  Center  v.  Planters'  etc.  purchase-money,  when  the  deed  recite* 
Bank,  22  Ala.   743;  Miles  v.  Blantou,  its  payment.] 


§759 


EQUITY   JURISPEUDENCE. 


1062 


the  subsequent  purchaser  or  encumbrancer  must  be  bona 
fide,  in  order  to  claim  the  benefits  of  the  first  registration, 
it  also  follows  that  if  such  subsequent  purchaser  or  en- 
cumbrancer was,  in  taking  his  conveyance,  mortgage,  or 
other  instrument  required  or  permitted  to  be  recorded, 
chargeable  with  notice  of  a  prior  unrecorded  conveyance 
or  encumbrance,  within  the  operation  of  the  settled  rules 
concerning  the  nature  of  notice  and  the  time  and  mode 
of  its  reception,  then  he  is  not  a  bona  fide  purchaser,  and 
does  not  obtain  the  statutory  superiority  of  title  or  prece- 
dence of  lien  by  his  earliest  registration.  This  construc- 
tion was  put  upon  the  English  statutes  at  an  early  day, 
and  has  been  adopted  in  nearly  all  the  American  states.* 


'  See  supra,  §§  659,  660;  1  Jones 
on  Mortgages,  sees.  570-573.  la  the 
following  discussion  of  recording  in 
connection  with  notice,  I  have  availed 
myself  of  Mr.  Jones's  able  and  full 
treatment  of  the  same  subject  in  his 
work  on  mortgages,  — a  work  which  I 
may  be  permitted  to  say  is  a  credit  to 
the  legal  literature  of  the  country. 
In  the  United  States  the  equitable 
applications  of  the  doctrine  concerning 
bona  Jide  purchase,  as  modified  by  the 
recording  acts,  are  mainly  confined  to 
mortgages.  I  desire  to  acknowledge 
the  assistance  I  have  received  and  the 
material  which  I  have  borrowed  from 
Mr.  Jones's  work:  Rolland  v.  Hart, 
L.  R.  6  Ch.  678;  Benham  v.  Keane,  1 
Johns.  &  H.  685;  Le  Neve  v.  Le  Neve, 
Amb.  436;  Forbes  v.  Deniston,  4  Brown 
Pari.  C.  189;  Hine  v.  Dodd,  2  Atk. 
275;  Davis  v.  Earl  of  Strathmore,  16 
Ves.  419;  Wyatt  v.  Barwell,  19  Ves. 
435,  438;  Tunstall  v.  Trappes,  3  Sim. 
286,  301;  Ford  v.  White,  16  Beav. 
120,  123;  Woodworth  v.  Guzman,  1 
Cal.  203;  Fair  v.  Stevenot,  29  Cal. 
486;  Mahoney  v.  Middleton,  41  Cal. 
41,  50;  Galland  v.  Jackman,  26  Cal.  79, 
87;  85  Am.  Dec.  172;  Lawton  v.  Gor- 
don, 37  Cal.  202;  Thompson  v.  Pioche, 
44  Cal.  508,  516;  O'Rourke  v.  O'Con- 
nor, .39  Cal.  442,  446;  Smith  v.  Yule, 
31  Cal.  180;  89  Am.  Dec.  167;  Beal  v. 
Gordon.  55  Me.  482;  Copeland  v.  Cope- 
land,  28  Me.  525;  Hart  v.  Farmers' and 
Mechanics'  Bank,  33  Vt.  252;  Day  v. 
Clark,  25  Vt.  397,  402;  Tucker  v.  Til- 


ton,  55  N.  H.  223;  Flynt  v.  Arnold, 
2  Met.  619;  George  v.  Kent,  7  Allen, 
16;  White  v.  Foster,  102  Mass.  375; 
Hamilton  v.  Nutt,  34  Conn.  501 ;  Jack- 
son v.  Burgott,  10  Johns.  457,  459;  6 
Am.  Dec.  349;  Jackson  v.  Van  Val- 
kenburgh,  8  Cow.  260;  Jackson  v. 
Post,  15  Wend.  588;  Van  Rensselaer 
V.  Clark,  17  Wend.  25;  31  Am.  Dec. 
280;  Fortv.  Burch,  5Denio,  187;  Ring 
V.  Steele,  3  Keyes,  450;  Butler  v. 
Viele,  44  Barb.  166;  La  Farge  F.  Ina. 
Co.  V.  Bell,  22  Barb.  54;  Schutt  v. 
Large,  6  Barb.  373;  Goelet  v.  Mc- 
Manus,  1  Hun,  306;  Smallwood  v. 
Lewin,  15  N.  J.  Eq.  60;  Mathews  v. 
Everitt,  23  N.  J.  Eq.  473;  Conover 
V.  Van  Mater,  18  N.  J.  Eq.  481; 
Jaques  v.  Weeks,  7  Watts,  261 ;  Union 
Canal  Co.  v.  Young,  1  VVhart.  410, 
4.32;  30  Am.  Dec.  212;  Solms  v.  Mc- 
Culloch,  5  Pa.  St.  473;  Nice's  Appeal, 
54  Pa.  St.  200;  Ohio  etc.  Co.  v.  Ross, 

2  Md.  Ch.  25;  Owens  v.  Miller,  29 
Md.  144;  Johnston  v.  Canby,  29  Md. 
211;  Lambert  V.  Nanny,  2  Munf.  196; 
Gibbes  v.  Cobb,  7  Rich.  Eq.  54;  Nel- 
son V.  Dunn,  15  Ala.  501;  Harrington 
V.  Allen,  48  Miss.  493;  Smitli  v.  Net- 
tles, 13  La.  Ann.  241;  Myers  v.  Ross, 

3  Head,  60;  Underwood  v.  Ogden,  6 
B.  Mon.  606;  Forepaugh  v.  Appold, 
17  B.  Mon.  625;  Sparks  v.  State  Bank, 
7  Blackf.  469;  Farmers' Bank  v.  Bron- 
son,  14  Mich.  361;  Baker  v.  Mather, 
25  Mich.  51;  Bavliss  v.  Young,  51  111. 
127;  Gilbert  v.  Jess,  31  Wis.  110;  Fal- 
las3  V.  Pierce,  30    Wis.   443;  Bell  v. 


1063  CONCERNING    BONA    FIDE    PURCllASE.  §  7G0 

These    exceptional    states   are    OLio   and    North    Caro- 
lina. 

§  760.  Purchaser  in  Good  Faith  with  Apparent  Rec- 
ord Title  from  a  Grantor  Charged  with  Notice  of  a  Prior 
Unrecorded  Conveyance.  —  This  rule  is  of  very  easy  ap- 
plication under  all  ordinary  circumstances  between  two 
consecutive  deeds  or  mortgages  where  the  second  is  re- 
corded before  the  first.  Circumstances  may  arise  which 
present  questions  of  great  intricacy  and  difficulty,  and 
occasion  perhaps  a  conflict  of  judicial  opinion.  A  grantee 
or  mortgagee,  being  a  purchaser  in  good  faith,  and  hold- 
ing a  record  title  which  appears  perfect,  may  really  have 
no  title  because  a  grantor  or  a  mortgagor  in  the  chain  of 
title  had  knowledge,  when  he  took  the  conveyance  to 
himself,  of  a  prior  unrecorded  deed  or  mortgage,  which 
was,  however,  recorded  before  his  own  deed  or  mortgage 
to  his  own  grantee.  The  essential  facts  giving  rise  to 
such  a  question  are  as  follows:  A  gives  a  deed  to  B,  which 
for  a  while  is  unrecorded.  A  subsequently  conveys  the 
same  land  to  C,  who  pays  a  valuable  consideration,  but 
who  has  actual  notice  of  B's  prior  deed,  and  C  puts  his 
deed  on  record  first.  B  then,  after  the  recording  of  C's 
deed,  puts  his  own  prior  deed  on  record.  After  the  record 
of  B's  deed,  C  conveys  the  land  to  D,  who  pays  a  valuable 
consideration,  and  has  no  actual  notice  of  B's  deed,  and 
only  the  constructive  notice  given  by  the  record.  The 
facts  might  be  varied  by  supposing  mortgages  in  place  of 
deeds.     Which    has  the    priority,   B  or  D  ?     There  are 

Thomas,  2  Iowa,  384;  English  v.  Wa-  the  precedence  acquired  by  the  earlier 
pies,  13  Iowa,  57;  Coe  v.  Winters,  15  record  of  a  subsequent  conveyance  or 
Iowa,  481;  Sims  v.  Hammond,  33  mortgage.  It  has  already  been  shown 
Iowa,  368;  Musgrove  v.  Bonser,  5  (ante,  §  722)  that  in  Ohio  a  docketed 
Or.  313;  20  Am.  Rep.  737.  [See  also  judgment  has  precedence  over  a  prior 
Tolbertv.  Horton,  3l!Minn.  518;  Muel-  unrecorded  mortgage:  Bercaw  v. 
lerv.  Brigham,  53  Wis.  173.]  Ezcep-  Cockerill,  20  Ohio  St.  163;  Bloom  v. 
tions:  In  Oliio  and  North  Carolina,  Noggle,  4  Ohio  St.  45;  Mayham  v. 
the  courts  have  held,  in  construing  the  Coombs,  14  Ohio,  428;  Stansell  v.  Rob- 
somewhat  special  language  of  the  erts,  13  Oliio,  148;  42  Am.  Dec.  193; 
local  statutes,  that  notice,  whether  Robinson  v.  Willoughby,  70  N.  C. 
actual  or  constructive,  of  a  prior  un-  358;  Fleming  v.  Burgin,  2  Ired.  Eq. 
recorded   instrument    shall  not  affect  584. 


§  760 


EQUITY    JURISPRUDENCE. 


1064 


earlier  decisions  which  give  the  precedence  to  D.'  These 
decisions,  however,  have  been  overruled  in  the  same  states 
in  which  they  were  given,  and  it  is  now  settled  by  an 
overwhelming  weight  of  authority  that  B  would  have  the 
precedence  over  D.  It  is  plain  that  C  got  no  title  by  his 
first  recording,  because  he  had  actual  notice.  When  C 
conveyed  to  D,  if  B's  deed  had  not  then  been  on  record, 
and  D  had  put  his  own  deed  on  record  before  B's  deed 
was  recorded,  D  would  have  obtained  the  title.  But  the 
record  of  B's  deed  prior  to  the  conveyance  to  D  cut  off 
the  latter's  precedence,  because  D  could  claim  nothing 
from  C's  first  record,  by  reason  of  C's  having  actual 
notice.^     This  result  evidently  rests  upon  the  fact  —  and 


'  Connecticut  v.  Bradish,  14  Mass. 
296,  303;  Trull  v.  Bigelow,  16  Mass. 
406;  8  Am.  Dec.  144;  Glidden  v.  Hunt, 
24  Pick.  221;  Ely  v.  V^^ilcox,  20  Wis. 
523,  530;  91  Am.  Dec.  436;  and  see  2 
Lead.  Cas.  Eq.,  4th  Am.  ed.,  Am. 
notes,  40,  41,  212.  The  reason  given 
is,  that  D,  on  taking  his  deed  or  mort- 
gage, and  on  making  search,  would 
find  an  unbroken  chain  of  record  title 
from  himself  through  C  up  to  A,  aud 
that  he  was  under  no  obligation  to  go 
out  of  such  a  chain  of  record  title,  and 
search  for  deeds  or  mortgages  to  per- 
sons by  or  through  whom  he  did  not 
derive  his  title. 

'  ]  Jones  on  Mortgages,  sees.  574, 
575;  Flynt  v.  Arnold,  2  Met.  619; 
Mahoney  v.  Middleton,  41  Cal.  41,  50; 
Fallass  v.  Pierce,  30  Wis.  443;  English 
V,  Waples,  13  Iowa,  57;  Sims  v.  Ham- 
mond, 33  Iowa,  368;  Van  Rensselaer 
V.  Clark,  17  Wend.  25;  31  Am.  Dec. 
280;  Jackson  v.  Post,  15  Wend.  588; 
Ring  V.  Steele,  3  Keyes,  450;  Schutt 
V.  Large,  6  Barb.  373;  Goelet  v.  Mc- 
Manus,  1  Hun,  306.  In  Flynt  v. 
Arnold,  2  Met.  619,  Shaw,  C.  J.,  said: 
"Suppose,  for  instance,  A  conveys  to 
B,  who  does  not  immediately  record 
his  deed.  A  then  conveys  to  C,  who 
has  notice  of  the  prior  unregistered 
deed  to  B;  C's  deed,  though  first  re- 
corded, will  be  postponed  to  the  prior 
deed  to  B.  Then,  suppose  B  puts  his 
deed  on  record,  and  afterwards  G  con- 
veys to  D.  If  the  above  views  are 
correct,  D  could  not  hold  against  B; 
not  in   the   right   of    C,    because,    ia 


consequence  of  actual  knowledge  of 
the  prior  deed,  C  had  but  a  voidable 
title;  and  not  in  his  own  right,  be- 
cause, before  he  took  his  deed,  B's 
deed  was  on  record,  and  was  construct- 
ive notice  to  him  of  the  prior  convey- 
ance to  B  from  A,  under  whom  his 
title  is  derived.  But,  in  such  a  case, 
if,  before  B  recorded  his  deed,  C  had 
conveyed  to  D  without  actual  notice, 
then  D,  having  neither  actual  nor  con- 
structive notice  of  the  prior  deed, 
would  take  a  good  title.  And  as  D, 
in  such  case,  would  have  an  indefea- 
sible title  himself  against  B's  prior 
deed,  so,  as  an  incident  to  the  right  of 
property,  he  could  convey  a  good  and 
indefeasible  title  to  any  other  person, 
although  such  grantee  should  have 
full  notice  of  the  prior  conveyance 
from  A  to  B.  Such  purchaser,  and  all 
claiming  under  him,  would  rest  on  D's 
indefeasible  title,  unaffected  by  any 
early  defect  of  title,  by  want  of  regis- 
tration, which  had  ceased  to  have  any 
effect  on  the  title,  by  a  conveyance  to 
D  without  notice,  from  one  having  a 
good  apparent  record  title."  Shaw, 
C.  J.,  criticises  the  earlier  Massachu- 
setts cases,  and  adds  some  very  valu- 
able remarks  upon  the  general  policy 
and  operation  of  the  recording  acts, 
and  the  duties  of  purchasers  in  search- 
ing the  records.  The  New  York  case 
of  Van  Rensselaer  v.  Clark,  17  Wend. 
25,  31  Am.  Dec.  280,  is  a  leading  au- 
thority in  support  of  the  proposition 
contained  in  the  text,  and  has  been 
followed  by  all  the  other  decisions  in 


1065  CONCERNING    BONA    FIDE    PURCHASE.  §  760 

there  all  of  the  decisions  place  it  —  that  C  took  with 
actual  notice,  and  so  could  acquire  no  precedence  by  his 
earliest  record.  If  this  fact  were  otherwise,  if  C  had  no 
notice  and  first  put  his  deed  or  mortgage  upon  record,  he 
would  then  clearly  obtain  a  perfect  title  or  superior  lien 
over  B's  prior  but  unrecorded  deed.  That  being  the  case, 
and  C  having  obtained  an  indefeasible  title,  if  he  should 
then  convey  to  D,  who  had  notice,  the  latter,  by  virtue  of 
another  settled  rule,  would  succeed  to  his  grantor's  rights, 
and  also  acquire  a  like  perfect  title,  as  Chief  Justice  Shaw 
expressly  states  in  the  passage  quoted.  The  same  would 
be  true  in  the  succession  of  purchasers,  each  obtaining  a 
record  but  each  affected  with  notice.  As  soon  as  any  one 
in  the  series  purchases  for  value  and  without  notice,  and 
places  his  conveyance  upon  record,  he  acquires  a  title  or 
lien  secure  as  against  the  earliest  unrecorded  deed  to  B. 
This  necessarily  leads  to  another  most  important  rule 
concerning  notice  in  connection  with  recording,  and  the 
extent  to  which  a  record  is  constructive  notice  to  subse- 
quent purchasers  and  encumbrancers. 

the  same  state.  In  Mahoney  v.  and  all  of  their  conveyances  being 
Middleton,  41  Cal.  41,  the  supreme  recorded,  yet  then,  if  B  should  record 
court  of  California  squarely  meets  the  his  deed  before  the  last  grantee  with 
question,  and  decides  in  full  accordance  knowledge,  and  Z  should  make  con- 
with  the  foregoing  Massachusetts  and  veyance,  the  purchaser  from  Z  would 
New  York  cases.  The  same  rule  ap-  be  bound  to  take  notice  of  B's  right, 
plies,  not  only  to  one,  but  to  any  num-  and  of  the  relations  existing  between 
ber  of  successive  grantees  and  grantors  him  and  all  the  su1)sequent  purchasers 
who  have  put  tlieir  conveyances  on  from  C  to  Z,  inclusive.  And  in  the 
record,  but  who  have  had  notice  of  a  same  case,  if  Z  should  sell  to  a  pur- 
prior  unrecorded  deed  or  mortgage,  or  chaser  in  good  faith  for  value  from 
who  have  not  paid  a  valuable  con-  him,  yet  if  B  should  get  his  convey- 
sideration.  In  the  recent  case  of  ance  recorded  bf/ore  tliat  of  such  pur- 
Fallass  v.  Pierce,  30  Wis.  443,  Dixon,  chaser,  his  title  would  be  preferred, 
C.  J.,  discussing  the  same  general  because  of  such  first  record.  And  it  is 
question,  and  adopting  the  same  sup-  manifest  that  the  same  result  would 
position  as  that  given  in  the  text  and  follow  if  in  the  case  supposed  none  of 
used  by  Shaw.  C.  J.,  said:  "If,  in  the  the  subsequent  grantees,  from  C  to  Z, 
case  supposed,  C  took  his  deed  with  inclusive,  paid  any  valuable  considera- 
knowledge  of  the  prior  conveyance  to  tion  for  the  land,  or,  if  in  the  case  of 
B,  and  had  then  conveyed  to  D,  who  each  successive  grantee,  his  title  was 
had  like  knowledge,  and  D  should  con-  defective  and  invalid  as  against  B, 
vey  to  E,  and  so  on,  conveyances  either  by  reason  of  his  knowledge  of 
should  be  executed  to  the  end  of  the  B's  title,  or  l)eeause  he  was  a  mere 
alphabet,  each  suljsequent  grantee  volunteer,  paying  no  consideratioa 
having  knowledge  of  B's  prior  right,  whatever  for  the  conveyance." 


§  761  EQUITY    JURISPRUDENCE.  1066 

§  761.     Break  in  the  Record  Title — When  Purchaser  is 
still  Charged  with  Notice  of  Prior  Unrecorded  Title.  —  A 

purchaser  or  encumbrancer  Is  not,  in  general,  bound  to 
search  the  records  for  encumbrances  as  against  a  title 
which  does  not  appear  on  the  record.  From  the  general 
policy  of  the  recording  acts  to  protect  purchasers  and  en- 
cumbrancers against  prior  unrecorded  deeds  and  mort- 
gages, it  necessarily  follows  that  the  title  upon  record,  in 
the  absence  of  notice  aliunde,  is  the  purchaser's  protec- 
tion. As  has  been  shown  in  the  section  upon  notice,'  the 
record  of  a  conveyance  or  of  a  mortgage  is  a  constructive 
notice  to  those,  and  to  those  only,  who  must  trace  their 
title  from  or  through  the  grantor,  or  the  mortgagor  by 
whom  the  deed  or  mortgage  was  executed.  If  there  is  a 
break  in  the  chain  of  record  title,  the  records  will  not 
enable  the  purchaser  to  supply  the  missing  links  and  to 
connect  the  broken  parts  by  any  systematic  search.  If 
a  purchaser  has  traced  the  title  by  the  records  regularly 
up  or  down  to  A,  and  the  record  does  not  show  the  title 
out  of  A,  then  the  statutes  render  A's  title  a  protection 
to  the  purchaser  under  it.  As  a  general  rule,  therefore, 
if  the  records  show  a  regular  chain  of  convej^ances  from 
A  to  B,  from  B  to  C,  the  record  of  a  mortgage  or  deed  of 
the  same  land  from  B,  prior  to  the  date  of  the  conveyance 
by  which  he  received  the  title  from  his  grantor,  A,  would 
not  affect  a  purchaser  or  mortgagee  from  C  with  notice.^ 

'  See  supra,  §  658.  from  Greenly's  executors  was  given  to 
'Page  V.  Waring,  76  N.  Y.  463,  the  plaintiff  and  recorded.  "This  is 
467-469;  Cook  v.  Travis,  20  N.  Y.  the  chain  of  the  plaintiff's  title,  upoa 
400;  Farmers'  Loan  &  T.  Co.  v.  which  he  bases  his  right  to  recover, 
Maltby,  8  Paige,  3G1;  Losey  v.  Simp-  and  if  there  was  nothing  to  break  this 
son,  11  N.  J.  Eq.  246;  Calder  v.  Chap-  chain,  his  right  would  be  plain  enough." 
man,  52  Pa.  St.  359;  91  Am.  Dec.  163;  The  following  is  the  chain  of  defend- 
Wing  V.  McDowell,  Walk.  Ch.  175.  ant's  title:  In  1861,  Peter  Poillon 
The  late  case  of  Page  v.  Waring,  76  gave  a  deed  of  the  same  land  to  Gold- 
N.  Y.  463,  clearly  illustrates  this  rule,  smith,  which  was  recorded  inimedi- 
The  controversy  was  between  two  ately.  In  1862,  Goldsmith  gave  a 
titles.  Peter  Poillon  owned  the  land  deed  of  an  undivided  half  of  the  land 
in  1827.  In  1827  he  gave  a  deed  of  it  to  Marks,  which  was  recorded  in  Sep- 
to  one  Hart,  but  this  deed  was  not  re-  tember  of  that  year.  In  March,  1S63, 
corded  until  1864.  In  1830,  Hart  exe-  Goldsmith  and  Marks  gave  a  deed  of 
cuted  a  deed  to  one  Greenly  which  was  the  land  to  Morton,  viiich  was  re- 
recorded at   once.     In    1863,  a   deed  corded  during   the  same  mouth.     In 


1067  CONCERNING    BONA    FIDE    rUKCHASE.  §  761 

Notwithstanding  the  generality  of  this  rule,  a  purchaser 
or  encumbrancer  may  be  bound  to  search  for  encum- 
brances as  against  a  title  not  appearing  of  record,  and 
may  therefore  be  affected  with  notice  by  such  encum- 
brances. Thus  in  the  case  last  supposed,  if  before  the 
conveyance  to  B  from  A,  B  had  held  some  estate,  legal 
or  equitable,  which  was  a  mortgageable  interest,  though 
not  the  legal  fee,  and  had  given  a  mortgage  while  hold- 
ing such  estate,  which  w^as  put  on  record,  the  mortgage 
being  executed  and  recorded  before  he  received  the  deed 
of  the  fee  from  A,  then  if  the  purchaser  from  C  had 
notice  of  the  fact  that  B  held  such  an  estate,  he  would 
be  bound  to  search  the  records  for  any  mortgage  made 
by  B  while  holder  thereof,  and  would  be  affected  with 
constructive  notice  by  the  record  of  such  a  notice.  The 
equitable  estate  of  a  vendee  in  possession  under  an  execu- 
tory contract  for  sale,  even  in  states  where  the  contract 
is  not  to  be  recorded,  and  even  when  it  is  verbal,  is  such 
a  mortgageable  interest;  and  if  the  vendee  gives  a  mort- 
gage which  is  recorded  before  he  obtains  a  conveyance  of 
the  fee,  a  purchaser  who  has  notice  of  his  prior  equitable 
interest  must  search  for  the  mortgage;  it  would  take  pre- 

1869,  Morton  conveyed  to  Fox,  and  derived  from  Hart  that  would  be  good 
immediately  after,  Fox  to  the  defend-  as  against  the  defendant:  Cook  v. 
ant,  both  deeds  being  immediately  Travis,  20  N.  Y.  400.  And  it  mat- 
put  on  record.  "It  will  be  seen  that  ters  not  that  all  the  deeds  in  the 
the  defendant  has  a  regular  chain  of  plaintiff's  chain  were  recorded  before 
title  from  Poillon,  and  that  all  the  the  conveyance  by  Morton  to  Fox, 
deeds  of  his  claim,  down  to  and  in-  and  by  Fox  to  the  defendant;  because 
eluding  the  deed  to  Morton,  were  re-  if  Morton  was  protected  by  the  re- 
corded before  the  deed  from  Poillon  to  cording  act,  and  had  good  title  under 
Hart  was  recorded;  and  this  priority  such  act,  then  the  persons  taking  title 
upon  the  records  presents  the  question  under  him  were  also  protected:  Web- 
to  be  considered  in  determining  the  ster  v.  Van  Steenbergh,  46  Barb.  21 1 ; 
rights  of  the  parties."  Earl,  J.,  said  Wood  v.  Chapin,  13  N.  Y.  509;  67  Am. 
(p.  468):  "It  matters  not  that  the  Dec.  62;  Hooker  v.  Pierce,  2  Hill,  650." 
deed  from  Hart  to  Greenly  was  re-  After  quoting  the  sections  of  the  stat- 
corded  before  the  deeds  in  the  defend-  utes,  he  adds:  "Under  these  acts  the 
ant's  chain  of  title;  because  if  the  unrecorded  deed,  though  prior  in 
defendant,  by  reason  of  the  record  of  date,  has  no  effect  as  to  the  subse- 
the  deeds  under  which  he  holds,  has  quent  deed  first  recorded,  and  the 
priority  over  the  deed  to  Hart,  and  a  subsequent  deed  conveys  the  title  as 
title  good  as  against  that  deed,  then  if  the  first  deed  had  not  been  exe- 
there  is  a  break  in  the  plaintiff's  cuted:  Hetzel  v.  Barber,  69  N.  Y.  1. 
chain  of  title,  and   no  title  could  be 


§  762  EQUITY   JURISPRUDENCE.  106S 

cedence  over  his  own  conversance  or  encumbrance.'  The 
notice  of  such  mortgageable  interest  might  be  actual  or 
constructive;  and  an  example  of  the  latter  kind  would  be 
that  given  by  recitals  in  a  deed  through  which  the  subse- 
quent purchaser  must  derive  his  title."  What  is  notice, 
in  its  various  forms  and  species,  has  been  considered  in 
a  former  section.' 

§  762.  III.  Good  Faith  Necessary.  —  The  most  general 
statement  of  the  doctrine  describes  the  purchase  as  one 
made  in  good  faith  for  a  valuable  consideration  and  with- 
out notice.  It  is  true  that  in  most  instances  the  want  of 
good  faith  consists  in  the  completion  of  the  purchase  after 
the  party  has  been  charged  with  notice,  for  such  conduct 
is  regarded  by  equity  as  constructively  fraudulent.^  The 
requisite  of  good  faith  extends  much  further.  A  pur- 
chaser may  part  with  a  valuable  consideration,  may  have 
no  notice  of  any  opposing  claim,  and  yet  lack  the  good 
faith  which  is  essential  to  render  his  position  a  protec- 
tion, and  his  defense  available.  It  is  an  elementary  doc- 
trine, therefore,  that,  independently  of  notice  and  valuable 
consideration,  any  want  of  good  faith  on  the  purchaser's 
part,  any  inequitable  conduct  of  his,  such  as  fraud  com- 
mitted in  the  transaction  against  his  own  immediate  ven- 
dor or  grantor,  or  a  participation  in  an  intended  fraud 
against  the  creditors  of  his  vendor  or  grantor,  or  his  ob- 
taining the  transfer  through  misrepresentations  or  con- 
cealments which  are  inequitable,  although  not  amounting 
to  positive  fraud,  and  the  like,  will  destroy  the  character 
of  a  bona  fide  purchase,  and  defeat  the  protection  other- 

^  Crane  v.  Turner,  7  Hun,  357;  af-  under  a  contract  for  the   sale  of   the 

firmed  67  N.  Y.  437.  land,  the   purdiaser   would,  by  such 

2  Crane  v.   Turner,  7  Hun,   357;  67  recital,  be  charged  with  notice  of  B's 

N.  Y.  437.     Thus  the  subsequent  pur-  equitable  interest,  and  that  it  was  a 

chaser  or  encumbrancer  must   derive  mortgageable  interest,  and  would  be 

liis  title  not   only  through    the   deed  bound    to    search   for    encumbrances 

from    B  to  C,   but  also  through  that  created  by  B  during  the  entire  period 

from   A    to    B.     If    the   latter   deed  while  he  was  in  possession  by  virtue  of 

should    contain    a    recital     that    the  his  equitable  interest  as  stated  by  the 

grailtee  B  had  been  in   possession  of  recital. 

the  land  for  a  certain  period  of  time  ^  See  ante,  sec.  V.,  §§  591-G76w 

prior   to   the  execution  of   the   deed,  ♦  See  ante,  §  591. 


1069  CONCEKNINQ    BONA   FIDE    PURCHASE.       §§  763,  764 

wise  given  to  it.  The  party  claiming  to  be  a  bona  fide  pur- 
chaser must  come  into  a  court  of  equity  with  absolutely 
clean  hands.* 

§  763.  Third.  Effects  of  a  Bona  Fide  Purchase  as  a 
Defense.  —  Having  explained  therationale  of  the  doctrine, 
and  ascertained  what  elements  enter  into  the  conception 
of  a  bona  fide  purchase,  I  pass  to  consider  with  somewhat 
more  of  detail  the  effects  which  it  produces  by  way  of  a  de- 
fense in  equitable  suits,  —  the  protection  which  it  affords 
to  a  defendant.^  Pursuing  the  order,  already  mentioned, 
adopted  by  Lord  Westbury,  the  various  cases  in  which 
the  defense  will  prevail  may  be  collected  into  three  classes: 
1.  Where  the  holder  of  a  legal  estate  appeals  to  the  auxil- 
iary jurisdiction  of  equity  for  relief;  2.  Where  the  holder 
of  an  equitable  estate  seeks  relief  against  a  subsequent 
purchaser  of  the  legal  estate,  or  against  a  purchaser  of  a 
subsequent  equitable  estate  who  has  obtained  the  legal 
estate;  3.  Where  the  holder  of  a  mere  "  equity,"  or  right 
to  some  distinctively  equitable  relief,  as  distinguished 
from  an  equitable  estate,  seeks  to  enforce  it  against  a  sub- 
sequent purchaser  of  either  a  legal  or  an  equitable  estate. 

§  764.  I.  Suits  by  Holder  of  the  Legal  Estate  under  the 
Auxiliary  Jurisdiction  of  Equity.  —  As  cases  falling  within 
this  class  are  very  infrequent  in  the  United  States,  no  de- 
tailed discussion  seems  to  be  necessary.  The  kinds  of 
suits  embraced  within  the  term  "  auxiliary  jurisdiction  "  as 
here  used  are  those  for  discovery  proper,  those  for  the  de- 
livery up  of  title  deeds  in  connection  with  discover}'',  those 
to  prevent  a  defendant  in  ejectment  from  setting  up  out- 

^  Cram  v.    Mitchell,    1    Sand.    Ch.  secured  by  a  mortgage  that  vitiates 

251.      There   are   some   old   cases   ia  the  defense  of  a  bona  fide  purchase  by 

■which  a  so-called  bona  fide  purchaser,  the  mortgagee,  aud  permits  an  equity, 

through  fraud  or  violence,   was  pro-  even  though  latent,  to  prevail:  Smith 

tected:     See   Culpepper's   Case,  cited  v.  Lehrman,  85  Ala.  394;  Meyer  Bros, 

in  Sanders  v.  Deligut-,  Freem.  Ch.  123;  v.  Cook,  85  Ala.  417.] 

Fagg's  Case,  cited  in  2  Vern.   701 ;  1  *  [The  defense  of  a  bona  fide  purchase 

Cas.    Ch,    68;    Harconrt   v.    Knowel,  for  a  valuable  consideration  and  with- 

cited  in  2  Vern.    159;  but  they  have  out   notice    ia   available    against   the 

long   been   overruled:    See   Carter  v.  United  States:  Colorado  Coal  Co.   v. 

Carter,    3  Kay  &   J.    617,    636,    6.37;  United  States,  123  U.  S.  31.S;  United 

Zollman  v.  Moore,  21  Gratt.  313,  321,  States  T.  Minor.  29  Fed.  Hep.  134.] 
[So  if  there  be  any  usury  in  the  debt 


§764 


EQUITY   JURISPRUDENCE. 


1070 


standing  terms  to  defeat  the  action,  and  those  to  perpetu- 
ate testimony.  It  has  been  settled  from  an  early  day  that 
no  suit  for  a  discovery  can  be  maintained  by  the  holder  of 
the  legal  estate  in  order  to  assist  him  in  maintaining  his 
title  against  a  bona  fide  purchaser  of  an  equitable  estate, 
further  than  as  to  facts  relevant  to  the  question  whether 
the  defendant  had  notice.  After  such  purchaser  has  suf- 
ficiently denied  notice,  he  will  not  be  compelled  to  make 
discovery  in  aid  of  plaintiff's  title.^  It  is  equally  well 
settled  that  the  holder  of  the  legal  estate  cannot  compel 
a  delivery  up  of  the  title  deeds  by  a  bona  fide  purchaser 
of  an  equitable  estate  —  for  example,  an  equitable  mort- 
gagee —  even  though  some  other  relief,  such  as  a  fore- 
closure, may  have  been  granted.'^     The  defense  likewise 


'  Burlace  v.  Cooke,  Freem.  Ch.  24, 
per  Lord  Nottingham ;  Parker  v.  Ely  th- 
more,  Prec.  Ch.  58,  per  Sir  John  Trev- 
or, M.  R. ;  Basset  v.  Nosworthy,  Gas. 
t.  Finch,  102;  2  Lead.  Cas.  Eq.  1,  per 
Lord  Nottingham  (this  is  the  lead- 
ing case.  An  heir  at  law  sued  a  pur- 
chaser from  a  devisee  of  plaintiiFs 
ancestor  seeking  to  discover  a  revoca- 
tion of  the  will,  and  also  to  set  aside 
certain  outstanding  terms  which  de- 
fendant bought  in  order  to  protect  his 
equitable  title.  The  defense  of  bona 
Jide  purchase  was  sustained  against 
both  reliefs);  Jerrard  v.  Saunders,  2 
Ves.  187,  454,  per  Lord  Loughborough 
(a  bill  for  discovery  only). 

»  Wallwyn  v.  Lee,  9  Ves.  24  (a  life 
tenant  mortgaged  property  in  fee, 
fraudulently  concealing  the  fact  of  his 
mere  life  estate  and  pretending  to  be 
owner  in  fee,  and  delivered  the  title 
deeds  to  the  mortgagee.  On  his  death 
the  remainderman  sued  for  a  discov- 
ery  and  to  have  the  deeds  surrendered. 
Lord  Eldon  sustained  the  defense  of 
6owa^c?e  purchase);  Joyce  v.  De  Mol- 
eyns,  2  Jones  &  L.  374  (an  heir  at  law 
of  a  deceased  owner  obtained  posses- 
sion of  the  title  deeds,  and  deposited 
them  with  bankers  as  security  by  way 
of  equitable  mortgage  for  a  loan.  The 
real  title  was  in  a  devisee  from  the  de- 
ceased owner.  A  suit  was  brought  on 
behalf  of  the  devisee  to  compel  a  de- 
livery up  of  the  deeds  by  the  bankers, 
but  the  relief  was  refused  by  Chancel- 


lor Sugden);  Heath  v.  Crealock,  L.  R. 
10  Ch.  22,  28  (a  mortgagor,  fraudu- 
lently  concealing  the  fact  of  the  out- 
standing mortgage,  which  hadconveyed 
the  legal  estate,  sold  and  conveyed  the 
property  to  the  defendant  and  handed 
over  the  title  deeds.  The  prior  mort- 
gagee sues  for  a  foreclosure  and  a  deliv- 
ery up  of  the  deeds.  While  the  fore- 
closure was  granted,  the  other  relief 
was  refused.  It  should  be  noticed 
that  the  defendant,  although  receiving 
a  conveyance  purporting  to  transfer 
the  legal  estate,  only  obtained  an  equi- 
table estate,  since  the  legal  estate  had 
already  been  vested  in  the  prior  mort- 
gagee, the  plaintiff;  also  that  the  de- 
fense of  bona  Jide 'purchase  under  these 
circumstances  did  not  prevent  the 
main  relief  of  a  foreclosure);  Waldy  v. 
Gray,  L.  R.  20  Eq.  238.  See,  however, 
Newton  v.  Newton,  L.  R.  6  Eq,  135; 
L.  R.  4  Ch.  143,  where,  under  the  spe- 
cial facts.  Lord  Romilly  drew  a  dis- 
tinction, and  ordered  the  deeds  to  be 
surrendered.  The  opinion  of  Lord 
Hatherley  in  this  case  on  appeal  is 
valuable  as  drawing  the  line  between 
the  cases  of  successive  equities  where 
the  priority  is  determined  by  order  of 
time,  and  the  cases  where  the  pur- 
chaser of  a  subsequent  equitable  estate 
may  set  up  the  defense  of  bona  fide 
purchase.  [Since  the  passage  of  the  ju- 
dicature act  in  England,  these  rulea 
have  been  modified.  The  chancery  di- 
vision of  the  high  court  of  justice  now 


1071  CONCERNING    BONA    FIDE    PURCHASE.  §  7G5 

prevails  in  suits,  unknown  in  this  country,  brought  by 
the  legal  owner  against  a  defendant  who  has  been  sued  in 
ejectment,  to  restrain  the  latter  from  setting  up  old  out- 
standing legal  terms,  in  order  to  defeat  a  recovery  in  such 
action,  and  to  set  aside  those  terms.'  Finally,  it  has  been 
said  that  the  defense  of  bona  fide  purchase  is  sufficient  to 
defeat  a  suit  for  the  perpetuation  of  testimony;  but  with 
respect  to  the  correctness  of  this  conclusion  there  is  at 
least  some  doubt.^ 

§  765.  Exceptions  and  Limitations.  — There  are,  how- 
ever, well-considered  and  authoritative  decisions,  in  which 
the  defense  has  not  been  permitted  to  prevail  against  the 
holder  of  the  legal  estate  suing  for  relief.  Although  these 
decisions  were  not  in  express  terms  placed  by  the  judges 
rendering  them  upon  the  ground  now  mentioned,  yet  the 
general  doctrine  upon  which  they  can  alone  be  sustained 
and  harmonized  with  the  current  of  authority  is  that 
first  explained  by  Lord  Westbury,  and  already  stated.* 
Where  the  suit  is  one  belonging  to  the  concurrent  juris- 
diction of  equity  and  law,  and  is  brought  by  the  holder 
of  a  legal  title  to  obtain  a  relief  purely  legal,  the  defense 
of  bona  fide  purchase  will  not  prevail,  because  it  would 
not  prevail  at  law,  and  to  allow  it  in  equity  would  simply 
be  an  abdication  of  its  rightful  jurisdiction  by  a  court  of 
equity,  and  a  putting  the  plaintiff  to  the  unnecessary  ex- 
pense and  delay  of  a  second  action  at  law.  Such  suits 
especially  are  those  brought  to  establish  and  recover 
dower,  and  those  brought  to  establish  tithes  in  England.* 

has  jurisdiction,  on  the  application  of  chaser  from  making  a  discovery  which 

the  legal  owner  of  title  deeds,  to  order  shall  undermine  his  title  do  not  seem 

them   to  be  delivered   up   by   a   pur-  to  apply  to  a  mere  suit  for  the  perpet- 

chaser  for  value  without  notice:  Cooper  uation  of  testitnony.     Bechinall  v.  Ar- 

V.  Vesey,  L.  R.  20  Ch.  Div.  611;  see  nold,  1  Vern.  354,  and  Jerrard  v.  Saun- 

also  the  quotation  from  the  opinion  in  ders,  2  Ves.  454,  458  (a  dictum  of  Lord 

Ind,  Coope,  &  Co.  v.  Emmerson,  L.  R,  Loughborough),  either  sustain  or  seem 

12    App.    C.    300,   cited   ante,   vol.   1,  to   favor  the  defense;  per  contra,  see 

§  200,  where  the  changes  affected  by  Dursley  v.  Fitzliardinge,  6  Ves.  251, 

the  judicature   act,   and   the   reasons  263,  264,  per  Lord  Eldon.  See  Coopers' 

therefor,  are  fully  stated.]  Eq.  PI.  56,  57,  283,  287. 

'  Basset  v.  Nosworthy,  Cas.  t.  Finch,  ^  See  fiupra,  %  742. 

102;  Goleborn  v.  Alcock,  2  Sim.  552.  *  Williams  v.  Lambe,  3  Brown  Ch. 

•  The  reasons  which  shield  the  pur-  263,  per  Lord  Thurlow  (dower);  Col- 


§  766  EQUITY    JURISPRUDENCE.  1072 

Whatever  difference  of  opinion  there  may  be  as  to  the 
correctness  of  this  limitation,  it  is  fully  settled  in  Eng- 
land, independently  of  any  statutes  concerning  registra- 
tion, that  the  defense  of  bona  fide  purchase  cannot  avail 
to  defeat  a  suit  for  foreclosure  brought  by  a  prior  legal 
mortgagee  against  a  subsequent  equitable  mortgagee  or 
purchaser  of  an  equitable  estate  who  has  paid  a  valuable 
consideration  without  notice  of  the  prior  mortgage.^  The. 
system  of  recording  necessarily  hinders  the  operation  of 
this  particular  rule  in  the  United  States;  but  it  is  based 
upon  principle,  and  in  the  absence  of  recording  acts 
would  doubtless  be  adopted  by  our  courts. 

§  766.  II.  Suits  by  the  Holder  of  an  Equitable  Estate 
or  Interest  ag-ainst  the  Purchaser  of  the  Legal  Estate.  — 
This  application  of  the  doctrine  includes  not  only  pur- 
chasers who  receive  a  conveyance  of  the  legal  estate  at 
the  time  and  as  a  part  of  their  original  and  single  pur- 
chase, but  also  those  who,  having  originally  purchased 
and  acquired  merely  an  equitable  estate,  afterwards  ob- 
tain a  conveyance  of  the  outstanding  legal  title  from  the 
one  in  whom  it  was  vested.  It  has  even  been  extended 
to  such  purchasers  of  an  equitable  estate,  who  have  not 
yet  actually  acquired  the  legal  title,  but  who  have  the 
best  right  to  call  for  it.  Cases  in  which  this  last  phase 
of  the  doctrine  can  be  properly  applied  are,  from  the 
nature  of  our  modes  of  dealing  with  real  estate,  very  in- 
frequent in  the  United  States.     The  common  occasions 

ling  V.  Archer,  1  Russ.  &  M.  284,  per  holds  the  correctness  of  the  decisions 

Sir  John  Leach  (tithes),  as  explained  and  the  ground  upon  which  they  are 

by  Lord  Westbury  in  Phillips  v.  Phil-  rested:  1  Roper  on  Husband  and  Wife, 

lips,    4   De   Gex,    F.    &   J.  208,    217.  446;  while  Lord  St.  Leonards,  in  the 

These  decisions  themselves,  as  well  as  later  editions  of  his  work,  on  vendors, 

the  principle  laid  down  by  Lord  West-  of  course  opposes  the  opinion  of  Lord 

bury,    do    not     stand    unchallenged.  Westbury. 

Their  correctness  has  been  denied  by         ^  Heath  v.  Crealock,  L.  R.   10  Ch. 

some;  the  explanation  given  by  Lord  22,  28;  Waldy  v.  Gray,  L.  R.  20  Eq. 

Westbury  has  been  rejected  by  others:  238;  Finch  v.  Shaw,  19  Beav.  500;  af- 

See  Bowen  v,  Evans,  1  Jones  &  L.  178,  lirmed  sub  nom.  Colyer  v.  Finch,  5  fl.  L. 

263;  Attorney-General  v.  Wilkins,  17  Cas.  905.     For   the   general   doctrina 

Beav.  285,  292;  Payne  v.  Compton,  2  upon  which  such  cases  must  be  rested, 

Younge  &  C.  457;  Blain  v.  Harrison,  as  laid   down   by  Lord   Romilly,   see 

11  IlL  384.     Mr.  Roper  strongly  up-  quotation  supra,  in  note  under  §  742. 


1073  CONCERNING    BONA    FIDE    PURCHASE.  §  767 

for  a  resort  to  the  doctrine  in  England,  where  it  is  little 
affected  by  statutes  of  registration,  are  the  cases  of  a  prior 
equitable  mortgage,  and  a  subsequent  sale  and  convey- 
ance of  the  land  by  the  mortgagor,  he  concealing  the  fact 
of  such  existing  mortgage;  of  several  consecutive  mort- 
gages of  the  same  land,  the  later  ones  being  taken  in 
ignorance  of  the  earlier;  successive  conveyances  of  his 
equitable  estate  by  the  same  cestui  que  trust,  the  later  pur- 
chaser being  ignorant  of  the  earlier  transfer;  and  pur- 
chasers from  a  trustee  in  violation  of  his  trust.  In  the 
United  States  the  recording  system  has  greatly  modified 
the  practical  operation  of  the  doctrine,  since  the  defend- 
ant must  generally  show,  in  order  to  obtain  protection, 
that  he  has  recorded  the  instrument  by  which  his  title 
was  acquired.  With  this  additional  feature,  the  instances 
most  frequently  coming  before  the  American  courts  of 
equity  are  cases  of  a  prior  unrecorded  mortgage  and  a 
subsequent  recorded  conveyance,  a  prior  unrecorded  and 
a  subsequent  recorded  mortgage,  a  prior  contract  of  sale 
and  a  subsequent  recorded  conveyance  or  mortgage,  a 
prior  vendor's  lien  or  other  equitable  lien  and  a  subse- 
quent recorded  conveyance  or  mortgage,  and  a  convey- 
ance by  a  trustee  of  land  subject  to  a  prior  trust,  the  trust 
being  more  often  constructive  or  resulting  than  express. 
The  case  of  a  prior  unrecorded  deed  purporting  to  convey 
the  legal  estate,  and  a  subsequent  recorded  deed  depend- 
ing wholly  upon  the  recording  acts,  does  not  belong  to 
the  equitable  jurisdiction. 

§  767.  Legal  Estate  Acquired  by  the  Original  Pur- 
chase. — In  the  first  place,  it  is  the  very  central  portion 
of  the  doctrine,  to  which  all  others  have  been  additions, 
that  where  the  defendant  acquired  the  legal  estate  at  the 
time  and  as  a  part  of  his  original  purchase,  the  fact  of  his 
purchase  having  been  bona  fide  for  value  and  without  no- 
tice is  a  perfect  defense  in  equity  to  any  suit  brought  by 
the  holder  of  a  prior  equitable  estate,  lien,  encumbrance, 
or  other  interest,  seeking  either  to  establish  and  enforce 

2Eq.  Joe.— 68 


§767 


EQUITY   JURISPRUDENCE, 


1074 


his  equitable  estate,  lien,  or  interest,  or  to  obtain  any 
other  relief  with  respect  thereto  which  can  be  given  by  a 
court  of  equity.*  A  mortgagee  of  land  may  be  a  bona  fide 
purchaser  within  the  meaning  of  the  general  doctrine. 
In  some  states  every  mortgagee,  subsequent  as  well  as 
prior,  acquires  the  legal  estate  as  against  the  mortgagor. 
In  other  states,  although  mortgages  create  only  an  equi- 
table lien,  they  are  expressly  embraced  within  the  record- 
ing acts.^     The  doctrine  is  also  extended,  in  many  of  the 


'  See  Basset  v.  Nosworthy,  2  Lead. 
Cas.  Eq.,  4th  Am.  ed.,  1,  4,  and  notes; 
Pilch  er  v.  Rawlins,  L.  R.  7  Ch.  259, 
268,  269,  per  James,  L.  J.;  Willoughby 
V,  Willoughby,  1  Term  Rep.  763,  767, 
per  Lord  Hardwicke,  and  other  cases 
cited  ante,  in  vol.  1,  under  §  200.  In 
this  country,  it  must  be  remembered 
that  the  defense  is  onlj'  made  available 
by  the  defendant's  having  first  put  his 
title  deed  upon  record.  The  following 
are  some  illustrations  merely  taken 
from  innumerable  decisions:  A  bona 
Jide  purchaser  from  a  trustee  of  land 
subject  to  a  conBtruclive  or  resulting 
ti-ust  is  protected  against  the  claims  of 
the  beneficiaries:  Wilson  v.  Western 
etc.  Co.,  77  N.  C.  445;  Bass  v.  Wheless, 
2  Tenn.  Ch.  531;  Fahn  v.  Bleckley,  55 
Ga.  81;  Gray  v.  Coan,  40  Iowa,  327; 
Maxwell  v.  Campbell,  45  Ind.  360 
(purchaser  at  judicial  sale  by  a  guar- 
dian is  protected  against  claims  by  the 
wards);  [Gorman  v.  Wood,  68  Ga. 
624;  Nidever  v.  Ayers,  83  Cal.  39; 
Johnson  v.  Sirnians,  69  Ga.  617;  Mc- 
Niel  v.  Congregational  Soc,  60  Cal. 
105;  Priest  v.  Chouteau,  85  Mo.  398; 
55  Am.  Rep.  373.  In  these  last  two 
cases  the  doctrine  was  applied  to  the 
purchase  of  partnership  realty  stand- 
ing in  the  name  of  one  of  the  partners.] 
Against  -prior  liens:  Burchard  v.  Fair 
Haven,  48  Vt.  327  (attachment  lien); 
Beall  V.  Butler,  54  Ga.  43  (laborer's 
lien);  Jones  v.  Lapham,  15  Kan.  540 
(equitable  lien).  Against  other  equitable 
interests:  Eldridge  v.  Walker,  80  III. 
270;  Farmers'  Nat.  Bank  v.  Fletcher, 
44  Iowa,  252;  Hardin  v.  Harrington, 
11  Bush,  367;  Briscoe  v.  Ashby,  24 
Gratt.  454;  Carter  v.  Allan,  21  Gratt. 
241:  Zollman  v.  Moore,  21  Gratt.  313; 
Campbell  v.  Texas  etc.  R.  R.  Co.,  2 
Woods,  263;  [Robbins  v.  Moore,  129 
111.  30;  Jasper  County  v.  Tavis,  76 
Mo,  13;  Jones  v.   Cathcart,  17  S.  C. 


592;  Learned  v.  Tritch,  6  Col.  432; 
Edwards  v.  Brown,  68  Tex.  329;  Rich- 
ardson V.  Haney,  76  Iowa,  101;  Van 
Bibber  V.  Reese,  71  Md.  608.]  Against 
an  unrecorded  defeasance:  Knight  v. 
Dyer,  57  Me.  174;  99  Am.  Dec.  765; 
Cogan  V.  Cook,  22  Minn.  137;  Hart  v. 
Farmers' etc.  Bank,  33  Vt.  252;  Bailey 
V.  Myrick,  50  Me.  171;  Newton  v. 
McLean,  41  Barb.  285;  Koons  v. 
Grooves,  20  Iowa,  373.  See,  however, 
Corpman  v.  Baccastow,  84  Pa.  St.  363; 
[Frink  v.  Adams,  36  N.  J.  Eq.  485.] 
Against  an  unrecorded  mortgage: 
Parker  v.  Jones,  57  Ga.  204;  Safi'old 
V.  Wade's  Ex'r,  51  Ala.  214;  Williams 
v.  Beard,  1  S.  C.  309.  Purchasers  of 
chattels,  when  protected:  Reed  v.  Gan- 
non, 3  Daly,  414  (trustee  to  whom 
personal  property  had  been  conveyed 
by  a  marriage  settlement  protected 
against  a  prior  unrecorded  mortgage 
of  the  same  chattels  given  by  the  hus- 
band); Sleeper  v.  Chapman,  121  Mass. 
404  (bona  Jide  assignee  of  a  chattel 
mortgage,  given  in  fraud  of  mortgagor's 
creditors,  j>rotected  as  against  such 
creditors);  Thorudike  v.  Hunt,  3  De 
Gex  &  J.  563.  [The  doctrine,  how- 
ever, does  not  apply  to  the  protection 
of  a  purchaser  claiming  under  a  forged 
deed.  Snch  purchasers  are  in  no 
better  position  than  if  they  had  pur- 
chased with  notice :  Camp  v.  Carpenter, 
52  Mich.  375;  Crawford  v.  Hoeft,  58 
Mich.  1 ;  McGinn  v.  Tobey,  62  Mich. 
252;  4  Am.  St.  Rep.  848.] 

*  Haynsworth  v.  BischofiF,  6  Rich. 
159;  Porter  v.  Green,  4  Iowa,  .571; 
Seevers  v.  Delashmutt,  11  Iowa,  174; 
77  Am.  Dec.  139;Willough  by  v.  Wil- 
loughby, 1  Term  Rep.  763,  per  Lord 
Hardwicke;  [Trentman  v.  Eldridge,  98 
Ind.  525;  Sweetzer  v.  Atterbury,  100 
Pa.  St.  18;  Bigeey  v.  Jones,  114  Pa. 
St.  517;  Sweeney  v.  Bixler,  69  Ala. 
539.J 


1075       CONCERNING  BONA  FIDE  PURCHASE.      §  768 

states  at  least,  to  assignments  of  mortgages,  the  assign- 
ment being  regarded  as  a  "conveyance,"  and  the  assignee 
as  a  "purchaser."  It  should  be  observed  that  the  effect 
of  a  bona  fide  purchase  and  a  previous  registration  is  ap- 
plied not  only  between  successive  assignees  of  the  mort- 
gage from  the  same  assignor,  but  also  between  such  an 
assignee  and  a  third  person  who  has  obtained  some  title, 
estate,  or  interest  in  or  lien  upon  the  mortgaged  prem- 
ises.' 

§  768.  Purchaser  First  of  an  Equitable  Estate  Subse- 
quently Acquires  the  Legal  Estate  —  Tabula  in  Naufragio- 
—  The  protection  is  not  confined  to  a  defendant  who  ob- 
tained the  legal  title  contemporaneously  with  his  original 
purchase.  It  includes  those  cases  where,  of  several  suc- 
cessive purchasers  holding  equitable  estates,  one  of  them 
later  in  time  has  obtained  an  outstanding  legal  estate. 
By  far  the  most  frequent  instance  in  England  is  that  of 
three  or  more  successive  mortgagees  by  conveyance,  A, 
B,  and  C,  where  the  first  only  would  obtain  the  legal 
estate  and  the  others  an  equitable  one.  If  C,  at  the  time 
of  loaning  his  money  and  taking  his  mortgage,  had  no 
notice  of  B's  prior  encumbrance, — that  is,  was  a  bona 
fide  purchaser  of  the  equitable  estate,  —  on  afterwards 
learning  of  B's  claim,  he  may  buy  in  or  procure  a  transfer 
of  A's  mortgage  to  himself,  and  may  thus  put  himself  in 
a  position  of  perfect  defense  against  the  enforcement  of 
B's  lien;  he  thus  acquires,  in  fact,  not  only  a  defense  to 
any  suit  brought  by  B,  but  the  absolute  precedence  over 
B  in  the  satisfaction  of  the  liens  out  of  the  mortgaged 
premises.^     This  particular  application  of  the  doctrine 

'  Westbrook  v.  Gleason,  79  N.   Y.  ess  of  Marlborough,  2  P.  Wms.  491 . 

23,  30,  31;   Fort   v.  Burch,  5  Denio,  Sir  Joseph   Jekyll  said:   "1.    That  if 

187;  St.  John  v.  Spalding,  1  Thomp.  a   third   mortgagee  buys  in   the    first 

&   C.    483;    Farmers'  Nat.    Bank    v.  mortgage,    thoupfh    it    be   pending   a 

Fletcher,  44  Iowa,  252;  and  see  ante,  bill  brought  by  the  second  mortgagee 

§§  733,  734,  and  cases  cited.     [See  also  to   redeem    the   first,    yet    tiie   third 

Simpson  v,  Del  Ho3'o,  94  N.   Y.  189;  mortgagee   having  obtained   the   first 

Bacon  v.  Van  Schoonhoven,  87  N.  Y.  mortgage,  and  got  the  law  on  his  side 

447.]  and   equal   equity,    he   shall    thereby 

^  The   leading   case   in    which    this  squeeze   out    the   second    mortgagee; 

rule  was  formulated  in  Brace  v.  Duch<  and    this    Lord    Chief    Justice    Hal^ 


§  769  EQUITY    JURISPRUDENCE.  1076 

to  successive  mortgages  is  known  in  the  English  equity 
as  the  rule  concerning  "tacking,"  —  a  rule  which  has 
been  universally  rejected  |^by  the  courts  of  the  various 
states. 

§  769.  Extent  and  Limitations  of  This  Rule.  —  The  doc- 
trine under  consideration  has  not  been  confined  to  mort- 
gagees. It  is  fully  settled  in  England  that  a  bona  fide 
purchaser  of  an  equitable  estate,  without  notice  of  a  prior 
conflicting  equitable  interest,  may,  even  on  afterwards  dis- 
covering the  same  and  the  consequent  defect  of  his  own 
title,  protect  himself  against  such  claimant  by  procuring 
a  conveyance  to  himself  of  the  outstanding  legal  estate; 
subject,  however,  to  this  important  exception,  that  if  the 
prior  claimant  is  a  cestui  que  trust,  and  the  title  of  the 
purchaser  is  thus  subject  to  a  trust  either  express  or  im- 
piled,  he  cannot,  after  notice  of  such  a  defect,  protect  him- 
self by  acquiring  the  legal  estate  from  the  trustee.^  Even 
where  the  bona  fide  purchaser  has  the  best  right  to  call  for 
the  legal  estate,  but  has  not  yet  actually  obtained  it,  he  is 
protected  against  the  prior  equitable  claimant.^ 

called  a  plank   gained   Dy   the   third  courts  of  this  conntry  as  both  inequi- 

mortgagee,    or     tabula    in    naufragio,  table  and  impossible  under  our  regis- 

which   construction  is  in  favor  oif   a  try    systerp,    yet    these    and   similar 

purchaser,  every  mortgagee  being  such  cases   are   sometimes   quoted    as    au- 

pro  tanto 6.    His  honor  said  in  thority  upon  the  general   proposition 

all   these  cases  it   must  be   intended  that   the   purchaser  of  a   subsequent 

that  the  puisne  mortgagee,  when  he  lent  equity  may  protect  himself  by  obtain- 

his  money,  had  no  notice  of  the  second  ing   the    legal    title.     I    doubt    their 

mortgage."     In    the   earlier    case    of  authority   in   this  country  upon  that 

Marsh  v.  Lee,  2  Vent.  337,  1  Cas.  Ch.  general  question. 

162,  decided   in  1670,  the   same   rule  ^  The  English  cases   in   support   of 

•was  recognized,  and  Chief  Baron  Hale  the  above   proposition  are  numerous, 

used  the   figure   tabula   in  nattfragio,  The  following  are  some  of  the  more 

■which  has  since  been  constantly  re-  recent:   Pilcher  v.   Rawlins,  L.    R.  7 

peated.  See  also  Marsh  v.  Lee,  1  Lead.  Ch.  259;  L.  R.   11  Eq.  53;  Carter  v. 

Cas.  Eq.,  4th  Am.  ed.,  Eng.  note,  837;  Carter,    3  Kay  &  J.   617;   Young  v. 

Young  V.  Young,    L.  E-.    3   Eq.  801;  Young,  L.   R.    3   Eq.    801;    Jones   v. 

Pease  v.  Jackson,    L.    R.  3  Ch.  576;  Powles,  3  Mylne  &  K.  581;  Prosser  v. 

Prosser  v.  Rice,  28  Beav.  68;  Bates  v.  Rice,  28  Beav.  68;  Pease  v.  Jackson, 

Johnson,  Johns.  304.     [See  also  Hosk-  L.  R.  3  Ch.  576. 

ing  v.  Smith,  L.  R.   13  App.  C.  582;  » Willoughby     v.     Willoughby,     1 

Marion  v.  Cox,  L.  R.  14  Ch.  Div.  151.]  Term.  Rep.  763,  per  Lord  Hardwicke; 

Although  the  doctrine  applied  to  sue-  Charlton  v.  Low,  3  P.  Wms.  328;  Ex 

cessive   mortgages,    as   gtated  in   the  parte  Knott,  11  Ves.  609;  Tildesley  v. 

text,  forms  that  peculiar  rule  known  Lodge,  3  Smale  &  G.   543;  Bowen  v. 

to  English  equity  as  "tacking,"  and  Evans,  1  Jones  &  L.  178,  264;  Shine  v. 

has  been  completely  rejected   by  the  Gough,  1  Ball  &  B.  436. 


1077  CONCERNING    BONA    FIDE    PURCHASE.  §  770 

§  770.  The  Purchaser  Acquires  the  Legal  Estate  from 
a  Trustee.  —  The  exception  already  mentioned  is  no  less 
firmly  settled.  It  has  already  been  seen  that  one  who 
obtains  the  legal  title  at  the  time  of  and  as  a  part  of  his 
original  purpose  may  acquire  his  estate  from  a  trustee  in 
derogation  of  the  trust;  but  if  he  purchases  in  good  faith 
and  for  value  and  without  notice,  he  will  be  protected 
against  the  claims  of  the  beneficiary,  and  hold  the  prop- 
erty free  from  the  trust;  and  this  efiect  extends  in  equity 
not  only  to  conveyances  of  land,  but  to  transfers  of  all 
kinds  of  personal  property.*  The  following  are  the  four 
possible  conditions  of  fact:  1.  Both  the  trustee  and  the 
purchaser  might  at  the  time  of  the  conveyance  be  aware 
of  the  trust,  and  therefore  of  its  violation  by  the  convey- 
ance. Here  the  purchaser  would  clearly  obtain  no  title, 
and  the  trustee  himself  would  be  responsible.  2.  Both 
might  be  ignorant  of  the  trust.  This  case  is  barely  possi- 
ble, but  very  improbable.  If  it  should  occur,  the  purchaser 
would  clearly  be  protected.  3.  The  trustee  might  be 
ignorant  and  the  purchaser  have  knowledge.  This  case, 
so  far.  as  it  relates  to  the  trustee's  ignorance,  is  improba- 
ble; but  the  purchaser  would  plainly  obtain  no  secure 
title.  4.  The  trustee  might  have  knowledge  and  the 
purchaser  be  ignorant.  This  is  a  more  common  case. 
The  purchaser,  being  bona  fide,  would  obtain  the  title,  but 
the  trustee  would  be  responsible  personally  for  his  viola- 
tion of  duty.  When  we  pass  to  the  other  condition,  of 
the  purchaser  of  an  equitable  estate  seeking  to  obtain 
protection  by  getting  in  the  legal  title,  it  is  clear  that  two 
of  the  foregoing  cases  could  not  exist.  The  very  question 
assumes  that  the  purchaser  had  discovered  the  defect  in 
his  own  title,  and  has  therefore  become  aware  of  the  trust, 
and  that  a  conveyance  to  himself  by  the  trustee  would  be 
a  violation  of  the  trust,  and  of  the  rights  of  tiie  prior  and 
opposing  cestui  que  trust.  The  only  two  possible  cases, 
therefore,  are:   1.    The  trustee  and    the    purchaser  both 

»  Thorndike  v.  Hunt,  3  Do  Gex  &.  J.  563;  Dawson  v.  Prince,  2  De  Gex  &  J.  4L 


§  771  EQUITY   JURISPRUDENCE.  1078 

aware  of  the  trust;  2.  The  trustee  ignorant  and  the  pur- 
chaser aware.  The  latter  is  not  probable,  but  is  possi- 
ble. The  foregoing  considerations  show  that  in  both  of 
these  cases  the  purchaser  would  not  be  protected;  taking 
the  legal  estate  from  the  trustee  with  notice  of  the  exist- 
ing trust,  he  would  himself  become  a  trustee.  In  this 
conclusion  the  decisions  are  unanimous,  holding  that  the 
purchaser  without  notice  and  for  value  of  an  equitable 
estate  cannot  after  notice  protect  himself  and  defeat  the 
claims  of  the  prior  beneficial  owner  by  getting  a  convey- 
ance of  the  legal  title  from  the  trustee.* 

§  771.  The  Rule  as  Applied  in  the  United  States.  —  Al- 
though the  modes  of  dealing  with  real  property  in  the 
United  States  are  entirely  unlike  those  prevailing  in  Eng- 
land, and  although  the  forms  and  species  of  the  estates 
created  and  the  circumstances  of  the  transactions  coming 
before  the  American  judges  are  very  different  from  those 
passed  upon  by  the  English  chancellor,  yet  the  courts  of 
this  country  have  recognized  and  adopted  the  foregoing 
doctrines,  and  have  applied  them  when  necessary  to 
analogous  cases,  and  under  analogous  conditions  of  fact. 
Indeed,  the  defense  of  bona  fide  purchase  has  sometimes 
been  pushed  to  an  extent,  as  it  seems,  not  warranted  by 
the  established  doctrines.  It  has  been  made  to  embrace 
not  only  those  who  have  purchased  equitable  estates  by 
means  of  conveyances  purporting  to  transfer  the  whole 
title,  but  even  to  those  who  have  intentionally  acquired 
a  mere  equitable  interest  or  lien  by  executory  contract  or 
otherwise,  knowing  that  the  legal  estate  was  held  by  an- 
other, and  who,  upon  afterwards  discovering  a  prior  and 
conflicting  equity  in  favor  of  a  third  person,  have  taken 
a  conveyance  of  that  legal  estate.  I  have  already  dis- 
cussed the  subject  with  some  care,  have  examined  Amer- 
ican authorities,  and  have  stated  those  conclusions  which 

»  Saunders  v.  Dehew,  2  Vera.  270;  272;  Baillie  v.  McKewan,  35  Beav. 
Willoughby  v.  Willoughby,  1  Term.  177;  Sharpies  v.  Adams,  32  Beav.  '213; 
Rep.  763,  771;  Carter  v.  Carter,  3  Kay    Colyer  v.  Finch.  19  Beav.  500;  5  H.  L. 


±tep 
&J. 


617,  642;  Allen  v.  Knight,  5  Hare,     Cas.  905. 


1079  CONCERNING    BONA    FIDK    PURCHASE.  §  772 

seem  to  be  sustained  by  settled  principles.  It  is  unneces- 
sary to  repeat  the  discussion,  and  I  simply  refer  to  those 
paragraphs.^ 

§  772.  And  as  Modified  by  the  Recording  Acts.  —  There 
may  be  modifications  of  these  results  produced  by  the 
peculiar  language  of  recording  acts.  '  In  some  of  the 
states  the  statutes  provide  for  the  registration,  not  only 
of  deeds,  mortgages,  and  assignments,  but  also  of  every 
species  of  instrument  which  can  affect  land  titles,  or  cre- 
ate any  equitable  interest  in  or  lien  upon  land,  includ- 
ing executory  contracts  for  the  sale  of  land.  Such  statutes 
must  necessarily  modify  the  operation  of  equitable  doc- 
trines originally  applicable  to  an  entirely  different  condi- 
tion. If,  where  these  enactments  exist,  the  owner  of  land 
gives  a  contract  for  its  sale  to  A,  and  afterwards  gives  a 
like  contract  to  B,  both  vendees  being  equally  meritorious, 
and  A's  contract  is  not  recorded,  while  B,  without  notice, 
puts  his  agreement  upon  record,  B  undoubtedly  obtains  a 
precedence  by  his  record;  and  if  he  subsequently  learns 
of  A's  prior  claim,  he  can  take  a  conveyance  of  the  legal 
estate  from  the  vendor  and  legal  owner,  and  completely 
protect  himself  by  an  earliest  record  thereof.  In  like 
manner,  if  A,  the  legal  owner  of  land,  gives  a  contract 
of  sale  to  B,  and  this  vendee  executes  a  deed  purporting 
to  convey  the  land  to  C,  and  afterwards  executes  a  like 
deed  to  D,  both  grantees  being  equally  meritorious,  and 
C's  deed  is  unrecorded,  but  D,  without  notice,  puts  his  upon 
record,  then  D,  although  acquiring  only  an  equitable 
interest  by  his  conveyance,  would  undoubtedly  gain  the- 
precedence  over  C.  When  D  subsequently  learns  of  C's 
prior  claim,  he  can  take  a  conveyance  of  the  legal  estate 
from  A,  and  by  a  first  record  of  that  conveyance  can, 
place  himself  in  a  position  of  complete  protection.  These 
results  seem  to  flow  necessarily  from  the  statute,  but  they 
are  due  entirely  to  the  peculiar  statutory  provisions.* 

»  See  ante,  §§  740,  741,  756.  Md.  Ch.   381;  Bellaa  v.  McCarty,  10 

«  Ohio  Life  Ins.  Co.  v.  Ross,  2  Md.     Watts,  13. 
Ch.  25;  U.  S.  lua.  Co.  v.  Shriver,  3 


§  773  EQUITY    JURISPRUDENCE.  1080 

§  773.  And  as  Applied  in  This  Country  to  PurcJiasers 
Acquiring  the  Legal  Estate  from  a  Trustee.  —  The  in- 
stances of  a  purchaser's  attempting  to  obtain  protection 
by  means  of  the  legal  estate  acquired  from  a  trustee  are 
much  less  frequent  in  this  country  than  in  England. 
There  are  the  two  quite  distinct  cases  of  the  purchaser 
who  acquires  the  legal  estate  at  the  time  of  his  original 
purchase,  and  the  purchaser  of  an  equitable  interest  who 
afterwards  gets  in  the  legal  estate  for  his  protection.  The 
first  of  these  cases  would  be  presented  where  a  cestui  que 
trust  sold  and  assigned  or  conveyed  to  A  and  afterwards 
sold  and  conveyed  the  same  interest  to  B,  who,  at  the 
same  time,  and  as  a  part  of  the  same  transaction,  received 
a  conveyance  also  from  the  trustee.  There  are  decisions 
w^hich  hold  that  a  purchaser  who,  like  B  in  the  above 
supposition,  intentionally  takes  a  transfer  from  a  cestui  que 
trust  of  his  interest,  knowing  that  he  is  a  cestui  que  trust, 
is  necessarily  charged  with  notice  of  any  and  all  defects 
and  infirmities  in  his  grantor's  title,  and  buys  subject 
to  any  prior  outstanding  interest  in  another  person.  A, 
which  had  been  created  by  his  grantor,  and  cannot,  at  the 
same  time,  and  as  a  part  of  the  same  transaction,  obtain  a 
deed  from  the  trustee,  and  protect  himself  thereby.  His 
title  would  be  subject  to  the  prior  equities  of  A,  notwith- 
standing his  earliest  registration  of  his  own  conveyances.* 
Other  decisions  do  not  apply  the  doctrine  of  constructive 
notice  so  severely,  and  would  regard  the  second  purchaser, 
under  these  circumstances,  as  protected  by  the  legal  es- 
tate obtained  from  the  trustee  without  notice.^  Passing 
to  the  second  case,  if,  under  circumstances  similar  to  those 
supposed  above,  a  cestui  que  trust  has  sold  and  transferred 
his  interest,  or  part  of  it,  to  A,  and  afterwards  makes  a 
like  sale  and  transfer  to  B,  who  pays  value  and  has  no 
notice  of  A's  rights,  but  knows  that  his  grantor  is  a  cestui 
que  trust,  and  intentionally  purchases  his  interest  as  an 

«  Sergeant  V.  Ingeraoll,  7  Pa.  St.  340;         «  Flagg  v.  Mann,  2  Sam.  486,  560; 
15  Pa.  St.  343;  an.l  see  Kramer  v.  Ar-     Vattier  v.  Hinde,  7  Pet.  252,  271. 
bburs,  7  Pa.  St.  165,  per  Gibson,  C.  J. 


1081  CONCERNING    BONA    FIDE    PURCHASE.  §  774 

equitable  one,  and  afterwards,  on  discovering  A's  prior 
claim,  procures  a  conveyance  of  the  legal  estate  from  the 
trustee,  in  accordance  with  the  doctrines  as  settled  by- 
courts  of  the  highest  authority,  he  cannot  rely  upon  the 
legal  title  as  a  protection  against  A.  The  same  must  be 
true,  and  upon  the  same  principle,  independently  of  pecu- 
liar recording  acts,  of  a  second  vendee,  who  enters  into 
his  contract  in  good  faith,  but  afterwards  discovers  that 
another  vendee  claims  under  a  prior  contract,  and  there- 
upon obtains  the  first  conveyance  of  the  legal  estate  from 
their  common  vendor;  and  of  a  second  grantee  from  the 
vendee  under  an  executory  contract,  who,  upon  discover- 
ing a  prior  grant  to  another  person  by  the  same  vendee, 
procures  a  deed  of  the  legal  estate  from  the  vendor  in 
whom  the  legal  title  was  vested.^ 

§  774.  Other  Instances  —  Purchaser  at  Execution  Sale 
—  Assignee  of  Thing  in  Action.  —  Among  the  other  in- 
stances in  which  the  general  doctrine  has  been  applied, 
and  the  defense  sustained,  by  the  American  courts,  the 
following  are  some  of  the  most  important:  Where  a  per- 
son becomes  a  bona  fide  purchaser  of  land  at  execution 
sale,  and  perfects  his  purchase  by  receiving  the  sheriff's 
deed,  he  stands  in  the  same  position  as  any  other  pur- 
chaser in  good  faith  without  notice  who  acquires  the 
legal  estate;  he  takes  the  land  free  from  any  unrecorded 
mortgage  or  other  equitable  interest  or  lien  not  appear- 
ing of  record  which  would  have  affected  the  land  in  the 
hands  of  the  judgment  debtor,  and  of  which  the  judgment 
creditor  might  even  have  had  notice.^   An  assignee  in  good 

>  See  ante,  §§  740,  756;  Sumner  r.  *  See  ante,  %  724;  Orth  v.  Jennings, 

Waugh,    56   111.    531,    539;    Flagg   v.  8  Blackf.  420;  Siemon  v.  Schurck,  29 

Mann,  2  Sum.  486,  518;  Bellas  v.  Mc  N.  Y.  598;  Jackson  v.  Chamberlain, 

Carty,  10 Watts,  13; ZoUman V.Moore,  8  Wend.  620,  625;   Jackson  v.  Post, 

21  Gratt.  313.  15  Wend.  588;  9  Cow.  120;  Gouverneur 

It  is  held  that  a  vendee  in  posses-  v.  Titus,  6  Paige,  347;  Den  v.  Rick- 

eion  under  a  land  contract,  who  buys  man,  13  N.  J.  L.  43;  Rodgers  v.  Gib- 

in  a  title  superior  to  that  of  his  ven-  son,  4  Yeates,  111;  Heister  v.  Fortner, 

dors,  cannot  claim  the  protection  of  a  2  Binn.  40;  4  Am.  Dec.  417;  Morrison 

bona  fide  purchaser,  but  must  hold  the  v.  Funk,  23  Pa,  St.  421;  Stewart  v. 

title   for    the   benefit  of    his   vendor:  Freeman,  22  Pa.  St.  120,  123;  Kellam 

Lewis  V.  Boskins,  27  Ark.  61;  Peay  v.  v.  Janson,  17  Pa.  St.  467;  Mann's  Ap- 

Capps,  27  Ark.  160.  peal,  1  Pa.  St.  24;  Wilaon  v.  Shoun- 


§775 


EQUITY    JURISPRUDENCE. 


1082 


faith  of  shares  of  stock,  who  has  perfected  his  title  by  a 
surrender  of  the  certificate,  the  issue  of  a  new  one  to  him- 
self, and  an  entry  upon  the  transfer-books  of  the  com- 
pany, is  generally  treated  as  a  bona  fide  purchaser;  and 
the  protection  has  sometimes  been  extended  to  a  trans- 
feree who, has  not  taken  these  steps  for  the  completion  of 
his  legal  title.  The  defense  has  in  like  manner  been  ap- 
plied to  the  assignee  in  good  faith  of  other  things  in 
action.^ 

§  775.  III.  Suits  by  the  Holder  of  an  "Equity."— In 
all  the  instances  of  the  preceding  subdivision,  the  plain- 
tiff has  held  some  equitable  estate  or  interest  in  or  lien 
upon  the  property,  which  he  has  sought  to  establish  or 
enforce  against  the  very  subject-matter,  either  by  perfect- 


berger,  24  Pa.  St.  121;  Scribner  v. 
Lockwood,  9  Ohio,  184;  Paine  v. 
Mooreland,  15  Ohio,  435;  45  Am. 
Dec.  585;  Runyaa  v.  McClellan,  24 
Ind.  165;  Ehle  v.  Brown,  31  Wis.  405; 
Rogers  V.  Hussey,  36  Iowa,  664;  Draper 
V.  Bryson,  26  Mo.  108;  69  Am.  Dec. 
483;  Harrison  v.  Cachelin,  23  Mo.  117; 
Waldo  V.  Russell,  5  Mo.  387;  Ohio  etc. 
Co.  V.  Ledyard,  8  Ala.  866;  Cooper  v. 
Blakey,  10  Ga.  263;  Miles  v.  King,  5 
S.  C.  146;  Ayres  v.  Duprey,  27  Tex. 
59.3,  605;  86  Am.  Dec.  657.  As  to  the 
effect  of  purchase  at  execution  sale 
by  the  judgment  creditor  himself,  see 
Gower  v.  Doheny,  33  Iowa,  36,  39; 
Halloway  v.  Platner,  20  Iowa,  121;  89 
Am.  Dec.  517;  but,  per  contra,  Arnold 
V.  Patrick,  6  Paige,  310,  316;  Dicker- 
son  V.  Tillinghast,  4  Paige,  215;  25 
Am.  Dec.  528;  Wright  v.  Douglass,  10 
Barb.  97:  Sargent  v.  Sturm,  23  Cal. 
359;  83  Am.  Dec.  118;  Orme  v.  Rob- 
erts, 33  Tex.  768;  Ayres  v.  Duprey, 
27  Tex.  593;  86  Am.  Dec.  657.  [And 
where  a  mortgage  is  taken  in  good 
faith  by  the  mortgagee,  a  purchaser  at 
a  foreclosure  sale,  though  having  no- 
tice of  prior  equities,  would  take  a  good 
title  by  reason  of  the  good  faith  of  the 
mortgagee:  Bergen  v.  Producers'  Mar- 
ble Yard,  72  Tex.  53;  Cooper  v.  Lough- 
lin,  75  Tex.  524.] 

1  See  ante,  §§  698,  note,  701,  712,  713, 
715.  Stocks:  Pratt  v.  Taunton  etc. 
Co.,  123  Mass.  110,  112;  25  Am.  Rep. 
37;    Loring    v.    Salisbury  Mills,    125 


Mass.  138;  Pratt  v.  Boston  etc.  R.  R., 
126  Mass.  443;  Machinists'  National 
Bank  v.  Field,  126  Mass.  345;  Sewall 
V.  Boston  Water  Works,  4  Allen,  277; 
81  Am.  Dec.  701;  Bank  v.  Lanier,  11 
Wall.  369;  Telegraph  Co.  v.  Daven- 
port,  97  U.  S.  369;  Morris  etc.  Co.  v. 
Fisher,  9  N.  J.  Eq.  667;  64  Am.  Dec. 
423;  Mt.  Holly  Co.  v.  Ferree,  17 
N.  J.  Eq.  117;  Bank  of  Commerce's 
Appeal,  73  Pa.  St.  59,  64;  Craig  v. 
Vicksburg,  31  Miss.  216;  Brewster  v. 
Sime,  42  Cal.  139,  147;  Thompson  v. 
Toland,  48  Cal.  99;  Winter  v.  Belmont 
M.  Co.,  53  Cal.  428,  432;  People  v. 
Elmore,  35  Cal.  653.  Where  assignee 
obtains  possession:  Ancher  v.  Bank  of 
England,  Dough.  637,  639;  Wells  v. 
Archer,  10  Serg.  &  R.  412;  13  Am.  Dec. 
682;  Ellis  v.  Kreutzinger,  27  Mo.  311; 
72  Am.  Dec.  270.  Where  assignee  of 
any  thing  in  action  perfects  his  legal 
title:  Fitzsimmons  v.  Ogden,  7  Cranch, 
1,  18;  Judson  V.  Corcoran,  17  How.  612; 
Downer  v.  Bank,  39  Vt.  25,  29.  And 
generally  that  bona  Jide  assignee  is 
protected:  Livingston  v.  Dean,  2 
Johns.  Ch.  478;  Murray  v.  Lylburn, 
2  Johns.  Ch.  441;  Bloomer  v.  Hender- 
son, 8  Mich.  395,  402;  77  Am.  Dec. 
453;  Croft  v.  Bunster.  9  Wis.  503, 
508;  Moore  v.  Holcombe,  3  Leigh,  597; 
24  Am.  Dec.  683;  Ohio  Life  Ins.  Co. 
v.  Ross,  2  Md.  Ch.  25,  39;  Sleeper 
v.  Chapman,  121  Mass.  404.  But  sea 
§§  708,  709,  714,  and  cases  cited. 


1083  CONCERNING    BONA    FIDE    PURCHASE.       §§  776,  777 

ing  his  title  and  ownership,  or  by  subjecting  it  to  his 
encumbrance.  The  defense  of  bona  fide  purchase  is  not 
confined  to  such  phaintifTs;  it  avails  also  against  parties 
who  claim  to  have  some  "  equity  "  as  distinguished  from 
an  equitable  estate  or  interest, —  parties,  that  is,  who  sim- 
ply claim  and  are  seeking  to  obtain  some  peculiar  equita- 
ble remedy,  such  as  reformation  or  cancellation,  and  the 
like.  In  this  respect  the  defense  is  a  protection  alike  to 
defendants  who  have  a  legal  estate,  and  those  who  have 
purchased  an  equitable  interest.' 

§  776.  Suits  for  Relief  against  Accident  or  Mistake. 
—  Thus,  as  against  a  subsequent  bona  fide  purchaser  for 
value,  a  court  of  equity  will  not  relieve  a  prior  party,  on 
the  ground  of  accident  or  mistake,  by  granting  a  remedy 
otherwise  appropriate,  such  as  setting  aside  a  conveyance 
which  had  been  executed  by  the  plaintiff  under  a  mis- 
take or  ignorance  of  his  rights,  or  correcting  an  instru- 
ment executed  under  a  mistake  of  fact.^ 

§  777.  Suits  for  Relief  against  Fraud  upon  Creditors 
or  between  Parties.  —  The  same  is  true  with  respect  to 
the  renaedy  of  cancellation  in  suits  to  set  aside  convey- 
ances or  sales  on  account  of  fraud,  either  as  against  the 
creditors  of  the  grantor,  or  against  the  grantor  himself. 
In  the  first  case,  where  a  conveyance  has  been  made 
with  intent  to  defraud  creditors  of  the  grantor,  so  that  it 
would  be  voidable  as  against  the  grantee,  but  this  grantee 
has  in  turn  conveyed  to  a  bona  fide  purchaser  for  value, 

»  Phillips  V.  Phillips,  4  De  Gex,  F.  238;  Penny  v.  Watts,  2  De  Gex  &  S. 
&  J.  208,218,  per  Lord  VVestbury;  St.  501;  1  Macn.  &  G.  150  (reversed  on 
John  V.  Spalding,  1  Thoinp.  &  C.  483  the  facts,  but  the  law  of  the  decis- 
(a  bona  Jide  assignee  of  a  recorded  ion  below  not  disturbed);  Ligon  v. 
mortgage,  who  had  also  recorded  his  Rogers,  12  Ga.  281,  292;  Whitman  v. 
assignment,  was  held  unaffected  by  a  Weston,  30  Me.  285.  [See  also  Knob- 
prior  unrecorded  agreement  by  which  lock  v.  Mueller,  123  111.  554;  Martin 
the  mortgage  was  satisfied).  [See  also  v.  Nixon,  92  Mo.  26;  Garrison  v. 
Indiana  etc.  R.  R.  Co.  v.  Bird,  116  Crowell,  67  Tex.  626;  Toll  v.  Daven- 
Ind.  217;  9  Am.  St.  Rep.  842.]  port,  74  Mich.  386;  Armitage  v.  Toll, 

»Bell  V.  Cundall,  Amb.    102;    Mai-  64  Mich.  412;  Lowe  v.  Allen,  68  Ga, 

den  V.  Menil,  2  Atk.  8;    Warrick  v.  225;  and  the  same  rule  applies  where 

Warrick,  3  Atk.  291,  293;  Harvey  v.  relief  is  sought  on  the  ground  of  du- 

Woodhouse,   Sel.   Gas.    Ch.   80;    Mar-  resa:  Rogers  v.  Adauis,  66  Ala.  600.] 
shall  V.  Collett,  1  Younge  &  C.   232, 


§  778  EQUITY  JURISPRUDENCE.  1084 

the  remedial  rights  of  the  creditors  to  have  the  original 
and  fraudulent  transfer  set  aside  are  then  cut  off,  and  the 
purchaser  has  a  complete  defense  against  their  claims.* 
In  the  second  case  of  fraud  between  the  parties,  where  a 
conveyance  has  been  obtained  by  the  grantee's  fraud,  so 
that  it  would  be  set  aside  at  the  suit  of  the  defrauded 
grantor,  but  the  fraudulent  grantee  has  in  turn  con- 
veyed to  a  bona  fide  purchaser  for  value  and  without 
notice,  the  latter  will  take  and  hold  the  property  free 
from  all  these  equities,  protected  against  the  equitable 
remedies  of  the  original  defrauded  owner.' 

§  778.  Fraudulent  Sales  of  Chattels.  —  The  defense 
has  been  extended  to  fraudulent  sales  of  chattels  under 
the  following  limitations,  which  it  may  be  proper  to 
state,  although  the  rules  belong  to  the  law  rather  than  to 
equity:  If  the  vendor,  induced  by  fraud,  sold  and  deliv- 
ered possession,  and  by  the  contract  intended  to  transfer 
the  property  as  well  as  the  possession  to  the  fraudulent 
vendee,  and  if  this  vendee,  before  the  vendor  has  disaf- 
firmed, should  transfer  the  goods  to  an  innocent  pur- 
chaser  for  a  valuable  consideration  and  in  good  faith, 

'  Bean  v.  Smith,  2  Mason,  252,  272-  creditors,  but  assigned  to  a  bona  fide 

282;    Wood   v.    Mann,    1    Sum.    506;  purchaser).      [See    also    Saunders   v. 

Fletcher  v.  Peck,  6  Cranch,  87,  133,  Lee,  101  N.  C.  3.] 
134;  Erskine  v.  Decker,  39  Me.  467;         *  Sturge  v.  Starr,  2  Mylne  &  K.  195; 

Hart   V.  Bank,   33   Vt.    252;  Poor  v.  Bowen  v.  Evans,  1  Jones   &   L.   178, 

W^oodburn,  25  Vt.  234,  236;  Hubbell  263,  264;  Gavagan  v,  Bryant,  83  111. 

V.  Currier,   10  Allen,  333;  Rowley  v.  376;    McNab   v.    Young,    81    111.    11; 

Bigelow,   12  Pick.  307;  23  Am.  Dec.  Dickerson  v.  Evans,  84  111.  451;  Chi- 

007;  Frazer  v.  Western,   1  Barb.  Ch.  oago  etc.  Co.    v.  Foster,  48   111.  507; 

220;  Ledyard  v.  Butler,  9  Paige,  132;  Fulton  v.   Woodman,    54    Miss.    158; 

37  Am.   Dec.  379;  Anderson  v.  P»,ob.  Farmers'  Nat.  Bank   v.   Fletcher,  44 

arts,   18  Johns.  515;  9  Am.  Dec.  235;  Iowa,  252;  Hurley  v.  Osier,  44  Iowa, 

reversing  3  Johns.  Ch.  371,377;  Phelps  642;  Henderson  v.  Henderson,  55  Mo. 

V.  Morrison,  24  N.  J.  Eq.  195;  Hood  534;  Rowley  v.  Bigelow,  12  Pick.  307; 

V.  Fahnestock,  8  Watts,  4S9;  34  Am.  23  Am.  Dec.  607;  Williamson  v.  Rus- 

Dec.  489;  Price  v.  Junkin,  4  Watts,  sell,  ,39  Conn.  406;   Root  v.  French, 

85;  28  Am.  Dec.  685;  Boyce  v.  Waller,  13   Wend.    570;     28    Am.    Dec.    482; 

2  B.  Mon.  91;  Spicer  v.  Robinson,  73  Mears  v.  Waple.s,  3  Houst.  581.     [Sea 

111.  519;  Henderson  v.  Henderson,  55  also  Martin  v.  Robinson.  67  Tex.  368; 

Mo.  534;  Sydnor  v.  Roberts,  13  Tex.  Fish  v.  Benson,  71  Cal.  429;  Hewlett 

598;  65  Am,  Dec.  84;  Reed  v.  Smith,  v.    Pilcher,    85    Cal.    542;    Zoeller  v. 

14  Ala.  380;  Collins  v.  Heath,  34  Ga,  Riley,   100  N.  Y.    108;    Valentine  v. 

443;  Coleman  v.  Cocke,  6  Rand.  618;  Lunt,    115   N.   Y.  496;    Halverson  v. 

18  Am,  Dec.    757;    Sleeper  v.    Chap.  Brown,  75  Iowa,  702;  King  v.  Caba- 

man,  121  Mass.  404  (a  chattel  mort-  niss,  81  Ga.  661;  Neal  v.  Gregory,  19 

gage  given  in  fraud  of  the  mortgagor's  Fla.  3Ji6.] 


1085  CONCERNING    BONA    FIDE    PURCHASE.       §§  779,  780 

the  rights  of  such  purchaser  would  be  superior  to  those 
of  the  original  vendor.  If,  however,  it  was  not  the  in- 
tention of  the  original  vendor  to  pass  the  property  to  the 
fraudulent  vendee,  but  only  the  possession,  such  vendee 
could  not  transfer  any  property  in  the  goods  even  to  an 
innocent  purchaser,  and  the  original  vendor  could  still 
assert  his  title.  Finally,  if,  under  the  circumstances 
first  described,  the  fraudulent  vendee  should  transfer  the 
goods  to  a  third  person,  who  had  actual  or  constructive 
notice,  or  who  did  not  pay  value,  the  original  vendor 
could  still  rescind  and  assert  his  ownership.^ 

§  779.  Fourth.  Affirmative  Relief  to  a  Bona  Fide 
Purchaser.  —  The  peculiar  theory  upon  which  equity 
acts  towards  a  bona  fide  purchaser  seems  of  necessity  to 
imply  that  he  should  be  a  defendant.  There  are  a  few 
special  circumstances,  however,  in  which  the  theory, 
consistently  followed  out,  requires  that  he  should  be 
aided  by  affirmative  relief.  When  these  circumstances 
are  carefully  examined,  it  will  be  found  that  the  fraud, 
or  what  equity  regards  as  fraud,  of  the  party  holding  the 
prior  title  or  interest,  and  against  whom  the  affirmative 
relief  is  granted,  is  usually,  if  not  always,  the  ground 
upon  which  the  court  interposes  on  behalf  of  the  subse- 
quent 6ona  ^cZe  purchaser.  The  following  are  the  impor- 
tant instances  of  such  relief. 

§  780.  Same.  Illustrations.  —  When  a  person,  A,  hav- 
ing a  prior  title  to  property,  and,  knowing  of  such  title, 

1  Stevenson  v.  Newnham,  13  Com.  nan,  73  N.  Y.  45;  Stevens  v.  Brennan, 
B.  285;  Kingsford  v.  Merry,  11  Ex.  79  N.  Y.  254;  Robinson  v.  Dauchy, 
577;  Pease  v.  Gloahec,  L.  R.  1  P.  C.  3  Barb.  20;  Pearse  v.  Pettis,  47  Barb. 
219;  Oakes  v.  Turquand,  L.  R.  2  276;  Spaulding  v.  Brewster,  50  Barb. 
H.  L.  325;  Root  v.  French,  13  Wend.  142;  Barnard  v.  Campbell,  65  Barb. 
570;  28  Am.  Dec.  482;  Caldwell  v.  2S6;  Joslin  v.  Cowee,  60  Barb.  48; 
Bartlett,  3  Duer,  341;  Keyser  v,  Har-  Roberts  v.  Dillon,  3  Daly,  50;  Field 
beck,  3  Duer,  373;  Brower  v.  Pea-  v.  Stearns,  42  Vt.  106;  Poor  v.  Wood- 
body,  13  N.  Y.  121;  Fassett  V.  Smith,  burn,  25  Vt.  234;  Hodgeden  v.  Hub- 
23  N.  Y.  252;  Hathorne  v.  Hodges,  bard,  18  Vt.  504;  46  Am.  Dec.  167; 
28  N.  Y.  486;  Spraights  v.  Hawley,  39  Decan  v.  Shipper,  25  Pa,  St.  239;  78 
N.  Y.  441;  100  Am.  Dec.  452;  Paddou  Am.  Dec.  334;  Jackson  v.  Summer- 
V.  Taylor,  44  N.  Y.  371;  Kinney  v.  ville.  13  Pa.  St.  359;  Dean  v.  Yates, 
Kiernan,  49  N.  Y.  164;  Weaver  v.  22  Ohio  St.  388;  Sargent  v.  Sturm, 
Barden,  49  N.  Y.  286;  Devoe  v.  23  Cal.  359;  83  Am.  Dec.  118;  Rison 
Brandt,  53  N.  Y.  462;  Manning  v..Kee.  v.  Kuapp,  1  DUl.  1S6,  201. 


§  781  EQUITY    JURISPRUDENCE.  1086 

actively  encourages  another  person,  B,  to  buy  the  same 
property,  concealing  or  not  disclosing  his  own  interest, 
but  leading  B  to  suppose  that  he  is  obtaining  a  valid 
title;  or  when,  under  the  same  circumstances,  A  being 
informed  of  B's  intention*,  and  being  brought  in  contact 
with  and  made  cognizant  of  the  transaction,  he  simply 
keeps  silence  and  permits  B  to  buy,  —  in  either  case,  B, 
being  a  bona  fide  purchaser  for  value  and  v.ithout  notice, 
can  compel  a  conveyance  or  release  by  A,  of  whatever 
estate,  title,  or  interest  the  latter  has.  This  relief  will 
be  granted,  even  though  A  was  an  infant  or  a  married 
woman,  since  it  does  not  depend  upon  a  capacity  to  con- 
tract, but  upon  unrighteous  conduct.* 

§  781.  Same.  Illustrations.  —  The  second  important 
class  of  cases  in  which  relief  may  be  given  to  the  bona 
fide  purchaser  is  that  of  encumbrancers  w^ho  have  misled 
the  purchaser  by  their  words  or  acts.  If  a  prior  encum- 
brancer, upon  being  inquired  of  by  one  intending  to 
purchase  the  property,  deny  the  existence  of  his  encum- 
brance, a  court  of  equity  will  certainly  grant  affirmative 
relief  to  the  bona  fide  purchaser  who  has  thus  been  misled, 
either  by  postponing  or  by  completely  setting  aside  the 
encumbrance,  as  the  circumstances  may  require.^     Mere 

>  Savage  v.  Foster.  9  Mod.  35.     In  503;  Carr  v.   Wallace,  7  Watts,  394; 

the  following  cases  the  doctrine  has  Vanhorn  v.  Frick,  3  Serg.  &  R.  278; 

been  applied  to  estates  in  land,  trust  Saunderson  v.  Ballance,  2  Jones  Eq. 

funds,    things   in    action,    and    other  322;   67   Am.    Dec.    218;   Higgins   v. 

formsof  interests,  in  some  defensively,  Ferguson,    14   111.    269;   Godeffroy  v. 

in  others  as  the  ground  of  affirmative  Caldwell,  2  Cal.  489;  56  Am.  Dec.  360. 

relief:    Sharpe  v.  Foy,  L.  R.    4   Ch.  If  a  misrepresentation  as  to  his  age  is 

35   (infant   married    woman);    In   re  made   by  an   infant  to  a  person  who 

Lush's  Trusts,  L.  R.  4  Ch.  591;  [Mc-  knows  his  actual  age,  and  cannot  be 

Danell  v.  Landrum,  87  Ky.  404;    12  misled   thereby,    the   infant   will  not 

Am.  St.  Rep.  500;]  (married  woman);  become  bound  in  equity  with  respect 

Overton  v.  Banister,  3  Hare,  503  (in-  to     such     misstatement:     Nelsou    v. 

fant    cestui    que   trust);    Nicholson  v.  Stocker,  4  De  Gex  &  J.  458. 

Hooper,  4    Mylne  &  C.  179,  185,  186  ^  Ibbottson  v.  Rhodes,  2  Vern.  554; 

(assignment  of  things  in  action);  Hobbs  Hickson   v.    Aylward,    3    MoUoy,    1; 

V.    Norton,    1    Vern.    136;    Watts   v.  and  see  Boyd  v.  Belton,  1  Jones  &  L. 

Hailswell,    4   Brown    Ch.    507,    note;  730.     Of  course  the  denial  need  not 

Berrisford    v.    Milward,    2   Atk.    49;  be  express  and  positive;  any  language 

Thompson  v.  Simpson,  2  Jones  &  L.  which    would  fairly  mislead  the  pur- 

110;   Wendell   v.    Van  Rensselaer,    1  chaser,  and  convince   him  that  there 

Johns.   Ch.   344;  Niven  v.  Belknap,  2  was    no   lien,   would   be   sufficient   to 

Johns.    573;    Cheeney   v.    Arnold,    18  raise  this  equity.    For  the  same  reason, 

Barb.   434;  Wells  v.  Pierce,  27  N.  H.  where  a  trustee  who  holds  the  legal 


1087  CONCERNING    BONA    FIDK    PURCHASE.  §  782 

silence  of  an  encumbrancer  does  not  render  him  liable, 
where  he  has  no  connection  with  the  transaction  in  which 
the  purchaser  is  engaged,  is  not  brought  into  any  rela- 
tions with  the  parties,  and  is  not  placed  under  any  equi- 
table obligation  to  make  disclosure.' 

§  782.  Same.  Illustrations.  —  In  the  two  foregoing 
classes  of  cases  the  one  who  makes  himself  subject  to  an 
equity  in  favor  of  the  bona  fide  purchaser  has  knowledge, 
or  at  least  notice,  of  the  title  or  encumbrance  with  respect 
to  which  he  incurs  liability,  or  against  which  the  pur- 
chaser obtains  relief;  but  the  doctrine  has  been  carried 
one  step  further.  Where  a  person  is  actually  ignorant  of 
his  own  right  in  certain  property,  but  under  such  circum- 
stances that  he  might  have  had  notice  of  it,  or  ought  with 
reasonable  care  to  have  known  of  it,  and  he  makes  a  rep- 
resentation untrue  in  fact  to  one  intending  to  deal  con- 
cerning the  property,  and  this  party,  relying  upon  the 
statement,  becomes  a  bona  fide  purchaser,  equity  will  re- 
lieve such  purchaser  as  against  the  one  making  the  untrue 
representation,  although  no  liability  may  be  incurred  at 
law.^     The  justice  of  this  rule  is  plain,  for  equity  often 

title    is  inquired  of  by  one  who  in-  a  party  has,  by  words  or  conduct,  made 

tends  to  purchase  from  or  deal  with  a   representation   to   another   leading 

the  cestui  que  trust,  and  states  that  the  him   to  believe  in  the  existence  of  a 

property  is  unencumbered,  he  will  be  particular  fact  or  state  of  facts,  and 

held  liable  to  the  purchaser  with  re-  that   other  person   has  acted  on   the 

spect  to  any  encumbrance  which  does  faith  of  such  representation,  then  the 

exist,  provided  he  had  received  notice;  party   who   made   the   representation 

but  the  trustee's  statements  must  be  shall  not  afterwards  be  heard  to  say 

clear  and  unmistakable  in  their  mean-  that   the  facts  were  not  as  he  repre- 

ing:    (Burrows  v.  Lock,   10  Ves.  470,  seated  them  to  be.     This  doctrine  is 

475;  Slim  v.  Croucher,  1  De  Gex,  F.  &  not  confined  to  cases  where  the  origi- 

J.    518;   2   Gitf.  37   ( forgetfulness   no  nal     representation    was    fraudulent, 

excuse);     In    re    Ward,    31    Beav.    1;  Where,  indeed,  that  is  the  case, — where 

Stephens  v.  Venables,  31  Beav.  124.  a  party  makes  a  representation  which 

^  Id.;    Osborn   v.  Lea,   9    Mod.  96,  he  knows  to  be  false,  in  order  thereby 

and  cases  cited  under  the  next  para-  to  induce  another  to  act  on  the  belief 

graph.  that  it  is  true,   and  that  other  party 

■•'  Teasdale  v,  Teasdale,  Sel.  Gas.  Ch.  does  so  act,  —  the  whole  transaction  is, 
69;  Pearson  v.  Morgan,  2  Brown  Ch.  in  the  strictest  and  most  obvious  and 
388;  Stiles  v.  Cowper,  3  Atk.  692;  popular  sense  of  the  word,  a  fraud. 
West  V.  Jones,  1  Sim.,  N.  S.,  205,  207,  But  the  doctrine,  not  only  of  this  court, 
208.  In  the  last  case.  Lord  Cranworth,  but  also  of  courts  of  law,  goes  much 
V.  C.,  said  (p.  207):  "  The  plaintiff  re-  further.  Even  where  a  representation 
lies  on  a  principle  perfectly  familiar,  is  made  in  the  most  entire  good  faith, 
not  only  to  courts  of  equity,  but  also  if  it  be  made  in  order  to  induce  an- 
te courts  of  law,  namely,  that  where  other  to  act  upon  it,  or  under  circum- 


§§  783,  784  EQUITY   JURISPRUDENCE.  1088 

proceeds  upon  higher  motives  of  morality  than  those 
which  sometimes  underlie  legal  rules.  An  innocent  pur- 
chaser should  not  suffer  loss  from  relying  upon  the  untrue 
statements  of  another,  although  not  made  with  an  intent 
to  mislead  or  deceive;  in  adjusting  the  loss  between  the 
two  who  are  both  innocent  of  an  intentional  wrong,  equity 
properly  lays  it  upon  him  who,  by  his  acts  or  words,  has 
made  the  loss  possible. 

§  783.  Same.  Removing  a  Cloud  from  a  Title.  —  In 
addition  to  the  foregoing  cases,  all  based  upon  an  element 
of  fraud,  actual  or  constructive,  affirmative  relief  may  be 
granted  to  a  bona  fide  purchaser,  under  some  other  cir- 
cumstances, to  remove  a  cloud  upon  his  title;  that  is,  to 
set  aside  judgments,  mortgages,  and  the  like,  which  are 
apparent  liens,  but  in  reality  inoperative  as  against  him, 
where  the  law  would  furnish  no  adequate  remedy.^ 

§  784.  Fifth.  Mode  and  Form  of  the  Defense.  — I 
shall  conclude  the  discussion  of  this  subject  with  a  very 
brief  consideration  of  the  manner  in  which  the  bona  fide 
purchaser  may  avail  himself  of  the  defense,  the  pleadings 
by  which  it  may  be  set  up,  and  the  necessary  contents  of 
those  pleadings.  Under  the  system  of  procedure  and 
pleading  peculiar  to  a  court  of  chancery,  and  in  whatever 
tribunals  that  system  is  still  preserved,  the  defense  may 
be  raised  in  three  different  manners.    If  the  fact  that  the 

stances  in  which  the  party  making  it  must  determine  the  liability:  Richard- 
may  reasonably  suppose  it  will  be  acted  son  v,  Chickering,  41  N.  H.  380;  77 
on,  then,  prima  facie,  the  party  making  Am.  Dec.  769;  Wells  v.  Pierce,  27  N.  H, 
the  representation  is  bound  by  it,  as  503;  Parker  v.  Barker,  2  Met.  423; 
between  himself  and  those  whom  he  Laurence  v.  Brown,  5  N.  Y.  304;  En- 
has  thus  misled."  Where  there  is  noth-  chanan  v.  Moore,  13  Serg.  &  R.  304; 
ing  but  mere  silence  or  acquiescence,  15  Am.  Dec.  601;  McKelvey  v.  Truby, 
equity  requires  that  the  party  should  4  Watts  &  S.  323;  Willis  v.  Swartz,  28 
be  in  such  a  position  or  relations  to  Pa.  St.  413;  Beaupland  v.  McKeen,  28 
the  others  that  a  duty  to  speak  rested  Pa.  St.  124;  70  Am.  Dec.  115;  and  see 
upon  him,  in  order  to  create  liability  the  peculiar  case  of  McKelway  v.  Ar- 
therefrom:  Strong  v.  Ellsworth,  26  mour,  ION.  J.  Eq.  115;  64Am.  Dec.445. 
Vt.  366;  Clabough  v.  Byerly,  7  Gill,  'Setting  aside  judgments:  Martin  v. 
354.  W^here  there  is  actual  procure-  Hewitt,  44  Ala.  418;  Sharp  v.  Hunter, 
ment,  interference,  inducement,  rep-  7  Cold.  389;  Filley  v.  Duncan,  1  Neb. 
resentations  actually  untrue,  although  134;  93  Am.  Dec.  337.  Setting  aside 
mistaken  and  without  misleading  in-  mortgages:  Dillon  v.  Costelloe,  2  Mol- 
tent,  the  principles  so  admirably  ex-  loy,  512;  Wallace  v.  Lord  Donegal,  1 
plained  by  Lord  Cranworth  in  the  Drn.  &  Walsh,  461;  Gibson  v.  Fletcher, 
above  extract,  and  stated  in  the  text,  1  Oh.  Rep.  59, 


10S9  CONCERNING    BONA    FIDE   PURCHASE.  §  785 

defendant  is  a  bona  fide  purchaser  for  value  without  notice 
is  clearly  shown  by  the  bill  of  complaint,  the  defendant 
may  resort  to  a  demurrer.*  The  usual  mode  of  presenting 
the  defense  is  by  a  plea;  and  if  it  contains  the  requisite 
averments,  and  they  are  established  by  evidence,  the  suit 
will  be  dismissed  without  the  necessity  of  an  answer  on  the 
merits.  Instead  of  resorting  to  a  "  plea,"  the  defendant  may 
set  out  the  facts  constituting  this  defense  in  his  answer.' 
If  he  neglects  to  put  in  a  plea,  and  fails  to  insert  the 
defense  in  his  answer,  he  cannot  raise  it  or  avail  himself 
of  it  in  any  subsequent  stage  of  the  suit.'  Wherever  the 
reformed  system  of  procedure  prevails,  and  all  remedies, 
equitable  as  well  as  legal,  are  obtained  through  the  single 
"  civil  action,"  the  defense  must,  of  course,  be  taken  ad- 
vantage of,  either  by  demurrer  or  by  answer.  Unless  the 
facts  appear  on  the  face  of  the  complaint  so  as  to  permit 
a  demurrer,  there  can  be  no  doubt  that  in  the  new  sys- 
tem as  well  as  in  the  old  the  defense  must  be  pleaded,  in 
order  to  be  available.* 

§  785.  Necessary  Allegations.  —  The  allegations  of  the 
plea,  or  of  the  answer  so  far  as  it  relates  to  this  defense, 
must  include  all  those  particulars  which,  as  has  been 
shown,  are  necessary  to  constitute  a  bona  fide  purchase. 
It  should  state  the  consideration,  which  must  appear  from 
the  averment  to  be  "valuable"  within  the  meaning  of  the 
rules  upon  that  subject,  and  should  show  that  it  has  ac- 
tually been  paid,  and  not  merely  secured.'    It  should  also 

*  Mitford'a  Eq.  PI.  199.  the   codes,   and  therefore  to  be  spe- 
'  With   respect    to  the    differences     cially  pleaded,   not   being  admissible 

between  a  "plea  "  and  an  "answer,"  under  an  answer  of  denials  general  or 

and  the  advantages  of  the  former,  see  special.     [Lupo  v.  True,  16  S.  C.  580. 

Atfy-Gen.  v.  Wilkins,  17  Beav.  2S5,  See  Bossick  Min.  Co.  v.  Davis,  1 1  Col. 

291;  LordRancliffe  V.  Parkyns,  6Dow,  130.     And  must  be  pleaded  as  fully  a* 

149,    per   Lord   Eldon;    Lancaster  v.  under    the    former    equity    practice: 

Evors,  1  Phill.  Ch.  349,  352;  Ovey  v.  Weber  v.  Rothchild,    15  Or.  385;    3 

Leighton,  2  Sim.  &  St.  234;  Earl  of  Am.  St.  Rep.   162;  Richards  v.  Sny. 

Portarlington  v.  Soulby,  7  Sim.  28.  der,  1 1  Or.  501 .] 

*  Phillips  V.  Phillips,  4  De  Gex,  P.  '  See  ante,  subdivision  on  valnable 
&  J.  208;  Lyne  v.  Lyne,  8  De  Gex,  consideration,  cases  cited  under  §§746- 
M.  &  G.  553;  21  Beav.  318.  751.     In  England  the  pleading  must 

*  The  defense  seems  plainly  to  be  show  that  the  consideration  has  all 
**  new  matter  "  within  the  meaning  of  been  paid,  etc     In  this  country  the 

2£Q.Jua.— 69 


I  785  EQUITY  JURISPRUDENCE.  1090 

deny  notice  in  the  fullest  and  clearest  manner,  and  this 
denial  is  necessary,  whether  notice  is  charged  in  the  com- 
plaint or  not.  The  denial  mnst  correspond  with  the  set- 
tled rules  upon  the  subject  of  notice,  so  as  to  bring  the 
case  within  the  operation  of  those  rules.'  Concerning  the 
foregoing  averments  there  has  been,  and  can  be,  no  doubt; 
there  is,  however,  some  confusion,  or  even  conflict,  with 
respect  to  the  allegations  concerning  the  defendant's  es- 
tate. There  are  many  English  decisions  which  hold  in 
the  most  positive  manner  the  following  requirements: 
The  defendant  must  allege  that  the  grantor  from  whom 
he  immediately  took  his  title  was  seised,  or  appeared  to 
be  seised,  or  pretended  to  be  seised,  of  a  legal  estate  at 
the  time  of  the  conveyance,  and  also  that  such  grantor 
was  in  possession,  if  the  conveyance  purported  to  be  of  a 
present  estate  in  possession.  Consequently  the  defendant 
must  allege  that  by  the  conveyance  in  question  he  either 
actually  obtained  a  legal  freehold  estate,  or  else  obtained 
what  purported  and  appeared  to  be  such  an  estate,  and 
what  he  at  the  time  purchased  as,  and  supposed  and  be- 
lieved to  be,  such  a  freehold  legal  estate,  —  that  he  ac- 
quired a  legal  seisin  from  his  immediate  grantor.  From 
these  decisions,  it  necessarily  follows  that  while  a  defend- 
ant who  really  acquires  only  an  equitable  estate,  which, 
however,  purported  to  be  a  legal  estate,  and  which 
he  in  good  faith  believed  to  be  such,  may  be  a  bona  fide 
purchaser  within  the  meaning  of  the  doctrine,  a  de- 
fendant who  knowingly  and  intentionally  purchases  an 

allegations  on  this  subject  may  vary  gi^^ing  it,  etc.,  have  been  adopted  in 
in  dififerent  states,  according  to  the  different  states,  the  allegations  must, 
particular  rules  prevailing  therein,  as  of  course,  correspond  to  the  rules  pre- 
shown  in  former  paragraphs;  but  vailing  in  the  particular  state,  as  here- 
should  conform  to  the  rules  as  settled  tofore  shown.  The  English  cases  on 
in  the  particular  state.  the  subject  of  denying  notice  and  al- 
^  See  ante,  subdivision  on  notice,  leging  consideration  would  be  mis- 
cases  cited  under  §§  752-756.  In  leading  in  some  of  the  states.  [See 
England  the  receipt  of  notice  before  Seymour  v.  McKinstry,  106  N.  Y. 
the  payment  of  the  consideration  and  238;  Graves  v.  Coutant,  31  N.  J. 
the  execution  of  the  conveyance  must  Eq.  763;  Dean  v.  Anderson,  34  N.  J. 
be  denied,  etc.  As  very  different  rules  Eq.  496;  Hill  v.  Moore,  62  Tex. 
on  the  subject  of  notice,  the  time  of  610.] 


1091  CONCERNING    BONA    FIDE    PURCHASE.  §  785 

equitable  estate  or  interest  cannot  avail  himself  of  the 
defense.  These  English  decisions  have  been  followed 
by  numerous  American  cases.^  This  is  plainly  the  same 
question,  under  another  form,  which  has  been  discussed 
in  the  preceding  subdivisions:  how  far  the  subsequent 
purchaser  of  a  mere  equitable  interest  is  entitled  to  the 
defense  of  a  bona  fide  purchaser.  That  discussion  need 
not  be  renewed,  and  I  simply  refer  to  the  paragraphs 
which  contain  it,  and  to  the  cases  heretofore  cited  in 
which  it  is  involved.^  It  should  be  remembered,  how- 
ever, in  applying  the  doctrine,  that  it  has  been  materially 
modified  by  the  recording  statutes.  Whenever,  as  is  com- 
monly the  case  in  this  country,  the  defense  of  bona  fide 
purchase  arises  in  connection  with  recording,  the  true  rule 
would  seem  to  be  as  follows:  The  defendant  must  aver  in 
his  plea  or  answer  that  he  has  purchased  an  estate  which 
comes  within  the  protection  of  the  recording  acts;  or  in 
other  words,  that  he  has  purchased  an  estate  or  interest, 
legal  or  equitable,  of  such  a  kind  that  the  conveyance  or 
instrument  constituting  his  muniment  of  title  must  or 
may  be  recorded,  so  that  by  his  recording  it  he  can  obtain 
the  protection  which  the  statutes  give  to  such  a  bona  fide 
purchaser  who  has  first  put  his  instrument  of  title  on 
record.' 

»  story  V.    Lord  Windsor,  2   Atk,  Heirs  v.  Banks,  6  T.  B.  Men.   198;  17 

630;  Trevanion  v.  Mosse,  1  Vera.  246;  Am.   Dec.    136;    Halstead  v.  Bank  of 

Hughes  V.  Garth,  Arab.  421;  Page  v.  Kentucky,  4  J.  J.   Marsh.   554;   Lar- 

Lever,   2  Ves.  450;   Dobson  v.  Lead-  rowe  v.  Beane,  10  Ohio,  498;  Jenkins 

beater,  13  Ves.  230;  Jackson  v.  Rowe,  v.  Bodley,   1  Smedes  &  M.    Ch.  3.38; 

4  Russ.  514;  Ogilvie  v.  Jeaflfreson,  2  Wailes  v.  Cooper,  24  Miss.  208;  Boone 

Giff.  353,  379;  Lady  Lanesborough  v.  v.  Chiles,  10  Pet.  177;  Vattier  v.  Hinde, 

Lord  Kilmaine,  2  Molloy,  403;  Snel-  7  Pet,  252,  271;  Alexander  v.  Pendle- 

grove  V.  Snelgrove,  4  Desaus.  Eq.  274  ton,    8    Cranch,    462;      [Eversdoa    v. 

(a  very  full  statement  of  all  the  requi-  Mayhew,  65  Cal.  163.] 

sites  for  a  good  plea,  and  a  review  of  *  See  a7ite,  *;§  740,  756. 

])revious   authorities);  Blake  v.   Hey-  '  See  aw<e,  §§  757-761.     [The  defense 

ward,  1  Bail.  Eq.  208;  Bush  v.  Bush,  3  of  a  bona  fide  purchase  for  value  and 

Strob.  Eq.  131;  Brown  V.  Wood,  6  Rich,  without  notice  is  a  personal  defense, 

Eq.  155;  Tompkins  v.  Anthon,  4  Sand,  and  can  only  be  relied  on  by  such  pur- 

Ch.  97;  Baynard  v.  Norris,  5  Gill,  468;  chaser  or  by  some  one  deriving  title 

46  Am.  Dec.  647;  Nantzv.  McPherson,  through  him:  Hayaes  V.  Whitsett,  18 

7  T.  B.  Mon.  597;  18  Am.  Dec.  216;  Or.  455.] 
Hunter  v.  Sumrall,  5  Litt  62;  Blight's 


786  EQUITY   JURISPRUDENCE.  1092 

SECTION  VIII. 

CONCERNING  MERGER. 


§  786.  Origin  and  nature  of  the  doctrine. 

§§787,788.  First.     Merger  of  estates. 

'§787.  I.  The  legal  doctrine. 

§  788.  II.  The  equitable  doctrine. 

8§  789-800.  Second.     Merger  of  charges. 

§  790.  I.  The  owner  of  the  property  becomes  entitled  to  the  charge, 

§  791.  Same.     Intention  prevents  a  merger. 

§  792.  Time  and  mode  of  expressing  the  intention. 

§  793.  Conveyance  to  the  mortgagee;  assignment  to  the  mortgagor  or 
to  his  grantee. 

§  794.  Merger  never  prevented  when  fraud  or  wrong  would  result. 

§  795.  Life  tenant  becomes  entitled  to  the  charge. 

§  796.  II.  The  owner  of  the  land  pays  off  a  charge  upon  it. 

§  797.  Owner  in  fee  personally  liable  for  the  debt  pays  off  a  charge, 

§  798.  Owner  who  is  not  liable  for  the  debt  pays  off  a  charge. 

§  799.  Life  tenant  pays  off  a  charge. 

§  800.  Priorities  affected  by  merger. 

§  786.  Origin  and  Nature  of  the  Doctrine.  —  The  ap- 
plications of  the  equitable  doctrine  concerning  merger, 
although  resting  upon  the  same  general  principle,  are 
various  in  form,  and  some  of  them  are  of  frequent  occur- 
rence in  this  country.  The  single  principle  from  which 
the  doctrine,  in  all  its  modes  and  forms  of  application, 
directly  results  is  the  fruitful  maxim,  that  equity,  in 
viewing  the  transactions  of  men,  and  in  determining  the 
rights  and  liabilities  arising  therefrom,  looks  at  the  real 
intent  of  the  parties  as  constituting  the  essential  sub- 
stance, and  not  at  the  mere  external  form.  In  this 
method  of  viewing  the  affairs  of  mankind,  equity  often 
establishes  different  rules,  creating  different  rights  and 
duties  from  those  which,  under  the  same  circumstances, 
prevail  at  law.^  The  equitable  doctrine  of  merger  is  a 
striking  illustration  of  this  most  righteous  principle;  and 

1  See  ante,  voL  1,  §§  378-384.     "  Equity  looks  to  the  intent,  rather  than  to- 
the  form," 


1093  CONCERNING    MERGER.  §  787 

the  whole  discussion  in  fact  consists  in  ascertaining 
when  and  how  a  merger,  which  would  have  been  inevita- 
ble at  law,  will  be  prevented  or  not  permitted  in  equity 
The  subject  will  be  treated  of  under  the  two  following 
divisions:  1.  Merger  of  estates  in  the  same  land;  2. 
Merger  of  charges  —  liens  and  encumbrances  —  on  the 
same  land. 

§  787.  First.  Merger  of  Estates. — I.  The  Legal  Doc- 
trine.—  The  rule  of  the  common  law  is  well  established, 
and  of  almost  universal  application,  that  where  a  greater 
and  a  less  legal  estate,  held  in  the  same  right,  meet  in 
the  same  person,  without  any  intermediate  estate,  a 
merger  necessarily  takes  place.  The  lesser  estate  ceases 
to  exist,  being  merged  in  the  greater,  w^hich  alone  re- 
mains; as  where  a  tenant  for  years  acquires  the  fee,  the 
term  is  merged.  For  the  purposes  of  a  merger,  by  the 
common  law,  every  estate  of  freehold  is  greater  than  any 
term  of  years.  Both  estates,  however,  must  be  held  in 
the  same  right,  in  order  that  this  result  may  follow.* 
There  is  a  well-settled  exception  to  this  general  rule  in 
the  case  of  estates-tail;  these  do  not  merge  in  the  fee, 
such  result  being  prevented  by  the  operation  of  the  stat- 
ute de  donis}  Courts  of  law,  under  the  influence  of  equi- 
table notions,  may  now  admit  of  some  other  exceptions.' 

'  2  Black.  Com.  157;  2  Spence's  Eq.  ute:  Parker  v.  Turner,  1  Vern.  458; 
Jur.  879,  880;  White  v.  Greenish,  11  Dunn  v.  Green,  3  P.  Wms.  9;  also  an 
Com.  B.,  N.  S.,  209,  233;  Jones  V.  Da-  estate-tail,  after  possibility  of  issue 
vies,  7  Hurl.  &  N.  507;  Lady  Piatt  v.  extinct,  or  when  changed  into  a  de- 
Sleap,  Cro.  Jac.  275.  An  estate  for  terminable  fee,  may  merge:  See  3 
years  will  merge  in  a  reversionary  Preston  on  Conveyancing,  240. 
term  of  years,  even  though  the  latter  '  Thus  it  is  held  in  Malloney  v. 
is  of  less  duration:  See  Hughes  v.  Horan,  49  N.  Y.  Ill,  10  Am.  Rep. 
Robotham,  Cro.  Eliz.  302;  Stephens  335,  that  where  the  fee  has  been  con- 
V.  Bridges,  6  Madd.  66.  As  illustra-  veyed  to  A,  by  a  deed  fraudulent  as 
tions  of  the  general  rule,  see  Welsh  against  the  creditors  of  the  grantor, 
V.  Phillips,  54  Ala.  309;  25  Am.  Rep.  and  the  conveyance  has  been  set  aside 
679;  Cary  v.  Warner,  63  Me.  571  (life  on  that  ground,  the  fact  that  it  was 
estate  and  reversion  in  fee);  Allen  v.  valid  as  between  the  immediate  par- 
Anderson,  44  Ind.  395  (life  estate  and  ties  will  not  cause  it  to  work  a  merger 
fee);  [Couch  v.  Eastham,  29  W.  Va.  of  a  smaller  prior  estate  held  by  the 
784;  Boykin  v.  Ancrum,  28  S.  C.  486;  grantee.  A;  to  the  loss  of  the  fee,  the 
13  Am.  St.  Rep.  698.]  law  will  not  add  as  a  penalty  the  fur- 

*  2  Black.  Com.  177.     Estates-tail  in  ther  loss  of   the  prior  estate  on  the 

copyholds,  however,  will  merge  in  the  ground  of  a  merger, 
lee,  since  they  are  not  within  the  atat- 


§  788  EQUITY   JURISPRUDENCE.  1094 

The  general  doctrine  is  not  confined  to  the  union  of  two 
legal  estates.  Wherever,  in  like  manner,  a  legal  and  an 
equal  and  co-extensive  equitable  estate,  or  a  legal  and  a 
less  equitable  estate,  meet  in  the  same  person,  in  either 
instance  the  equitable  estate  is  merged  at  law,  for  the  law 
regards  the  legal  estate  as  the  superior.*  There  is,  how- 
ever, the  same  exception  as  above,  that  an  equitable 
estate-tail  will  not  merge  in  the  legal  fee.^ 

§  788.  II.  The  Equitable  Doctrine.  —  Where  the  legal 
estate  —  for  example,  the  fee  —  and  an  equal  co-extensive 
equitable  estate  unite  in  the  same  person,  the  merger 
takes  place  in  equit}^  in  the  absence  of  acts  showing  an 
intention  to  prevent  it,  as  certainly  and  as  directly  as  at 
the  law.  Under  these  circumstances,  merger  is  prima 
facie  the  equitable  as  well  as  legal  rule.'  If,  however,  the 
holder  of  an  equitable  estate  obtains  the  legal  fee,  and 
procures  it  to  be  conveyed  to  a  trustee  with  an  express 
declaration  that  there  shall  be  no  merger,  then  it  seems 
that  a  court  of  equity  will  not  permit  a  merger  in  oppo- 
sition to  such  a  direct  intention.*     Where  the  owner  of  a 

'  Selby     V.    Alston,    3     Vea.    339;  the  whole   legal  estate  and  a  partial 

Brydges   v.    Brydges,    3   Ves.    125  a;  equitable  estate,  the  latter  sinks  into 

Capel  V.  Girdler,  9  Ves.  509;  Welsh  v.  the  former,   for  it  would  be  a  disad- 

Phillips,  54  Ala.  309;  25  Am.  Rep.  679.  vantage  to  him.     There  is  no  absurd- 

*  Merest  v.  James,  6  Madd.  118;  ity  in  saying  that  a  person  may  have 
Browne  v.  Blake,  1  Molloy,  382.  the  whole  legal  estate,  and  a  limited 

*  Selby  V.  Alston,  3  Ves.  339;  interest  in  the  beneficial  interest  in 
Brydges  v.  Brydges,  3  Ves.  125  a;  that  estate,  as  there  is  in  saying  that 
Wykham  v.  Wykham,  18  Ves.  418,  he  has  the  whole  legal  fee  and  a  legal 
per  Lord  Eldon;   James  v.  Morey,  2  remainder." 

Cow.  246;  14  Am.  Dec.  475.  In  *  Belaney  v.  Belaney,  L.  R.  2  Ch. 
Brydges  v.  Brydges,  3  Ves.  125  a.  Lord  138;  Tifhn  v.  Tiffin,  1  Vern.  1.  The 
Alvanley  laid  down  the  equitable  doc-  rule  in  Shelley's  case  was  so  unfavor- 
trine  in  an  accurate  manner,  which  ably  regarded  by  courts  of  equity  that 
received  the  strong  approval  of  Lord  they  would  not  permit  a  merger  of  an 
Eldon,  and  the  decision  is  a  leading  equitable  in  a  legal  estate,  in  order  to 
authority:  "  I  admit  that  where  a  per-  render  the  life  interest  and  the  re- 
son  has  the  same  interest  in  the  legal  mainder  of  the  same  kind,  and  thus 
and  equitable  estate,  he  ceases  to  let  in  the  operation  of  the  rule:  See 
have  the  equitable  estate,  and  has  the  Shapland  v.  Smith,  1  Brown  Ch.  76; 
legal  estate,  upon  which  this  court  Lord  Say  and  Seal  v.  Jones,  3  Brown 
will  not  act,  but  leaves  it  to  the  Pari.  C.  113;  Venables  v.  Morris,  7 
rules  of  law.  But  it  must  always  be  Term  Rep.  342-438;  Silvester  v.  Wil- 
understood  with  this  distinction,  that  son,  2  Term  Rep.  444.  No  merger 
it  holds  only  where  the  legal  and  equi-  will  take  place  in  equity  where  the 
table  estates  are  co-extensive  and  two  interests  are  held  by  different 
commensurate;  but  I  do  not  by  any  rights:  Chambers  v.  Kingham.  L.  R. 
means  admit  that  where  a  person  has  10  Ch.  Div.  743,  745. 


1095  .   CONCERNING    MERGER.  §  7S8 

legal  estate  —  as,  for  example,  tlie  fee  —  acquires  by  pur- 
chase or  in  any  other  manner  a  lesser  equitable  estate  not 
co-extensive  and  commensurate  with  his  legal  estate,  or 
a  lesser  legal  estate,  a  distinction  exists;  the  merger,  al- 
though taking  place  at  law,  does  not  necessarily  take  place 
in  equity;  indeed,  it  may  be  said  that  the  leaning  of  equity 
is  then  against  any  merger,  and  that,  prima  facie,  it  does 
not  result.  The  settled  rule  of  equity  is,  that  the  inten- 
tion of  the  one  acquiring  the  two  interests  then  controls. 
If  this  intention  has  been  expressed  by  taking  the  trans- 
fer to  a  trustee,  or  by  language  inserted  in  the  instrument 
of  transfer,  it  will,  of  course,  be  followed.  If  the  intention 
has  not  been  thus  expressed,  it  will  be  sought  for  and  as- 
certained in  all  the  circumstances  of  the  transaction.  If  it 
appears  from  all  these  circumstances  to  be  for  the  benefit 
of  the  party  acquiring  both  interests  that  a  merger  shall 
not  take  place,  but  that  the  equitable  or  lesser  estate  shall 
be  kept  alive,  then  his  intention  that  such  a  result  should 
follow  will  be  presumed,  and  equity  will  carry  it  into  exe- 
cution by  preventing  a  merger,  and  by  treating  the  equi- 
table or  lesser  interest  as  subsisting,  and  by  admitting 
all  the  consequences,  for  the  protection  of  the  party  with 
respect  to  other  matters,  which  necessarily  result  from 
the  fact  of  the  equitable  estate  being  left  in  existence.^ 

'  Brydge3  v.  Brydges,  3  Vea.  125  a;  action  was  one  to  recover  possession  of 
Chambers  v.  Kingham,  L.  R.  10  Ch.  land, — simple  ejectment, — in  which 
Div.  743,  745;  Thorn  v.  Newman,  3  the  plaintiff  only  alleged  and  sought 
Swanst.  603;  Adams  v.  Angell,  L.  R.  5  to  recover  upon  his  legal  title  in  his 
Ch.  Div.  634,  645,  and  cases  cited;  complaint.  Livingston,  the  original 
Forbes  v.  Moffatt,  18  Ves.  384;  St.  owner,  had  demised  the  land  to  one 
iPaul  V.  Lord  Dudley  and  Ward,  15  Taylor  by  a  perpetual  lease,  reserving 
Ves.  167,  173;  Andrus  v.  Vreeland,  29  a  rent-charge  with  a  clause  of  re-en- 
N.  J.  Eq.  394;  Welsh  v.  Phillips,  54  try.  L.  assigned  this  rent-charge  and 
Ala.  309;  25  Am.  Rep.  679;  Fowler  v.  all  his  rights  to  Dr.  Clarke,  who  died 
Fay,  62  111.  375;  Worcester  Bank  v.  in  1846,  and  the  plaintiff  is  his  heir 
Cheeney,  87  111.  692;  Hart  v.  Chase,  at  law.  The  action  is  brought  to  re- 
46  Conn.  207;  Malloney  v.  Horan,  49  cover  the  land  on  account  oMailure  to 
N.  Y.  Ill;  10  Am.  Rep.  335;  Binsse  pay  the  rent.  The  defense  was  aa 
V.  Paige,  1  Abb.  App.  138;  Sheehan  follows:  Taylor  had  given  a  mortgage 
T.  Hamilton,  2  Keyes,  304;  4  Abb.  on  the  land,  which  had  been  fore- 
App.  211.  This  case  presents  an  closed,  and  the  land  was  bought  in  by 
interesting  and  most  iinportant  ques-  Dr.  Clarke  in  1831,  and  was  by  him 
tion  with  respect  to  the  application  of  conveyed  to  one  Risley  and  from  him 
the  equitable  doctrine  in  legal  actions  by  mesne  conveyances  to  the  defend- 
under  the  reformed  procedure.     The  ant.     The  defendant's  contention  was. 


§  789  EQUITY   JURISPRUDENCE.  1096 

The  same  rule  may  be  stated  in  a  negative  form.  If 
from  all  the  circumstances  a  merger  would  be  disadvan- 
tageous to  the  party,  then  his  intention  that  it  should  not 
result  will  be  presumed  and  maintained.  The  language 
of  some  American  cases  seems  to  state  the  rule  so  broadly 
that  it  would  include  an  equitable  interest  co-extensive 
and  commensurate  with  the  legal  estate,  and  would  thus 
fail  to  recognize  the  distinction  heretofore  laid  down. 
This  may  perhaps  result  from  the  fact  that  instances  of 
a  legal  and  an  equitable  fee  uniting  in  the  same  person 
have  very  rarely  come  before  the  American  courts  for  ad- 
judication; and  the  judges,  in  stating  the  equitable  doc- 
trine correctly  applicable  to  the  facts  before  them,  have 
naturally  expressed  it  in  terms  somewhat  broader  than 
was  necessary  for  the  decision.^ 

§  789.  Second.  Merger  of  Charges.  —  Whenever  the 
owner  of  the  legal  estate  in  land  becomes  also  the  holder 
of  any  charge  directly  resting  upon  it,  the  latter  merges 
at  law  and  disappears  in  the  same  manner  as  a  lesser 
estate  merges.  The  equitable  doctrine  preventing  the 
merger  under  these  circumstances  is  even  stronger  and 
more  readily  applied  than  in  the  case  of  two  estates.  The 
**  charges"  referred  to  include  mortgages,  and  other  liens 
and  encumbrances,  and  sometimes  easements,  servitudes, 
and  similar  interests  which  are  not  rights  of  property  or 
estates.     There  are  two  principal  conditions  of  fact  to  be 

that  Dr.  Clarke  being,  in  1831,  owner  enforcing  such   equitable   right   by  a 

both    of   the    land    and    of   the    rent-  separate  action  in  equity.      [See  also, 

charge,  the  latter  merged  and  was  ex-  in  support  of  the  general  rule,  Smith 

tinguished.     In    reply,    the    plaintiff  v.  Roberts,  91  N.   Y.  470;   Asche  v. 

proved    the   intention   of   Dr.    Clarke  Asche,  113  N.  Y.  232.] 
that  the  rent-charge  should  not  merge,         ^  If  A,  holding  the  equitable  fee  as  a 

but  should  be  kept  alive.     The  court  cestui  que   trust  under  a  dry,  passive 

below  held  that   the  doctrine  of  non-  trust,  should  acquire  directly  to  him- 

merger    was    purely    equitable,     and  self    the    legal    fee,   there    can    be    no 

could  not  be  invoked  by  the  plaintiff  doubt  upon  the  authorities  that  a  mer- 

in   this   legal   action.     The   court    of  ger  would  take  place  in  equity  as  well 

appeals,  on  the  contrary,  decided  that  as  at  law.     This  case,  which  is  not  in- 

in  such  a  legal  action,  brought  upon  a  frequent  in  England,  where  such  trusts 

legal  title,  and  seeking  a  purely  legal  are  common,  is  very  infrequent  in  the 

remedy,  the  plaintiff  may  still  invoke  United  States.     The  English  author- 

the  aid  of   an  equitable  right  or  title  ities  seem  to  hold  very  distinctly  that 

which  he  holds,  and  is  no  lonc;er  put  a    mere    expressed    intention    of    the 

to  the  necessity   of  establishing   and  party  would  not  prevent  the  merger. 


1097  CONCERNING   MERGSR.  §  790 

considered:  1.  "Where  the  legal  owner  of  the  property  be- 
comes, by  bequest,  devolution,  or  transfer,  holder  of  the 
charge;  2.  Where  the  owner  of  the  property  voluntarily 
pays  off  the  charge. 

§  790.  I.  The  Owner  of  the  Property  Becomes  Entitled 
to  the  Charge.  —  When  the  owner  of  the  fee  becomes  ab- 
solutely entitled  in  his  own  right  to  a  charge  or  encum- 
brance upon  the  same  land,  with  no  intervening  interest 
or  lien,  the  charge  will,  at  law,  merge  in  the  ownership 
and  cease  to  exist.  Under  like  circumstances  a  merger 
will  take  place  in  equity,  where  no  intention  to  prevent  it 
has  been  expressed,  and  none  is  implied  from  the  circum- 
stances and  the  interests  of  the  party;  and  a  presumption 
in  such  a  case  arises  in  favor  of  the  merger.'  Generally, 
the  same  result  follows  whether  a  mortgagee  assigns  a 
mortgage  to  the  mortgagor,  or  the  mortgagor  conveys  the 
land  to  the  mortgagee.^  The  merger  of  a  charge  or  en- 
cumbrance under  these  circumstances  is,  however,  in 
most  instances  only  a  presumption,  which  can  generally 
be  overcome,  and  which  sometimes  does  not  even  arise.* 

*  Forbes   v.   MofiFatt,   18    Vea.    384;  will  not  be  presumed,  but  will  depend 

Lord  Compton  V.  Oxenden,  2  Yes.  261,  upon   the  interest   of   the   mortgagee 

264;    Swinfen  v.   Swinfen,    29    Beav.  as  showing    the    intent:    Stantons   v. 

199;  Byam  v.  Sutton,    19   Beav.   556;  Thompson,  49   N.    H.  272;    Edgerton 

Swabey  v,  Swabey,  15  Sim.  106;  Tyler  v.  Young,  43  111.  464. 
V.  Lake,  4   Sim.  351,    358;  Brown  v.         '  There  is  some  discrepancy  between 

Stead,  5  Sim.  535;  Grice  v.  Shaw,    10  the  earlier  and  more  recent  decisions. 

Hare,  76;  Smith  v.  Phillips,   1  Keen,  In   Toulmin  v.    Steere,  3    Men    210, 

694;   Baldwin  v.  Sager,    70   111.    503;  224,  Sir   William  Grant   said:    "The 

Robins  v.  Swain,  68  111.   197;  Lilly  v.  cases  of  Greswold  v,  Marsham,  2  Uh. 

Palmer,  51  111.  331;  Gardner  v.  Astor,  Cas.  170,  and  Mocatta  v.  Murgatroyd, 

3   Johns.    Ch.    53;    8   Am.    Dec.  465;  1    P.  Wms.  393,  are  express   authori- 

Starrv.  Ellis,  6  Johns.  Ch.  393;  James  ties  to  show  that   one   purchasing  an 

V.  Johnson,  6   Johns.  Ch.  417;  James  equity  of  redemption  cannot  set  up  a 

V.  Morey,  2  Cow.  246,  286,  300,  313;  prior   mortgage  of  his  own,  nor,  con- 

14  Am.  Dec.  475;  Gregory  v.  Savage,  sequently,  a  mortgage  which   he  has 

32  Conn.  250,  264;  Bassett  v.  Mason,  got    in,    against    subsequent    encum- 

18  Conn.   131;   Wilhelmi  v.  Leonard,  l)rances  of  which  he  had  notice";  or 

13  Iowa,  3.30;  [Douk  v.  Alexander,  117  in    other  words,    that    the    mortgage 

111.  330.]  would  always  merge  in  equity.     This 

'  Id.    Some  recent  cases  draw  a  dis-  dictum    has    been     repeatedly    disap- 

tinction  as  follows:  If  the  mortgagee  proved  by  the  ablest  judges,  and  must 

assigns  the  mortgage  to  the  mortgagor,  be  regarded  as  completely  overthrown 

a    merger    is    presumed;    but    if    the  by  modern    decisions:  See    Adams   v. 

mortgagor   conveys   the   land   to   the  Angell,    L.   R.   5   Ch.  Div.   634,    641, 

mortgagee,  especially  where  there  ia  a  645,  and  cases  cited, 
subsequent    encumbrance,    a    merger 


§  791  EQUITY   JURISPRUDENCE.  1098 

§  791.  Same.  Intention  Prevents  a  Merger.  —  The 
equitable  doctrine  concerning  the  merger,  where  the  owner 
of  the  fee  becomes  entitled  to  the  charge  or  encumbrance, 
may  be  stated  as  follows,  substantially  in  the  language  of 
most  eminent  judges.  Sir  William  Grant  says:  "  The 
question  is  upon  the  intention,  actual  or  presumed,  of  the 
person  in  whom  the  interests  are  united."  Sir  George 
Jessel  says:  "  In  a  court  of  equity  it  has  always  been  held 
that  the  mere  fact  of  a  charge  having  been  paid  ofif  does 
not  decide  the  question  whether  it  is  extinguished.  If  a 
charge  is  paid  off  by  a  tenant  for  life,  without  any  ex- 
pression of  his  intention,  it  is  well  established  that  he 
retains  the  benefit  of  it  against  the  inheritance.  Al- 
though he  has  not  declared  his  intention  of  keeping  it 
alive,  it  is  presumed  that  his  intention  was  to  keep  it 
alive,  because  it  is  manifestly  for  his  benefit.  On  the 
other  hand,  when  the  owner  of  an  estate  in  fee  pays  off 
or  becomes  entitled  to  a  charge,  the  presumption  is  the 
other  way,  but  he  can,  by  expressly  declaring  his  inten- 
tion, either  keep  it  alive  or  destroy  it.  If  there  is  no  rea- 
son for  keeping  it  alive,  then  equity  will,  in  the  absence 
of  any  declaration  of  his  intention,  destroy  it;  but  if  there 
is  any  reason  for  keeping  it  alive,  such  as  the  existence  of 
another  encumbrance,  equity  will  not  destroy  it."  In  short, 
where  the  legal  ownership  of  the  land  and  the  absolute 
ownership  of  the  encumbrance  become  vested  in  the  same 
person,  the  intention  governs  the  merger  in  equity.  If 
this  intention  has  been  expressed,  it  controls;  in  the  ab- 
sence of  such  an  expression,  the  intention  will  be  pre- 
sumed from  what  appear  to  be  the  best  interests  of  the 
party  as  shown  by  all  the  circumstances;  if  his  interests 
require  the  encumbrance  to  be  kept  alive,  his  intention 
to  do  so  will  be  inferred  and  followed;  if,  on  the  contrary, 
his  best  interests  are  not  opposed  to  a  merger,  then  a  mer- 
ger will  take  place  according  to  his  supposed  intention. 
This  is  the  general  rule,  subject,  however,  to  one  impor- 
tant exception,  to  be   mentioned  in  a  subsequent  para- 


1099 


CONCERNING    MERGER. 


§  791 


graph.^  If  the  person  expressly  declares5  his  intention 
that  the  charge  shall  be  kept  on  foot,  no  question  can 
generally  arise,  for  he  can,  with  the  single  exception 
mentioned,  always  prevent  a  merger  in  this  manner.^ 
The  presumption  of  an  intent  to  preserve  the  encum- 


'  Forl>es  v.  Moffatt,  18  Ves.  384,  per 
Sir  William  Grant;  Adam3  v.  Angell, 
L.  R.  5  Ch.  Div.  634,  645,  per"  Sir 
George  Jessel;  Swabey  v.  Swabey,  15 
Sim.  106;  Grice  v.  Shaw,  10  Hare,  76; 
Bailey  v.  Richardson,  9  Hare,  734, 
736;  Tyrwhitt  v.  Tyrwhitt,  32  Beav. 
244;  Swinfen  v.  Swiufen,  29  Beav.  199; 
Davis  V.  Barrett,  14  Beav.  542;  Simon- 
ton  V.  Gray,  34  Me.  50;  Given  v.  Marr, 
27  Me.  212;  Hoklen  v.  Pike,  24  Me. 
427;  Clark  v.  Clark,  56  N.  H.  105; 
Stantous  v.  Thompson,  49  N.  H.  272; 
Hinds  v.  Ballon,  44  N.  H.  619;  Moore 
V.  Beasom,  44  N.  H.215;  Drew  v.  Rust, 
36  N.  H.  335;  Bell  v.  Woodward,  34 
N.  H.  90;  Weld  v.  Sabin,  20  N.  H.  533; 
51  Am.  Dec.  240;  Bullard  v.  Leach, 
27  Vt.  491;  Walker  v.  Barker,  26  Vt. 
710;  Slocum  v.  Catlin,  22  Vt.  137; 
Evans  v.  Kimball,  1  Allen,  240,  242; 
New  Eng.  J.  Co.  v.  Merriam,  2  Allen, 
390;  Savage  v.  Hall,  12  Gray,  363; 
Grover  v.  Thatcher,  4  ■ '.ray,  526;  Loud 
V.  Lane,  8  Met.  517,  518,  519;  Brown  v. 
Lapham,  3  Cush.  551;  Hunt  v.  Hunt, 
14  Pick.  374;  25  Am.  Dec.  400;  Gib- 
son V.  Crehore,  3  Pick.  475;  5  Pick. 
146;  Knowles  v.  Carpenter,  8  R.  L 
548;  Mallory  v.  Hitchcock,  29  Conn. 
127;  Bassett  v.  Mason,  18  Conn.  131; 
Lockwood  V.  Sturdevant,  6  Conn. 
373;  Campbell  v.  Vedder,  1  Abb. 
App.  295;  Purdy  v.  Huntington,  42 
N.  Y.  334;  1  Am.  Rep.  532;  Hancock 
V.  Hancock,  22  N.  Y.  568;  Judd  v. 
Seekins,  62  N.  Y.  266;  Sheldon  v.  Ed- 
wards, 35  N.  y.  279;  Bascom  v.  Smith, 
34  N.  Y.  320;  Clift  v.  White,  12  N.  Y. 
519;  Spencer  v.  Ayrault,  10  N.  Y. 
202;  Vanderkemp  v.Shelton,  11  Paige,' 
28;  Skeel  v.  Spraker,  8  Paige,  182; 
White  V.  Knapp,  8  Paige,  173;  Mills- 
paugh  V.  McBride,  7  Paige,  509;  34 
Am.  Dec.  360;  James  v.  Johnson,  6 
Johns.  Ch.  417,  423;  Starr  v.  Ellis,  6 
Johns.  Ch.  393;  Gardner  v.  Astor,  3 
Johns.  Ch.  53;  8  Am.  Dec.  465;  Loomer 
V.  Wheelwright,  3  Sand.  Ch.  135, 
157;  Angel  v.  Boner,  38  Barb.  425; 
McGiven  v.  Wheelock,  7  Barb.  22; 
James  v.  Morey,  2  Cow.  246;  14  Am. 
Dec.    475;    Hoppock  v.   Ramsey,    28 


N.  J.  Eq.  413;  Mulford  v.  Petersen, 
35  N.  J.  L.  127;  Duncan  v.  Smith, 
31  N.  J.  L.  325;  Van  Wagenen  v. 
Brown,  26  N.  J.  L.  196;  Hinchman 
V.  Emans,  1  N.  J.  Eq.  100;  Duncan  v. 
Drury,  9  Pa.  St.  332;  49  Am.  Dec.  565; 
Moore  v.  Harrisburg  Bank,  8  Watta, 
138;  Wallace  v.  Blair,  1  Grant  Cas. 
75;  Polk  v.  Reynolds,  31  Md.  106; 
Bell  V.  Tenny,  29  Ohio  St.  240;  Jordan 
v.  Forlong,  19  Ohio  St.  89;  Tower  v. 
Divine,  37  Mich.  443;  Snyder  v.  Sny- 
der,  6  Mich.  470;  Richardson  v.  Hock- 
enhull,  85  111.  124;  Baldwin  v.  Sager,  70 
111.  603;  Huebsch  v.  Scheel,  81  111. 
281;  Robins  V.  Swain,  68  111.  197;  Fow- 
ler V.  Fay,  62  111.  375;  Clark  v. 
Laughlin,  62  111.  278;  Lilly  v.  Palmer, 
51  111.  .331;  Edgerton  v.  Young,  43111. 
464:  Aiken  v.  Milwaukee  etc.  R.  R., 
37  Wis.  4G9;  Webb  v.  Meloy,  32  Wis. 
319;  Lyon  v.  Mcllvaine,  24  Iowa,  9; 
Welhelmi  v.  Leonard,  13  Iowa,  330; 
W^hite  V.  Hampton,  13 Iowa,  259;  Davis 
V.  Pierce,  10  Minn.  376;  Christian  v. 
Newberry,  61  Mo.  446;  Grellet  v.  Heil- 
shorn,  4  Nev.  526;  Carter  v.  Taylor,  3 
Head,  30;  Besser  v.  Hawthorn,  3 
Or.  129;  Atkinson  v.  Morrissy,  3 
Or.  332;  Knowles  v.  Lawton,  18  Ga. 
476;  63  Am.  Dec.  290;  Tucker  v.  Crow- 
ley, 127  Mass.  400;  Delaware  etc.  Co. 
V.  Bonnell,  46  Conn.  9;  Hart  v.  Chase, 
46  Conn.  207;  New  Jersey  Ins.  Co.  v. 
Meeker,  40  N.  J.  L.  18;  ^tna  Life 
Ins.  Co.  V.  Corn,  89  111.  170;  Meacham 
V.  Steele,  93  111.  135;  Dunphy  v.  Rid- 
dle, 86  111.  22;  Worcester  Bank  v. 
Cheeney,  87  111.  602;  Smith  v.  Oster- 
meyer,  68  lud,  432;  Shimer  v.  Ham- 
mond, 51  Iowa,  401:  Waterloo  Bank  v, 
Elmore,  52  Iowa,  541 ;  Scott  v.  Web- 
ster, 44  Wis.  185;  [Hanlan  v.  Doherty, 
109  Ind.  37.]  The  exception  referred  to 
in  the  text  is  the  case  where  the  owner 
of  land  who  is  primarily  bound  to  pay 
the  debt  secured  pays  ofiF  or  takes  an 
assignment  of  the  mortgage.  Seepoai, 
§797. 

■•'  Bailey  v.  Richardson,  9  Hare,  734, 
73fi;  Tyrwhitt  v.  Tyrwhitt,  32  Beav. 
244;  [Agiiew  v.  R.  R.  Co.,  24  S.  C.  18; 
68  Am.  Rep.  237.  ] 


§  792  EQUITY   JURISPRUDENCE.  1100 

brance  alive  may,  on  the  other  hand,  be  inferred  from 
the  circumstances  of  the  case,  from  the  position  of  the 
owner's  property,  and  especially  from  the  fact  that  a  mer- 
ger would  let  in  other  charges  or  encumbrances/ 

§  792.  Time  and  Mode  of  the  Intention.  —  While  the 
intention  controls,  it  must  be  understood  as  the  intention 
existing  at  the  time  the  two  interests  came  together.  If 
there  was  then  no  intention  to  keep  the  encumbrance 
alive,  a  merger  cannot  be  prevented  by  an  intention  after- 
wards formed  and  expressed,  or  from  a  subsequent  change 
of  circumstances  from  which  an  intention  might  be  in- 
ferred.' Where  the  intention  is  expressed,  it  may  be  by 
the  manner  in  which  the  encumbrance  is  transferred,  as 
to  a  trustee  for  the  owner  of  the  land,  or  by  recitals  or 
other  language  in  the  assignment  of  the  security  or  con- 
veyance of  the  land;  no  particular  mode  is  requisite,  pro- 
vided the  intention  is  sufficiently  declared.'  If  there  is 
no  expression  of  an  intention  at  the  time,  then  all  the 
circumstances  will  be  considered,  in  order  to  discover  what 
is  for  the  best  interests  of  the  party.     He  will  be  pre- 

*  Swinfen  v.  Swinfen,  29  Beav.  199;  and  mortgagee  produce  a  merger: 
Davis  V.  Barrett,  14  Beav.  542;  Tyr-  Power  v.  Lester,  23  N.  Y.  527;  and 
whitt  v.  Tyrwhitt,  32  Beav.  244;  Stan-  see  Gillig  v.  Maass,  28  N.  Y.  191. 
tons  v.  Thompson,  49  N.  H.  272;  War-  Taking  a  new  mortgage  on  the  same 
ren  v.  Warren,  30  Vt.  530;  Hancock  land,  or  other  security,  for  the  same 
V.  Hancock,  22  N.  Y.  568;  Campbell  debt  does  not  generally  merge  the  old 
V.  Vedder,  1  Abb.  App.  295;  Hill  one:  Christian  v.  Newberry,  61  Mo. 
V.  Pixley,  63  Barb.  200;  lx)ud  v.  Lane,  446;  [Hutchinson  v.  Swartaweller,  31 
8  Met.  517;  [Lowman  v.  Lowman,  118  N.  J.  Eq.  205;  McElhaney  v.  Shoe- 
Ill.  582;  Hospes  v.  Almstedt,  83  Mo.  maker,  76  Iowa,  416.] 
473.]  To  effect  a  merger  in  any  case,  "Cole  v.  Edgerly,  48  Me.  108; 
the  person  must  be  owner  of  the  land  Given  v.  Marr,  27  Me.  212;  Hunt  v. 
and  of  the  charge  at  the  same  time.  Hunt,  14  Pick.  374,  383;  Gardner  v. 
If  a  mortgagee  has  assigned  his  mort-  Astor,  3  Johns.  Ch.  53;  8  Am.  Dec. 
gage,  and  afterwards  takes  a  convey-  465;  Loonier  v.  Wheelwright,  3  Sand, 
ance  of  the  land,  there  will  be  no*  Ch.  135,  157;  Champney  v.  Coope, 
merger,  even  though  the  assignment  34  Barb.  539;  Aiken  v.  Milwaukee 
of  the  mortgage  be  not  recorded:  etc.  R.  R.,  37  Wis.  469. 
Campbell  v.  Vedder,  1  Abb.  App.  '  Bailey  v.  Richardson,  9  Hare,  734; 
295;  Purdy  v.  Huntington,  42  N.  Y.  Tyrwhitt  v.  Tyrwhitt,  32  Beav.  244; 
334;  1  Am.  Rep.  532.  A  mortgage  as-  Spencer  v.  Ayrault,  10  N.  Y.  202; 
signed  to  the  wife  of  the  mortgagor  wUl  [Gresham  v.  Ware,  79  Ala.  192.]  And 
not  merge  under  modern  state  stat-  see,  as  to  the  effect  of  such  recitals, 
utes:  Faiilks  v.  Dimock,  27  N.  J.  Eq.  Bean  v.  Boothby,  57  Me.  295;  Camp- 
65;  Model  Lodging  H.  Ass'nv.  Boston,  bell  v.  Knights,  24  Me.  332;  Crosby 
114  Mass.  133;  Bemis  v.  Call,  10  Al-  v.  Cha^e,  17  Me.  369;  Crosby  v.  Tay- 
len,  512;  Bean  v.  Boothby,  57  Me.  295;  lor,  15  Gray,  64;  77  Am.  Dec.  352. 
nor  will  the  mairiage  of  the  mortgagor 


1101  CONCERNING   MERGER.  §  793 

sumed  to  have  intended  that  the  charge  should  he  kept 
alive  or  should  merge  according  to  the  henefit  resulting 
from  either.  If  a  merger  would  let  in  other  encum- 
brances which  he  was  not  already  hound  to  pay,  this  is  a 
circumstance  almost  decisive  of  an  intention  not  to  per- 
mit a  merger.'  Parol  evidence  of  all  the  surrounding 
circumstances  of  the  transaction  and  of  the  property  is 
therefore  admissible,  for  the  purpose  of  discovering  the 
intention,  or  to  show  that  a  merger  must  take  place,^  and 
also  to  show  fraud,'  but  not  to  prove  the  intention  di- 
rectly.* 

§  793.  Conveyance  to  the  Mortgagee  —  Assignment  to 
the  Mortgagor  or  to  his  Grantee.  —  Where  a  mortgagee 
takes  a  conveyance  of  the  land  from  the  mortgagor  or 
from  a  grantee  of  the  mortgagor,  if  the  transaction  is 
fair,  the  presumption  of  an  intention  to  keep  the  security 
alive  is  very  strong.  It  is  generally  for  the  interests  of 
the  party  in  this  position  that  the  mortgage  should  not 
merge,  but  should  be  preserved  to  retain  a  priority  over 
other  encumbrances.  As  the  mortgagee  acquiring  the 
land  is  not  the  debtor  party  bound  to  pay  off  either  the 
mortgage  or  the  other  encumbrances  on  the  land,  there  is 
nothing  to  prevent  equity  from  carrying  out  his  pre- 
sumed intent,  by  decreeing  against  a  merger.*^     On  the 

*  Swinfen  v.  Swinfen,  29  Beav.  199;  tation,  Johnson  v.  Webster,  4  DeGex, 

Davis  V.  Barrett,  14  Beav.  542;  Hatch  M.  &  G.  474;  Astley  v,  Milles,  1  Sim. 

V.    Skelton,   20    Beav.    453;    Earl    of  298.     A   devise   of   the  land  without 

Clarendon  v.  Barham,  1  Younge  &  C.  mentioning  the  encumbrance  ia  some 

Ch.  688;  and  cases  ante,  under  §  791;  evidence  of  an  intention  that  it  should 

[Smith  V.  Roberts,  91  N.  Y.  470.]     If,  merge:  Swinfen  v.  Swinfen,  29  Beav. 

after   the   ownership  and   the  charge  199,  204. 

have   become   united,  the  party  does  *  Fiske  v.  McGregory,  34  N.  H.  414; 

any   act    which    clearly    shows    that  Miller  v.  Fichthorn,  3i  Pa.    St.  252, 

he   regards  the  encumbrance   as  still  259;  Frey  v.  Vanderhoof,  15  Wis.  397; 

subsisting,  this   is  strong,  even  if  not  [Smith  v.  Roberts,  91  N.  Y.  470.] 

conclusive,  evidence  of  an  intent  that  *  Astley  v.  Milles,  1  Sim.  298,  345; 

there  should  be  no  merger;  as,  for  ex-  Wade   v.    Howard,    1 1    Pick.    289;   6 

ample,    he    transfers    the    mortgage:  Pick.  492;  Howard  v.  Howard,  3  Met. 

Powell  V.  Smith,  30  Mich.  451;  he  be-  548. 

queaths   the  encumbrance  in  specific  *  McCabe  v.  Swape,  14  Allen,  188. 

terms:  Blundell  v.  Stanley,  3  De  Gex  '  Stantons   v.  Thompson,  49  N.  H. 

&   S.  433;  and   see  Wilkes  v.  Collin,  272;  Edgerton  v.  Young,  43  111.  464; 

L.  R.  8  Eq.  338;   or  devises  the  land  Freeman  v.  Paul,  3  Me.  260;  14  Am. 

subject  to  the  charge:  Hatch  v.  Skel-  Dec.  237;  Walker  v.   Barker,   26  Vt. 

ton,  20  Beav.  453;  but  see,  for  a  limi-  710;   Slocum   v.   Catlin,    22   Vt.  137; 


§  794  EQUITY    JURISPRUDENCE.  1102 

other  han3,  an  assignment  of  the  mortgage  to  the  mort- 
gagor himself  raises  a  contrary  presumption.  At  least, 
the  presumption  of  a  merger  is  much  stronger  in  this  case; 
it  is  generally  the  intention,  and  is  often  the  duty,  of  the 
mortgagor  to  pay  off  and  discharge  the  encumbrance  by 
thus  becoming  the  holder  of  it,  and  there  is  a  clear  dis- 
tinction between  the  two  cases.^  An  assignment  of  a 
mortgage  to  a  grantee  of  the  mortgagor,  unless  he  has 
expressly  assumed  to  pay  it  and  thus  made  himself  the 
principal  debtor,  does  not  generally  create  a  merger.  It 
generally  being  for  the  interest  of  such  grantee  to  keep 
the  mortgage  alive,  and  to  maintain  by  its  means  a  pri- 
ority over  any  subsequent  encumbrance  or  title,  such  an 
intention  will  be  presumed  and  carried  into  effect  by  a 
co«urt  of  equity.*  When  a  mortgage  upon  the  whole  land 
is  assigned  to  one  of  two  or  more  tenants  in  common,  it  is 
not  merged,  but  may  be  retained  and  enforced  by  him 
against  his  co-tenants.' 

§  794.  Merger  never  Prevented  when  Fraud  or  Wrong 
would  Result.  —  Whatever  may  be  the  circumstances,  or 
between  whatever  parties,  equity  will  never  allow  a  mer- 
ger to  be  prevented  and  a  mortgage  or  other  security  to 
be  kept  alive,  when  this  result  would  aid  in  carrying  a 
fraud  or  other  unconscientious  wrong  into  effect,  under 
the  color  of  legal  forms.  Equity  only  interposes  to  prevent 
a  merger,  in  order  thereby  to  work  substantial  justice.* 

Mallory  v.  Hitchcock,  29  Conn.   127;  cisions;  Watts  v.    Symes,  1  De  Gex, 

Mulforrl  V.  Peterson,  35  N.  J.  L.  127;  M.  &  G.  240;  Mobile  Branch  Bank  v. 

Thompson   v.  Boyd,  21    N.  J.  L.  58;  Hunt,  8   Ala.  876;    Loud  v.  Lane,  8 

22  N.  J.  L.  543;  Duncan  v.  Smith,  31  Met.  517;  Pitts  v.  Aldrich,  11  Allen, 

N.  J.L.  .325;  Fithin  V.  Corwin,  17  0hio  39;    Savage    v.    Hall,    12  Gray,  363. 

St.   118;  Knowles   v.  Lawtou,  18  Ga.  [See  also  Fellows  v.  Dow,  58  N.  H, 

476;    63   Am.    Dec.    290;    Dunphy  v.  21;  Green  v.  Currier,  63  N.  H.  563.] 
Riddle,  86  111.  22;  Worcester  Bank  v.         »  Titsworth    v.    Stout,    49    111.   78; 

Cheeney,  87    111.  602;    Scott  v.  Web-  95  Am.   Dec.  577;    Barker  v.   Flood, 

ster,  44  Wis.  185;  ^tna  L.  Ins.  Co.  v.  103  Mass.  474;  and  conversely  when 

Corn,  89  111.  170;  Meacham  v.  Steele,  the  owner  of  the  land  becomes  devisee 

93  111.  135;  [Factors'  etc.   Ins.  Co.  v.  of  an  undivided  interest  in  the  mort- 

Murphy,  111  U.  S.  738;  Wead  v.  Gray,  gage:  Clark  v.  Clark,  56  N.  H.  105. 
78    Mo.  59;    Baker   v.    Northwestern         *  Worthington  v.  Morgan,  16  Sim. 

Guaranty  Loan  Co.,  36  Minn.  185.]  547;   Hutchins  v.  Carleton,  19  N.  H. 

1  Id.  487;  McGiven   v.  Wheelock,  7  Barb. 

*  Adams  v.  Angell,  L.  R.  5  Ch.  Div.  22;   Hinchman  v.  Emana,  1  N.  J.  Eq. 

634,  disapproving  of  some  early  de-  100. 


1103  CONCERNING    MERGER.  §§  795,  796 

§  795.  Life  Tenant  becomes  Entitled  to  the  Charge.  — 
When  a  life  tenant  becomes  entitled  to  a  mortgage  or  other 
charge  upon  the  entire  inheritance,  no  presumption  of  a 
merger  arises.  The  transaction  is  presumed  to  be  for  his 
own  benefit.  The  security  does  not  merge,  but  remains 
in  his  hands  a  valid  encumbrance  which  he  may  enforce 
against  the  inheritance.'  The  same  rule  applies  to  every 
one  who  has  only  a  partial  interest  in  the  land  subject 
to  a  charge,  such  as  a  tenant  in  common  or  a  lessee.* 

§  796.  II.  The  Owner  of  the  Land  Pays  off  a  Charge 
upon  It.  —  The  questions  now  to  be  considered  are  quite 
different  from  those  already  discussed.  In  the  preceding 
subdivision  (I.)  the  ownership  of  the  land  and  of  the 
charge  have  become  united  in  any  manner  in  the  same 
person,  either  by  the  owner  of  the  land  acquiring  the 
charge,  or  by  the  holder  of  the  charge  acquiring  title  to 
the  land.  Assuming  it  possible  that  the  two  interests 
may  he  kept  distinct,  the  questions  discussed  are,  whether 
the  charge  merges  or  does  not  merge;  when  it  is  kept  alive 
and  when  it  disappears.  In  the  present  division  we  have 
the  single  condition  of  fact,  that  the  owner  of  the  land 
which  is  subject  to  a  charge,  mortgage,  or  other  encum- 
brance pays  it  off;  whether  upon  so  doing  he  takes  a 
formal  assignment  or  not  is  often  immaterial.  Under 
these  circumstances  the  distinctive  question  to  be  now 
examined  is,  whether  it  is  possible  for  the  party  thus  pay- 
ing off  a  charge  to  keep  it  alive  as  a  subsisting  encum- 
brance in  any  manner,  by  any  form  of  proceeding;  or 
whether  the  charge  must  necessarily  merge  in  the  own- 
ership, and  cease  to  exist.  If  it  cannot  possibly  be  kept 
alive,  then  all  further  questions  of  the  party's  intention, 
expressed  or  presumed,  are  meaningless.     If  a  merger  is 

'  Countess  of  Shrewsbury  v.  Earl  of  645:  and  see  post,  cases  on  mortgages 
Shrewsbury,  1  Ves.  227,  233;  Drink-  paid  off  by  a  doweress  or  other  life  ten- 
water  V.  Combe,  2  Sim.  &  St.  3-10,  345;  ant,  §  799. 

Pittv.  Pitt,  22  Beav.  294;  Burrell  v.  »Id.;   Titsworth    v.    Stout,    49   111. 

Earl  of  Egremont,  7  Beav.  205;  Mor-  78;  95  Am.  Dec.  677;  Barker  v.  Ford, 

ley  V.  Morley,  5  De  Gex,  M.  &  G.  610;  103  Mass.  474;  Qark  v.  Clark.  56  N.  H- 

Adams  v.  Angell,  L.  R.  5  Cb.  Div.  634,  105. 


§  797  EQUITY   JURISPRUDENCE.  1104 

not  necessary,  and  the  charge  can  be  kept  alive,  then  the 
questions  concerning  the  party's  intention,  expressed  or 
presumed,  and  of  the  benefit  to  himself,  will,  of  course, 
arise,  and  will  be  governed  by  the  rules  formulated  in 
the  preceding  subdivision.  If  a  merger  can  be  prevented 
when  the  owner  of  the  land  pays  off  a  charge,  the  ques- 
tion whether  there  is  a  merger  or  not  depends  upon  his 
intention,  in  the  manner  already  explained.  There  are 
two  cases  to  be  considered:  1.  When  the  owner  in  fee  pays 
off  a  charge;  2.  When  a  life  tenant  or  other  owner  of  a 
partial  interest  pays  off  a  charge. 

§  797.  1.  Owner  in  Fee  Pays  off  a  Charge.  —  An  owner 
of  the  fee  subject  to  a  charge,  who  is  himself  the  principal 
and  primary  debtor,  and  is  liable  personally  and  primarily 
for  the  debt  secured,  cannot  pay  off  the  charge,  and  in 
any  manner  or  by  any  form  of  transfer  keep  it  alive. 
Payment  by  such  a  person  and  under  such  circumstances- 
necessarily  amounts  to  a  discharge.  The  encumbrance  can- 
not be  prevented  from  merging  by  an  assignment  taken 
directly  to  the  owner  himself,  or  to  a  third  person  as 
trustee.  This  rule  applies  especially  to  a  mortgagor  who 
continues  to  be  the  primary  and  principal  debtor.'  The 
rule  also  applies  to  a  grantee  of  the  mortgagor  who  takes 
a  conveyance  of  the  land  subject  to  the  mortgage,  and  ex- 

'  Johnson  v.  Webster,  4  De  Gex,  M.  has  expressly  assumed  and   promised 

ft  G.  474;  Otter  v.  Lord  Vaux,  6  Da  to  pay  the  mortgage  as  a  part  of  the 

Gex,  M.  &  G.  638;  Brown  v,  Lapham,  consideration,    such   grantee   becomes 

3  Gush.  551,  554;  Wedge  v.  Moore,  6  the  principal  debtor,  primarily  liable, 

Cush.  8;  Kilborn  v.  Robbins,  8  Allen,  and  the  mortgagor  assumes  the  posi- 

466,471;  Strong  v.  Converse,  8  Allen,  tion   of  a  surety.     If  the   mortgagor 

557;  85  Am.  Dec.  732;  Butler  v.  Sew-  then  pays  ofif  the  mortgage,  he  may 

ard,  10  Allen,  466;  Bemis  v.  Call,  10  preserve   its  lien  alive  as  a   security 

Allen,  512;  Eaton  v.  Simondg,  14  Pick,  against   the   land   for  his   own  reim- 

98;  Crafts   v.  Crafts,    13   Gray,    360;  bursement:  Stillman   v.  Stillman,    21 

Wads  worth  v.    Williams,    100   Mass.  N.    J.  Eq.    126;    Jumel   v.    Jumel,    7 

126;  Cherry   v.  Monro,  2   Barb.    Ch.  Paige,  591;  Cox  v.  Wheeler,  7  Paige, 

618;  Robinson  v.   Urquhart,  12  N.  J.  248,  257;  Halsey  v.  Reed,  9  Paige,  446; 

Eq.  515;  Commonwealth  v.  Chesapeake  Kinnear     v.    Lowell,     34     Me.    299; 

etc.  Co.,32Md.  591;Swiftv.  Kraemer,  Fletcher  v.  Chase,   16  N.   H.  38,  42; 

13  Cal.  526;  73  Am.  Dec.  603;  [Jones  Robinson  v.  Leavitt,  7  N.  H.  73,  100; 

V.  Lamar,    34   Fed.    Rep.  454.]     The  Funk  v.  McReynold,  33  111.  481,  495; 

rule    does    not    necessarily   apply  to  Baker  v.  Terrill,    8   Minn.    195,   199; 

every  mortgagor.     If  a  mortgagor  has  [Birke  v.  Abbott,  103  Ind.  1;  53  Am. 

conveyed  the  land  to  a  grantee,  who  Rep.474j  Orrickv.Durham,79Mo.l74.} 


1105 


CONCERNING    MERGER. 


§  798 


pressly  assumes  and  promises  to  pay  it  as  a  part  of  the  con- 
sideration. He  is  thereby  made  tlie  principal  debtor,  and 
the  land  is  the  primary  fund  for  payment.  If  he  pays 
ofif  the  mortgage,  it  is  extinguished.^ 

§  798.  Owner  Who  is  not  Liable  for  the  Debt  Pays  ofif 
the  Mortgage.  —  On  the  other  hand,  when  an  owner  of 
the  premises  who  is  not  personally  and  primarily  liable 
to  pay  the  debt  secured  pays  off  a  mortgage  or  other 
charge  upon  it,  he  may  keep  the  lien  alive  as  a  security 
for  himself  against  other  encumbrances  or  titles,  and  thus 
prevent  a  merger.  Whether  he  does  so  is  a  question  of 
intention,  governed  by  the  rules  laid  down  in  the  previous 
paragraphs.  When  it  is  evidently  for  his  benefit,  the 
intention  will  be  presumed.  He  may  thus  be  entitled  to 
preserve  the  lien,  even  without  a  formal  assignment  of  the 
security  to  himself.  Among  those  who  are  thus  regarded 
as  equitable  assignees  are  grantees  of  the  mortgagor  not 
having  assumed  payment  of  the  mortgage,  heirs,  devisees, 
and  in  fact  all  parties  entitled  to  redeem,  and  not  per- 
sonally liable  as  principal  debtors.^ 


*  Mickles  v.  Townsend,  18  N.  Y. 
575;  Russell  v.  Pistor,  7  N.  Y.  171;  57 
Am.  Dec.  509;  Fitch  v.  Cotheal,  2 
Sand.  Ch.  29;  Lilly  v.  Palmer,  51  111. 
331;  Frey  v.  Vanderhoof,  15  Wis.  397; 
and  cases  cited  at  end  of  the  last  pre- 
ceding note;  [also  Goodyear  v.  Good- 
year, 72  Iowa,  329.]  See,  however, 
Kellogg  V.  Ames,  41  N,  Y.  259.  Taking 
a  conveyance  subject  to  the  mortgage, 
or  with  words  simply  to  that  effect, 
does  not  render  the  grantee  the  prin- 
cipal debtor,  so  as  to  bring  him  within 
the  operation  of  this  rule:  Pike  v. 
Goodnow,  12  Allen,  472;  Strong  v. 
Converse,  8  Allen,  557;  85  Am.  Dec. 
732;  Campbell  v.  Knights,  24  Me. 
332;  Weed  etc.  Co.  v.  Emerson,  115 
Mass.  554;  Belmont  v.  Coman,  22  N.  Y. 
438;  78  Am.  Dec.  213;  Trotter  v. 
Hughes,  12  N.  Y.  74;  62  Am.  Dec. 
137;  Fowler  v.  Fay,  62  111.  375;  Hull 
V.  Alexander,  26  Iowa,  569.  If  a  per- 
son who  has  conveyed  land  with  a 
covenant  warranting  against  encum- 
brances afterwards  pays  off  or  takes 
an  assignment  of  a  mortgage  upon  the 
2  Eq.  Jur.— 70 


premises,  the  same  becomes  extin- 
guislied;  he  cannot  keep  it  alive  as  a 
subsisting  lien,  for  to  do  so  would  be 
a  direct  violation  of  his  own  covenant: 
Mickles  v.  Townsend,  18  N.  Y.  575; 
Stoddard  v.  Rotton,  5  Bosw.  378; 
Butler  V,  Seward,  10  Allen,  466; 
Mickles  v.  Dillaye,  15  Hun,  296; 
[Jones  V.  Lamar,  34  Fed.  Rep.  454.] 

»  Parry  v.  Wright,  1  Sim.  &  St.  369; 
5  Russ.  142;  Watts  v.  Symes,  1  De 
Gex,  M.  &  G.  240,  244;  16  Sim.  640; 
Squire  v.  Ford,  9  Hare,  47,  60;  Ander- 
son V.  Pignet,  L.  R.  8  Ch.  180,  187; 
Gunter  v.  Gunter,  23  Beav.  571;  Raw- 
iszer  v.  Hamilton,  51  How.  Pr.  207; 
Binsse  v.  Paige,  1  Abb.  App.  138; 
Powell  V.  Smith,  30  Mich.  451;  Brown 
V.  Lapham,  3  Cush.  551,  554;  Pool  v, 
Hathaway,  22  Me.  85;  Hatch  v,  Kim- 
ball, 16  Me.  146;  Aiken  v.  Gale,  37 
N.  H.  501,  505;  Drew  v.  Rust,  36 
N.  H.  335;  Spaulding  v.  Crane,  46  Vt. 
292;  Walker  v.  King,  45  Vt.  525;  44 
Vt.  601;  Wheeler  v.  Willard.  44  Vt. 
640;  Warren  v.  Warren,  30  Vt.  530; 
Cheeseborough   \.    Millard,  1   Johns. 


§§  799,  800  EQUITY   JURISPRUDENCE.  1106 

§  799.  2."  Life  Tenant  Pays  off  a  Charge.  — The  rule  is 
well  settled  that  when  a  life  tenant,  or  any  other  person 
having  a  partial  interest  only  in  the  inheritance  or  in  the 
land,  pays  off  a  charge,  mortgage,  or  encumbrance  on  the 
entire  premises,  he  is  presumed  to  do  so  for  his  own  ben- 
efit. The  lien  is  not  discharged  unless  he  intentionally 
release  it.  He  can  always  keep  the  encumbrance  alive 
for  his  own  protection  and  reimbursement.  His  inten- 
tion to  do  so  will  be  presumed  even  though  he  has  taken 
no  assignment.  In  fact,  his  payment  constitutes  him  an 
equitable  assignee.^  The  rule  is  most  frequently  applied 
in  this  country  to  widows  entitled  to  dower  in  premises 
subject  to  a  mortgage.  If  they  pay  off  the  mortgage  in 
order  to  protect  their  dower,  they  become  equitable  as- 
signees, and  may  preserve  and  enforce  the  lien  against 
the  inheritance  for  reimbursement  over  and  above  the 
proportion  of  the  debt  which  they  are  bound  to  contribute.* 
The  rule  extends  in  like  manner  to  tenants  for  years' 
and  to  tenants  in  common.* 

§  800.  Priorities  Affected  by  Merger.  —  It  is  plain 
from  the  foregoing  discussion  that  the  doctrine  of  merger, 
in  its  application  to  encumbrances,  has  an  intimate  con- 
nection with  the  general  subject  of  priorities.  Whether 
a  certain  mortgage  or  other  charge  is  still  subsisting,  and 
retains  its  priority,  or  whether  it  is  in  reality,  though  not 
perhaps  in  form,  extinguished,  so  as  to  let  in  subsequent 
liens,  must  often  be  determined  by  the  rules  concerning 

Ch.   409;    7   Am.    Dec.    494;    Bell   v.  10  Paige,  49;  Lainsoa  v,  Drake,   105 

Mayor,  10  Paige,  49;  Skeel  v.  Spraker,  Mass.  5G7;  Newhall  v.  .Savings  Bank, 

8  Paige,  182;  Millspaugh  v.  McBride,  101  Mass.  431;  3  Am.  Rep.  387;  Mc- 
7  Paige,  509;  34  Am.  Dec.  360;  Abbott  Cabe  v.  Swap,  14  Allen,  191;  Davis  v. 
V.  Kasson,  72  Pa.  St.  183;  [Wadsworth  Wetherell,  13  Allen,  63;  90  Am.  Dec. 
V.  Lyon,  93  N.  Y.  201;  45  Am.  Rep.  177;  McCabe  v.  Bellows,  7  Gray,  148; 
190.]  66  Am.  Dec.  467;  Gibson  v.  Crehore, 

*  Shrewsbury  v.  Shrewsbury,  1  Ves.  3  Pick.  475;  Houghton  v.  Hapgood,  13 

233;  Drinkwater  v.   Combe,  2  Sim.  &  Pick.  158;  Carll  v.  Butman,  7  Me.  102, 

St.  340,  345;  Burrell  v.  Earl  of  Egre-  105;  opencer  v.  Waterman,  36  Conn, 

mont,  7  Beav.  205;   Pitt   v.   Pitt,  22  342. 

Beav.  294;  Morley   v.  Morley,  5   De  '  Averill  v.    Taylor,    8  N.    Y.    44; 

Gex.  M.  &  G.  610.  Loud  v.  Lane,  8  Met.  617;  Bacon  v. 

••'  Foster   v.    Hilliard,    1    Story,   77;  Bowdoin,  22  Pick.  401. 

Swaine  v.  Perine,  5  Johns.  Ch.  490;  *  See  ante,  §  795,  and  cases  cited  vu 

9  Am.  Dec.  318;  Bell  v.  Mayor  etc.,  note. 


1107  CONCERNING    EQUITABLE    ESTOPPEL.  §  801 

merger.  The  doctrine  has  therefore  a  twofold  application, 
—  between  the  immediate  parties,  the  owner  of  the  laud 
or  the  debtor  on  one  side,  and  the  holder  of  the  lien  on 
the  other,  and  between  the  holders  of  successive  encum- 
brances and  partial  interests. 


SECTION   IX. 

CONCERNING  EQUITABLE  ESTOPPEL. 


§  801.  Nature  of  the  rights  created  by  estoppeL 

§  802.  Origin  of  equitable  estoppel. 

§  803.  How  far  fraud  is  essential  in  equitable  estoppels. 

§  804.  Definition. 

§  805.  Essential  elements  constituting  the  estoppeL 

§  806.  Theory  that  a  fraudulent  intent  is  essential. 

§  807.  Fraudulent  intent  necessary  in  an  estoppel  affecting  the  legal 
title  to  land. 

§§  803-81 2.  Requisites  further  illustrated. 

§  808.  The  conduct  of  the  party  estopped. 

§  809.  Knowledge  of  the  truth  by  the  party  estopped. 

§  810.  Ignorance  of  the  truth  by  the  other  party. 

§  811.  Intention  by  the  party  who  is  estopped. 

§  812.  The  conduct  must  be  relied  upon,  and  be  an  indacement  for  the 
other  party  to  act. 

§  813.  Operation  and  extent  of  the  estoppeL 

§  814.  As  applied  to  married  women. 

§  815.  As  applied  to  infants. 

§§  816-821.  Important  applications  in  equity. 

§  816.  Acquiescence. 

§  817.  Same:  as  preventing  remedies. 

§  818.  Same:  as  an  estoppel  to  rights  of  property  and  contract. 

§  819.  As  applied  to  corporations  and  stockholders. 

§  820.  Other  instances  of  acquiescence. 

§  821.  Owner  estopped  from  asserting  his  legal  title  to  land. 

§  801.    Nature  of  the  Rights  Created  by  Estoppel.  — It 

has  been  said  by  some  writers  and  judges  that  the  doc- 
trine of  equitable  estoppel  is  a  branch  merely  of  the  law 
of  evidence.  This  is,  however,  an  entirely  mistaken  and 
by  no  means  harmless  view.  Nothing  can  tend  to  pro- 
duce more  confusion  of  mind  in  the  correct  understand- 


§  801  EQUITY    JURISPRUDENCE.  1108 

ing  of  legal  rules,  and  in  their  proper  application  to  the 
affairs  of  life,  than  the  exhibition  of  them  under  wrong 
divisions  of  the  law,  and  the  consequent  representation  of 
them  as  connected  with  relations  which  do  not  exist.  It 
is  undoubtedly  true  that  authors  of  works  on  evidence 
intended  for  professional  use  do  often  treat  of  matters 
which  form  no  legitimate  part  of  that  subject.  This  may- 
be convenient,  but  it  is  not  an  accurate  and  scientific 
method,  and  should  never  be  pursued  when  the  purpose 
is  to  define  and  describe  the  nature  of  legal  doctrines  and 
of  the  rights  and  duties  which  flow  therefrom.  Rules 
which  determine  and  regulate  primary  rights  of  property 
and  of  contract  constitute  a  part  of  the  substantive  law, 
and  do  not  belong  to  the  law  of  evidence,  which  is  simply 
a  branch  of  the  law  concerning  procedure.'  The  rights 
and  corresponding  duties  created  by  estoppels  are  pri- 
mary,—  rights  of  property  or  of  contract.  This  is  cer- 
tainly true  of  common-law  estoppels,  and  it  is  no  less  true 
of  equitable  estoppels;  the  effect  of  the  latter  is  substan- 
tially the  same  as  that  of  the  former,  the  difference  being 
in  the  facts  from  which  the  estoppel  arises,  and  not  in 
the  consequences  produced  by  it.  An  estoppel  determines 
the  right  which  a  person  may  enforce  by  action  or  rely 
on  in  defense,  and  not  the  mere  mode  and  means  by 
which  those  rights  may  be  proved.'    In  fact,  the  principle 

'  This  truth  is  clearly  and  most  con-  recover  the  amount  of  the  bill  from 

clusively  shown   by  Sir   James   Fitz-  the  acceptor,  and  it  may  possibly  be 

James  Stephen,  in  the  introduction  to  the  only  ground  upon  which  a  recovery 

his  admirable  work  entitled  a  Digest  can  be  rested.     One  other  illustration 

of    the   Law    of   Evidence  (pp.  xiii.,  of  an  estoppel,  regarded  as  more  dis- 

xiv.).  tinctively  equitable,  and  having  more 

*  One  or  two  illustrations  will  clearly  the  appearmice  of  being  only  a  rule  of 
show  the  correctness  of  this  statement,  evidence:  A  is  owner  of  land.  He 
A  tenant  is  estopped  from  denying  his  stands  by  and  knowingly  permits  B 
landlord's  title.  This  is  certainly  a  to  expend  money  and  make  improve- 
right  of  property,  enabling  the  land-  ments  on  the  land,  under  the  innocent 
lord  to  recover  rent,  or  perhaps  the  but  mistaken  assumption  of  a  right  to 
land  itself,  although  he  has  in  fact  no  do  so,  and  interposes  no  objection, 
title,  and  no  other  right  of  property  than  asserts  no  claim  of  title.  A  is  then 
that  created  by  the  estoppel.  An  ao-  estopped  from  setting  up  his  title  as 
ceptor  is  estopped  from  denying  the  against  B's  right  to  the  improvements, 
genuineness  of  the  prior  signatures  on  This  is  clearly  a  right  of  property  in 
the  bill.  This  is  a  right  of  contract,  B.  In  strictness,  A  has  the  whole  title, 
whereby  the  holder  may  be  enabled  to  and  B  has  no  right  of  property  by  the 


1109  CONCERNING    EQUITABLE    ESTOPPEL.  §  802 

which  underlies  the  doctrine  of  the  implied  authority  of 
an  agent  in  most  of  its  applications,  and  which  prevents 
the  principal  from  denying  the  authority  which,  by  his 
conduct,  he  has  held  the  agent  out  to  the  world  as  possess- 
ing, is  identically  the  same  principle  which  constitutes 
the  essence  of  all  equitable  estoppels;  and  if  the  rules 
concerning  these  estoppels  are  merely  a  part  of  the  law 
of  evidence,  we  should,  for  the  same  reason  and  to  the 
same  extent,  regard  the  rules  concerning  the  nature  and 
effects  of  implied  agency  as  also  belonging  to  evidence. 
Many  similar  illustrations  might  be  selected  from  various 
departments  of  the  law.  Equitable  estoppel  is,  therefore, 
a  particular  doctrine,  based  upon  justice  and  conscience, 
which  is  the  origin,  wherever  it  may  be  invoked,  of  pri- 
mary rights  of  property  or  of  contract. 

§  802.  Origin  of  Equitable  Estoppel.  —  Estoppel  was 
recognized  by  the  common  law  at  a  very  early  day.  The 
original  legal  rules  concerning  it  were  arbitrary  and 
sometimes  unjust,  and  are  still,  to  a  certain  extent,  tech- 
nical and  strict.  Lord  Coke  gave  a  very  harsh  definition 
of  estoppel  as  it  existed  in  his  time:  "An  estoppel  is 
where  a  man  is  concluded  by  his  own  act  or  acceptance 
to  say  the  truth."  He  added:  "Touching  estoppels, 
which  are  a  curious  and  excellent  sort  of  learning,  it  is  to 
be  observed  that  there  are  three  kinds  of  estoppels,  viz., 
by  matter  of  record,  by  matter  in  writing,  and  by  matter 
in  pais."  His  discussion  shows  clearly  that  "  by  matter 
in  writing  "  he  meant  only  a  deed,  —  a  writing  under  seal. 
The  instances  which  he  gave  of  estoppels  in  pais  were: 
"  By  matter  in  pais,  as  by  livery,  by  entry,  by  acceptance 
of  rent,  by  partition,  and  by  acceptance  of  an  estate." 
These  instances  of  legal  estoppels  in  pais  are  not  included 

ordinary  rules  of  law  applicable  in  the  absolute,  but  is  no  less  a  right  of  prop- 
absence  of  the  estoppel.  The  estoppel  erty.  One  mode  of  acquiring,  title  is 
creates  a  right  in  B,  which  is  as  much  by  the  common-law  estoppel  resulting 
a  right  of  property  as  though  it  had  from  a  covenant  of  warranty.  It  is  a 
resulted  from  a  conveyance,  or  from  a  pure  fiction  to  say  that  the  covenantee 
statutory  adverse  possession;  it  is  his  does  not  acquire  a  title  by  the  estop- 
only  right  of  property;  it  may  not  be  peU 


§  802  EQUITY  JURISPRUDENCE,  1110 

within  the  "equitable  estoppels  "  which  form  the  subject- 
matter  of  the  present  section.  Although  the  facts  from 
which  equitable  estoppels  arise  are  all  matters  in  pais  as 
distinguished  from  records  and  deeds,  yet  the  whole  doc- 
trine is  an  expansion  of  and  addition  to  the  original  legal 
estoppels  iyi  pais,  and  embraces  rules  unknown  to  the  law 
when  Lord  Coke  wrote.  Equitable  estoppel  in  the  mod- 
ern sense  arises  from  the  conduct  of  a  party,  using  that 
word  in  its  broadest  meaning  as  including  his  spoken  or 
written  words,  his  positive  acts,  and  his  silence  or  nega- 
tive omission  to  do  anything.  Its  foundation  is  justice 
and  good  conscience.  Its  object  is  to  prevent  the  uncon- 
scientious and  inequitable  assertion  or  enforcement  of 
claims  or  rights  which  might  have  existed  or  been  en- 
forceable by  other  rules  of  the  law,  unless  prevented  by 
the  estoppel;  and  its  practical  effect  is,  from  motives  of 
equity  and  fair  dealing,  to  create  and  vest  opposing  rights 
in  the  party  who  obtains  the  benefit  of  the  estoppel.'    The 

*  Horn  V.  Cole,  51  N.  H.   287,  289;  and  unconscientious  advantage  of  his 

12  Am.  Rep.  111.    The  opinion  of  Per-  strict  legal  rights,   though  now  with 

ley,  C.  J.,  in  this  case,  is  such  an  ad-  us,    like    many     other     doctrines    of 

mirable  and  accurate  presentation  of  equity,  habitually  administered  at  law. 

the  true  reasons  and  grounds  of  the  ....  It  would   have  a  tendency    to 

doctrine,  pointing  out  so  clearly  the  mislead  us  in  the  present  inquiry,  as 

distinctions    between    estoppel    from  there  is  reason  to  suspect  that  it  has 

conduct  as  a  creature  of  equity,  and  sometimes  misled  others,  if  we  should 

estoppel  in  pais  at  law,  establishing  so  confound  this  doctrine  of  equity  with 

firmly,  on  the  solid  foundation  of  jus-  the  legal  estoppel  hy  matter  in  pais.  The 

tice  and  good  conscience,  the  equitable  equitable  estoppel  and  legal  estoppel 

conception,    and   sustaining    so    com-  agree  indeed  in  this,  that  they  both 

pletely  the    various    positions    of    the  preclude    from  showing    the  truth  in 

text,  both  as  to  the  nature  of  estoppel  the   individual   case.      The    grounds, 

as  a  rule  of  property,  contract,  or  rem-  however,  on  which  they  do  it  are  not 

edy,  rather  than  a  mere  rule  of  evi-  only  different,  but  directly  opposite. 

dence,  and  as  to  the  essential  requisites.  The  legal  estoppel  shuts  out  the  truth, 

that    I    cannot  refrain   from   quoting  and  also  the  equity  and  justice  of   the 

it  at  some  length.     Mr.  Chief  Justice  individual    case,    on    account   of    the 

Perley  says:  "  The  ground  on  which  a  supposed    paramount    importance    of 

party  is  precluded  from  proving  that  rigorously  enforcing  a  certain  and  uu- 

his  representations  on  which  another  varying  maxim  of  the  law.     For  rea- 

has  acted  were  false  is,  that  to  per-  sous  of  general  policy,  a  record  is  held 

mit  it  would   be   contrary   to   equity  to  import  incontrovertible  verity;  and 

and   good   conscience It  thus  for  the  same  reason,  a  party,  is  not  per- 

appears  that  what  has  been  called  an  mitted  to  contradict  his  solemn  ad- 
equitable  estoppel,  and  sometimes  mission  by  deed.  And  the  same  is 
with  less  propriety  an  estoppel  in  pais,  equally  true  of  legal  estoppels  by  mat- 
is  properly  and  peculiarly  a  doctrine  of  ter   in   pais Legal    estoppels 

equity,  originally  introduced  there  to  exclude  evidence  of  the  truth,  and  tha 

prevent  a  party  from  taking  a  dishonest  equity  of  the  particular  case,  to  sup- 


nil 


CONCERNING    EQUITABLE    ESTOPPEL. 


§  802 


doctrine  of  equitable  estoppel  is  pre-eminently  the  crea- 
ture of  equity.     It  bas,  bowever,  been  incorporated  into 


port  a  strict  rule  of  law  on  grounds  of 
public  policy.  Equitable  estoppels 
are  admitted  on  the  exactly  opposite 
ground  of  promoting  the  equity  and 
justice  of  the  individual  case  by  pre- 
venting a  party  from  asserting  his 
rights  under  a  general  teclinical  rule 
of  law,  when  he  has  so  conducted  him- 
self that  it  would  be  contrary  to 
equity  and  good  conscience  for  him  to 
allege  and  prove  the  truth.  The 
facts  upon  which  equitable  estoppels 
depend  are  usually  proved  by  oral 
evidence;  and  the  evidence  should 
doubtless  be  carefully  scrutinized 
and  be  full  and  satisfactory  before  it 
should  be  admitted  to  estop  the  party 
from  showing  the  truth,  especially  in 
cases  affecting  the  title  to  land.  But 
where  the  facts  are  clearly  proved, 
the  maxim  that  estoppels  are  odious  — 
which  was  used  in  reference  to  legal 
estoppels,  because  they  shut  out  the 
truth  and  justice  of  the  case  —  ought 
not  to  be  applied  to  these  equitable 
estoppels,  as  it  has  sometimes  been, 
inadvertently  as  I  think,  from  a  sup- 
posed analogy  with  the  legal  estoppel 
by  matter  in  pais,  to  which  they  have, 
in  this  respect,  no  resemblance  what- 
ever  In  this  equitable  estop- 
pel the  party  is  forbidden  to  set  up 
his  legal  title,  because  he  has  so  con- 
ducted himself  that  to  do  it  would  be 
contrary  to  equity  and  good  con- 
;Science.  As  in  other  cases  of  fraud 
and  dishonesty,  the  circumstances  out 
of  which  the  question  may  arise  are  of 
infinite  variety,  and  unless  courts  of 
law  are  willing  to  abdicate  the  duty 
of  administering  the  equitable  doc- 
trine effectually  in  the  suppression  of 
fraud  and  dishonesty,  the  application 
of  it  cannot  be  confined  within  the 
limit  of  any  narrow  technical  defini- 
tion, such  as  will  relieve  courts  from 
looking,  as  in  other  cases  depending 
on  fraud  and  dishonesty,  to  the  cir- 
cumstances of  each  individual  case. 
Certain  general  rules  will  doubtless 
apply,  as  in  other  cases  where  relief  is 
Bought  on  such  grounds.  But  I  find 
myself  unable  to  agree  with  the  au- 
thorities, where  the  old  maxim  that 
legal  estoppels  are  odious  has  been 
applied  to  this  equitable  estoppel,  and 
where  attempts  have  been  made  to  lay 


down  strict  definitions  such  as  would 
defeat  the  re/nedy  in  a  large  proportion 
of  the  cases  that  fall  with  in  the  prin'iple 
on  which  the  doctrine  is  founded. 
The  doctrine  having  been  borrowed 
from  equity,  courts  at  law  that  have 
adopted  it  should  obviously  look  to 
the  practice  in  equity  for  their  guide 
in  the  application  of  it,  and  in  equity 
the  doctrine  has  been  liberally  applied 
to  suppress  fraud  and  enforce  honesty 
and  fair  dealing,  without  anj'  attempt 
to  confine  the  doctrine  within  the  lim- 
its of  a  strict  definition.  For  instance, 
the  doctrine  has  not  in  equity  been  limited 
to  cases  where  there  was  an  actual  inten- 
tion to  deceive.  The  cases  are  numer- 
ous where  the  party,  who  was  estopped 
by  his  declarations  or  his  conduct  to 
set  up  his  legal  title,  was  ignorant  of 
it  at  the  time,  and  of  course  could 
have  had  no  actual  intention  to  de- 
ceive by  concealing  his  title.  Yet  if 
the  circumstances  were  such  that  he 
ought  to  have  informed  himself,  it  has 
been  held  to  be  contrary  to  equity  and 
good  conscience  to  set  up  his  title, 
though  he  was  in  fact  ignorant  of  it 
when  he  made  the  representations. 
Nor  is  it  nea'sxary  in  equity  that  the 
intention  should  be  to  deceive  any  particu- 
lar individual  or  individuals.  If  the 
representations  are  such,  and  made 
in  such  circumstances,  that  all  per- 
sons interested  in  the  subject  have 
the  right  to  rely  on  them  as  true, 
their  truth  cannot  be  denied  by  the 
party  that  has  made  them  against  any 
one  who  has  trusted  to  them  and  acted 
on  them."  After  citing  and  comment- 
ing on  numerous  decisions,  the  chief 
justice  concludes  (p.  360):  "Tliough  I 
do  not  find  that  the  precise  point  taken 
here  for  the  plaintiff  has  been  directly 
decided  in  any  of  our  cases,  yet  the 
general  current  of  our  decisions  oa. 
the  subject  tends  to  a  liberal  applica- 
tion of  the  doctrine  for  the  suppres* 
sion  of  fraud  and  dishonesty,  and  tli& 
promotion  of  justice  and  fair  dealing. 
No  disposition  has  been  shown  in  the 
courts  of  this  state  to  treat  this  equi- 
table estoppel  as  odious,  and  embarrass 
its  application  by  attempts  to  confine 
it  within  the  limits  of  a  narrow  tech- 
nical definition.  We  are  content  to 
follow  where   the   spirit  and  general 


§  803  EQUITY   JURISPRUDENCB.  1112 

the  law,  and  is  constantly  employed  by  courts  of  law  at 
the  present  day  in  the  decision  of  legal  controversies. 
Preserving  its  original  character,  and  depending  upon 
equitable  principles,  it  is  administered  in  the  same  man- 
ner, and  in  conformity  with  the  same  rules,  by  the  courts 
both  of  law  and  of  equity,  so  that  the  decisions  of  either 
class  of  tribunals  may  be  quoted  as  authorities  in  the 
subsequent  discussion.  The  particular  applications  of 
the  doctrine  are  so  various  and  so  numerous,  that  no  at- 
tempt will  be  made  to  discuss  them  with  any  fullness.  I 
shall  confine  myself  simply  to  an  explanation  of  the  gen- 
eral principles  which  determine  the  nature,  essential  ele- 
ments, operation,  and  effect  of  the  equitable  estoppel,  and 
to  a  brief  statement  of  a  few  important  applications  which 
frequently  come  before  courts  of  equity.  For  a  more  ex- 
haustive discussion  the  reader  is  referred  to  treatises  on 
the  law  of  estoppel. 

§  803.  How  Far  Fraud  is  Essential  in  Equitable  Es- 
toppels. —  There  is  a  theory  which  makes  the  essence 
of  equitable  estoppel  to  consist  of  fraud.  In  accordance 
with  this  view,  the  language  used  by  some  courts  in  de- 
fining and  describing  the  general  doctrine  has  been  so 
sweeping  and  positive  that,  taken  literally,  it  does  not 
admit  the  possibility  of  such  an  estoppel  unless  the  party 
has  been  guilty  of  actual  intentional  fraud  in  law;  and 
thus  the  whole  doctrine  is  represented  as  virtually  a  mere 
instance  of  legal  fraud.     This  theory  is  not  sustained  by 

tone    of    these    decisions    lead;     and  be  liable  for  the  natural  consequences 

they  lead   plainly  to  the  conclusion,  of  his  representation,  and   cannot   be 

that  where  a  man  makes  a  statement  heard  to  say  that   the  party  actually 

disclaiming  his  title  to  property,  in  a  injured  was   not  the  one  he  meant  to 

manner  and  under  circumstances  such  deceive,  or  that  his  fraud  did  not  take 

as  he  must  understand  those  who  heard  effect  in   the  manner   he    intended." 

the    statement   would    believe   to   be  These  views  will,  in  my  opinion,  rec- 

true,  and  if  they  had   an  interest  in  oncile    much  apparent   conflict  of  ju- 

the  subject  would  act  on  as  true,  and  dicial  decision;  they  certainly  furnish 

one,  using  his  own  means  of  knowledge  the  basis  of  principle  upon  which  the 

with  due  diligence,  acts  on  the  state-  administration    of    the     doctrine    by 

ment  as  true,  the  party   who  makes  courts  of  equity  must  be  rested.     See 

the  statement  cannot   show  that   his  also   Stevens   v.    Dennett,  61  N.    H. 

representation  was  false,  to  the  injury  324,  833,  per  Foster,  J.;  posi,  in  note 

of  the  party  who  believed  it  to  be  true  under  §  805. 
and  acted  on  it  as  such;  that  he  will 


1113  CONCERNING    EQUITABLE    ESTOPPEL.  §  803 

principle,  and  it  cannot  be  made  universal.  There  are 
well-settled  cases  of  equitable  estoppel,  familiar  to  courts 
of  equity,  which  do  not  rest  upon  fraud,  and  instances 
are  admitted,  even  by  the  courts  which  maintain  this 
theory,  which  cannot  be  said  to  involve  any  element  of 
fraud  unless  by  a  complete  perversion  and  misuse  of  lan- 
guage. It  is  undoubtedly  in  accordance  with  the  methods 
long  pursued  by  courts  of  equity  to  apply  the  term  "fraud- 
ulent" to  the  party  estopped,  in  the  following  manner: 
It  is  in  strict  agreement  wdth  equitable  notions  to  say  of 
such  party  that  his  repudiation  of  his  own  prior  conduct 
which  had  amounted  to  an  estoppel,  and  his  assertion  of 
claims  notwithstanding  his  former  acts  or  words,  would 
be  fraudulent,  —  would  be  a  fraud  upon  the  rights  of  the 
person  benefited  by  the  estoppel.  It  is  accurate,  there- 
fore, to  describe  equitable  estoppel,  in  general  terms,  as 
such  conduct  by  a  party  that  it  would  be  fraudulent,  or  a 
fraud  upon  the  rights  of  another,  for  him  afterwards  to 
repudiate  and  to  set  up  claims  inconsistent  with  it. 
This  use  of  the  term  has  long  been  familiar  to  courts  of 
equity,  which  have  always  treated  the  word  "fraud  "  in  a 
very  elastic  manner.  The  meaning  here  given  to  fraud 
or  fraudulent  is  virtually  synonymous  with  "unconscien- 
tious" or  "inequitable."  In  exactly  the  same  manner, 
and  with  exactly  the  same  signification  given  to  the  word, 
the  doctrine  of  specific  enforcement  of  verbal  contracts 
for  the  sale  of  land  when  part  performed  by  the  plaintiff 
has  been  explained  by  saying  that  it  would  be  fraudulent 
for  the  defendant  to  contest  his  liability  by  setting  up 
the  statute  of  frauds  after  he  had  permitted  the  plaintiff, 
without  objection,  to  go  on  and  part  perform  the  verbal 
agreement.  In  this  explanation  courts  of  equity  do  not 
mean  that  the  defendant's  conduct  in  denying  the  validity 
of  the  agreement  is  actual  fraud,  —  a  willful  deception, — 
but  simply  that  it  is  unconscientious;  much  less  do  they 
assert  that  there  was  actual  fraud  —  willful  deception  — 


§  803  EQUITY    JURISPRUDENCE.  1114 

ill  the  act  of  entering  into  the  verbal  contract.     In  ex- 
actly the  same   manner  it  is   in  strict  accordance  with 
equitable  conceptions   and  equitable  terminology  to  de- 
scribe as  fraud  or  fraudulent  the  act  of  repudiating  con- 
duct which  had  constituted  an  estoppel,  and  of  asserting 
claims  inconsistent  therewith;  it  is  entirely  another  thing 
to  say  that  the  conduct  itself —  the  acts,  words,  or  silence 
of  the    party  —  constituting   the   estoppel    is   an   actual 
fraud,  done  with  the   actual  intention  of  deceiving.     I 
would  venture  the  suggestion  that  the  theory  which  re- 
gards  fraud  as  the  essence  of  equitable  estoppel  origi- 
nated in   courts   possessing  only  a  partial  and   limited 
jurisdiction.    Such  courts,  administering  nearly  the  whole 
jurisprudence  by  means  of  legal  actions,  and  being  able 
to  admit  equitable  notions  only  so  far  as  they  could  be 
harmonized  with  legal  dogmas  and  legal  procedure,  would 
naturally  formulate  the  doctrine  of  equitable  estoppel  in 
such  a  manner  that  it  should  become  a  rule  of  law  not 
inconsistent  with  the  legal  system  as  a  whole.    This  could 
only  be  done  by  giving  prominence  to  the  element  of 
fraud,  and  by  making  it  in  fact  essential.    By  this  method 
equitable  estoppel  was  made  to  be  a  branch  or  application 
of  the  legal  rules  concerning  fraud.     The  theory,  having 
been  thus  formulated  by  tribunals  of  great  ability  and 
high   authority,  was   perhaps   adopted    by  other   courts 
without  a  careful  examination  of  its  occasion  and  origin. 
When  all  the  varieties  of  equitable  estoppel  are  compared, 
it  will  be  found,  I  think,  that  the  doctrine  rests  upon  the 
following  general  principle:  When  one  of  two  innocent 
persons  —  that  is,  persons  each  guiltless  of  an  intentional, 
moral  wrong — must  suffer  a  loss,  it  must  be  borne  by  that 
one  of  them  who  by  his  conduct — acts  or  omissions  — 
has  rendered  the  injury  possible.    This  is  confessedly  the 
foundation  of  the  rules  concerning  the  implied  authority 
of  agents,  which  are  declared  by  judges  of  the  highest 
ability  to    be  applications  of  the  doctrine  of  equitable 


1115 


CONCERNING  EQUITABLE  ESTOPPEL. 


§  804 


estoppel.*  This  most  righteous  principle  is  sufficient,  and 
alone  sufficient,  to  explain  all  instances  of  such  estoppel, 
and  although  fraud  may  be,  and  often  is,  an  ingredient 
in  the  conduct  of  the  party  estopped,  it  is  not  an  essen- 
tial element,  if  the  word  is  used  in  its  true  legal  meaning. 
§  804.  Definition.  —  From  the  foregoing  general  de- 
scription it  will  appear,  I  think,  that  the  following  defini- 
tion is  accurate,  and  covers  all  phases  and  applications 
of  the  doctrine:  Equitable  estoppel  is  the  effect  of  the 
voluntary  conduct  of  a  party  whereby  he  is  absolutely 
precluded,  both  at  law  and  in  equity,  from  asserting 
rights  which  might  perhaps  have  otherwise  existed,  either 
of  property,  of  contract,  or  of  remedy,  as  against  another 
person,  who  has  in  good  faith  relied  upon  such  conduct, 
and  has  been  led  thereby  to  change  his  position  for  the 
worse,  and  who  on  his  part  acquires  some  corresponding 
right,  either  of  property,  of  contract,  or  of  remedy.^ 


'  See  North  River  Bank  v.  Aymar, 
3  Hill,  262;  Farmers'  and  Mechanics' 
Bank  v.  Butchers'  and  Drovers'  Bank, 
16  N.  Y.  125;  69  Am.  Dec.  678;  Gris- 
wold  V.  Haven,  25  N.  Y.  595;  82  Am. 
Dec.  380;  Exchange  Bank  v.  Men- 
teath,  26  N.  Y.  505. 

*  This  definition,  it  will  be  observed, 
differs  somewhat  in  form  from  that 
often  given  by  text-writers.  It  is 
based  upon  an  abandonment  of  the 
fiction  that  estoppel  is  a  mere  rule  of 
evidence  not  affecting  the  real  rights 
of  parties,  and  it  incorporates  the 
truth  that  the  party  estopped  loses, 
and  the  party  having  the  benefit  of 
the  estoppel  obtains,  a  right,  which 
may  be  of  property,  of  contract,  or 
sometimes  simply  of  remedy.  In  his 
Digest  of  the  Law  of  Evidence  (p.  124), 
Sir  James  Fitzjames  Stephen  thus 
formulates  the  doctrine:  "  When  one 
person,  by  anything  which  he  does  or 
says,  or  abstains  from  doing  or  saying, 
intentionally  causes  or  permits  an- 
other person  to  believe  a  thing  to  be 
true,  and  to  act  upon  such  belief  otlicr- 
wise  than  but  for  that  belief  he  would 
have  acted,  neither  the  person  first 
mentioned  nor  his  representative  in 
interest  is  allowed,  in  any  suit  or  pro- 
ceeding   between    himself    and    such 


person  or  his  representative  in  inter- 
est, to  deny  the  truth  of  that  thing. 

"  When  any  person,  under  a  legal 
duty  to  any  other  person  to  conduct 
himself  with  reasonable  caution  in  the 
transaction  of  any  business,  neglects 
that  duty,  and  when  the  person  to 
whom  the  duty  is  owing  alters  his 
position  for  the  worse  because  he  ia 
misled  as  to  the  conduct  of  the  negli- 
gent person  by  a  fraud,  of  which  such 
neglect  is  in  the  natural  course  of 
things  the  proximate  cause,  the  negli- 
gent person  is  not  permitted  to  deny 
that  he  acted  in  the  manner  in  which 
the  other  person  was  led  by  auch 
fraud  to  believe  him  to  act." 

The  first  clause  states  the  rule  in 
its  ordinary  applications,  and  the 
author  cites,  as  examples,  Pickard  v. 
Sears,  6  Ad.  &  E.  469,  474;  Freeman 
V.  Cooke,  2  Ex.  654,  661;  Howard  v. 
Hudson,  2  El.  &  B.  1 ;  Knights  v.  Wif- 
fen,  L.  R.  5  Q.  B.  660.  The  second 
clause  states  the  rule  in  its  application 
to  the  case  of  a  negligent  act  causing 
fraud.  As  examples,  he  cites  Young 
V.  Grote,  4  Bing.  258,  where  A  signed 
blank  checks  and  gave  them  to  his 
wife  to  fill  up  as  she  wanted  money. 
She  filled  up  a  check  for  £50  2s.  so 
carelessly  that  room  waa  left  for  the 


§  805  EQUITY   JURISPRUDENCE.  1116 

§  805.   Essential  Elements  Constituting  the  Estoppel.  — 

In  conformity  with  the  principle  already  stated  which 
lies  at  the  basis  of  the  doctrine,  and  upon  the  authority  of 
decisions  which  have  recognized  and  adopted  that  princi- 
ple, the  following  are  the  essential  elements  which  must 
enter  into  and  form  a  part  of  an  equitable  estoppel  in  all 
of  its  phases  and  applications.  One  caution,  however,  is 
necessary,  and  very  important.  It  would  be  unsafe  and 
misleading  to  rely  on  these  general  requisites  as  applicable 
to  every  case,  without  examining  the  instances  in  which 
they  have  been  modified  or  limited.  1.  There  must  be 
conduct  —  acts,  language,  or  silence — amounting  to  a  rep- 
^edontation  or  a  concealment  of  material  facts.  2.  These 
facts  must  be  known  to  the  party  estopped  at  the  time  of 
his  said  conduct,  or  at  least  the  circumstances  must  be 
such  that  knowledge  of  them  is  necessarily  imputed  to  him. 
3.  The  truth  concerning  these  facts  must  be  unknown  to 
the  other  party  claiming  the  benefit  of  the  estoppel,  at  the 
time  when  such  conduct  was  done,  and  at  the  time  when 
it  was  acted  upon  by  him.  4.  The  conduct  must  be  done 
with  the  intention,  or  at  least  with  the  expectation,  that 
it  will  be  acted  upon  by  the  other  party,  or  under  such 
circumstances  that  it  is  both  natural  and  probable  that 
it  will  be  so  acted  upon.  There  are  several  familiar  spe- 
cies in  which  it  is  simply  impossible  to  ascribe  any  in- 
tention or  even  expectation  to  the  party  estopped  that  his 
conduct  will  be  acted  upon  by  the  one  who  afterwards 
claims  the  benefit  of  the  estoppel.  5.  The  conduct  must 
be  relied  upon  by  the  other  party,  and,  thus  relying,  he 

insertion  of  figures   before   the  "50"  leaves  his  door  unlocked,  whereby  his 

and  of  words  before  the  "fifty."     She  goods  are  stolen.     He  is  not  estopped 

gave  the  check  to  A's  clerk  to  get  it  from  denying  the  title  of  an  innocent 

cashed.      He  inserted  a  3  before  the  purchaser  from  the  thief.     The  author 

50,  and  "three  hundred  and"  before  also  cites,  on  the  doctrine  generally, 

the  "fifty,"  and  A's   banker   in  good  Bank  of  Ireland  v.  Evans's  Charities,  5 

faith  paid  the  deck  so  altered  to  the  H.  L.  Cas.  389;  Swan  v.  British  Austr. 

clerk.     Held,    that    A  was   estopped  Co.,  7  Com.  B.,  N.  S.,  400,  448;  7  Hurl. 

as  against  the  banker  to  claim   that  &  N.  603;  2  Hurl.  &  C.  175;    Halifax 

the   check  was    not    valid:   Swan   v.  Guardians  v.   Wheelwright,  L.   R.  10 

North  Br.  etc.  Co.,  2  Hurl.  &  C.  175,  Ex.  183;  Car-rv.  London  &  N.  W.  R'y, 

181,  per  Blackburn,  J.  A  man  carelessly  L.  R.  10  Com.  P.  307,  316,  317. 


1117 


CONCERNING  EQUITABLE  ESTOPPEL. 


§  805 


must  be  led  to  act  upon  it.  6.  He  must  in  fact  act  upon 
it  in  such  a  manner  as  to  change  his  position  for  tlie 
worse;  in  other  words,  he  must  so  act  that  he  would  suffer 
a  loss  if  he  were  compelled  to  surrender  or  forego  or 
alter  what  he  has  done  by  reason  of  the  first  party  being 
permitted  to  repudiate  his  conduct  and  to  assert  rights 
inconsistent  with  it.'     It  will  be  seen  that  fraud  is  not 


*  I  shall  cite  only  a  few  of  the  lead- 
ing and  ablest  decisions  which  illus- 
trate the  text,  and  especially  those 
which  do  not  admit  fraud  as  a  neces- 
sary element  of  the  conduct  by  which 
a  party  is  estopped.  Pickard  v.  Sears, 
6  Ad.  &  E.  469,  474,  is  the  leading 
case.  The  facts  substantially  were: 
A,  the  owner  of  chattels  in  B's  posses- 
sion, which  were  taken  in  execution 
by  C,  abstained  from  claiming  them 
for  several  months,  and  conversed  with 
C's  attorney  about  them  without 
mentioning  his  own  claim,  and  thus 
impressed  C  with  the  belief  that  the 
goods  belonged  to  B.  C  sold  them, 
and  this  was  held  sufficient  to  sustain 
a  finding  that  A  was  estopped.  In 
giving  the  opinion  of  the  court  Lord 
Denman  thus  stated  the  rule:  "The 
rule  of  the  law  is  clear,  that  where  one, 
by  his  words  or  conduct,  willfully 
causes  another  to  believe  in  the  exist- 
ence of  a  certain  state  of  things,  and 
induces  him  to  act  on  that  belief,  so 
as  to  alter  his  own  previous  position, 
the  former  is  concluded  from  averring 
against  the  latter  a  dififerent  state  of 
things  as  existing  at  the  same  time." 
The  word  "willfully,"  in  this  state- 
ment, might  imply  that  fraud  was  a 
necessary  ingredient  in  the  conduct 
which  creates  an  estoppel.  The  word 
was,  however,  explained  in  subsequent 
decisions,  and  this  interpretation  com- 
pletely abandoned.  In  Freeman  v. 
Cooke,  2  Ex.  654,  Parke.  B.,  said:  "The 
rule  laid  down  in  Pickard  v.  Sears,  6 
Ad.  &  E.  469,  was  to  be  considered  as 
established;  but  that  by  the  term  'will- 
fully,'in  that  rule,  must  be  understood, 
if  not  that  the  party  represents  that 
to  be  the  truth  which  he  knows  to  be 
untrue,  at  least  that  he  means  his 
representation  to  be  acted  upon,  and 
that  it  is  acted  upon  accordingly;  and 
ff,  whatever  a  mans  real  meaning  may 
he,  he  so  conducts  himself  that  a  rea- 
Bonable  man  would  take  the  represen- 


tation to  be  true,  and  believe  that  it 
was  meant  that  he  should  act  upon  it, 
and  did  act  upon  it,  as  true,  the  party 
making  the  representation  would  be 
equally  precluded  from  contesting  its 
truth;  and  conduct  by  negligence  or 
omission,  when  there  is  a  duty  cast 
upon  a  person,  by  usage  of  trade  or 
otherwise,  to  disclose  the  truth,  may 
often  have  the  same  effect;  as,  for  in- 
stance, a  retiring  partner,  omitting  to 
inform  his  customers  of  the  firm,  in 
the  usual  mode,  that  the  continuing 
partners  were  no  longer  authorized  to 
act  as  his  agents,  is  bound  by  all  con- 
tracts made  by  them  with  third  per- 
sons on  the  faith  of  their  being  author- 
ized." In  the  still  later  case  of  Cor- 
nish V.  Abington,  4  Hurl.  &  N.  549, 
Pollock,  C.  B.,  said  that  the  term 
"willfully,"  as  used  in  Pickard  v. 
Sears,  6  Ad.  &  E.  469,  meant  sim- 
ply "voluntarily,"  and  that  this  was 
its  established  signification.  He  add- 
ed the  following  statement  of  the 
general  rule:  "  If  a  party  uses  language 
which,  in  the  ordinary  course  of  busi- 
ness and  the  general  sen^e  in  which 
words  are  understood,  conveys  a  cer- 
tain meaning,  he  cannot  afterwards 
say  that  he  is  not  bound,  if  another, 
so  understanding  it,  has  acted  upon 
it.  If  any  person,  by  a  course  of  con- 
duct,  or  by  actual  expression,  so  con- 
ducts  himself  that  another  may  reason- 
ably imfer  tlie  existence  of  an  agreement 
or  license,  whether  the  party  intends  that 
he  should  do  so  or  not,  it  has  the  effect 
that  the  party  using  that  language,  or  who 
has  80  conducted  himself,  cannot  after- 
tvards  gainsay  the  reasonable  inference 
to  be  draivn  from  the  words  or  conduct." 
This  mode  of  stating  the  general  rule 
is  absolutely  necessary  to  explain  nu- 
merous well-settled  and  even  familiar 
applications  of  the  estoppel,  where  it 
is  not  only  impossible  to  impute  to  the 
party  estopped  any  actual  intention 
that  his  conduct  should  be  acted  upon 


§  805 


EQUITY    JURISPRUDENCE. 


1118 


given  as  an  essential  requisite  in  the  foregoing  statement. 
It  is  not  absolutely  necessary  that  the  conduct  mentioned 


by  the  other  party,  but  even  where 
the  conduct  waa  done  without  auy 
knowledge  or  expectation  that  it  ever 
would  be  80  acted  upon  by  the  person 
who  does  afterwards  act  upon  it  and 
thus  obtains  the  benefit  of  the  estoppel. 
In  the  quite  recent  case  In  re  Bahia 
etc.  R'y,  L.  R.  3  Q.  B.  584.  the  neces- 
sity  of  fraud  as  an  essential  ingredient 
of  the  conduct  was  again  denied,  the 
court  holding  that  if  a  representation 
is  made  with  the  intention  that  it 
shall  be  acted  upon  by  another,  and  he 
does  so  act  upon  it,  there  is  an  estop- 
pel. Finally,  in  the  rule  as  carefully 
formulated  by  Mr.  Stephen  upon  the 
basis  of  the  latest  English  decisions, 
as  quoted  in  the  previous  note,  the  ele- 
ment of  fraud  is  clearly  omitted.  In 
fact,  the  second  paragraph  of  his  rule 
includes  cases,  covered  by  the  forego- 
ing language  of  Chief  Baron  Pollock, 
where  there  is  even  no  intention  on 
the  part  of  the  one  estopped  that  his 
comtuct  should  be  acted  upon. 

American  cases  of  the  highest  author- 
ity are  no  less  explicit.  In  Continental 
Bank  v.  Bank  of  the  Commonwealth, 
50  N.  Y.  575,  581,  582,  Folger,  J.,  said: 
"  Is  the  plaintiff  estopped  from  main- 
taining that  the  certificate  was  a  for- 
gery, and  the  admission  of  its  teller 
an  innocent  mistake?  There  is  no 
disagreement  as  to  the  general  defini- 
tion of  an  estoppel  in  pais.  It  is 
agreed  that  there  must  have  been  some 
act  or  declaration  of  the  plaintifif  or  of 
its  agent  to  the  defendant's  assignor 
which  so  afi'ected  the  conduct  of  the 
latter  to  their  injury  as  that  it  would 
be  unjust  now  to  permit  the  plaintiff 
to  set  up  the  truth  of  the  case  to  the 
contrary  of  its  mistaken  act  or  decla- 
ration. But  the  plaintiff  insists  that 
there  are  certain  limitations  to  be  put 
upon  this  generality.  Tlie  plaintiff 
claims  that  it  is  necessary  that  its  act 
or  declaration  must  have  been  made 
with  the  intent  to  mislead.  [The 
judge  examines  the  English  cases 
above  quoted.]  We  hold  that  there 
need  not  be,  upon  the  part  of  the  per- 
son making  a  declaration  or  doing  an 
act,  an  intention  to  mislead  the  one 
who  is  induced  to  rely  upon  it.  There 
are  cases  in  which  parties  have  been 
estopped,  when  their  acta  or  declara- 


tions have  been  done  or  made  in  igno- 
rance of  their  own  rights,  not  knowing 
that  the  law  of  the  land  gave  them 
such  rights.  Here  certamly  there 
could  be  no  purpose  to  mislead  others, 
for  there  was  not  the  knowledge  to  in- 
form the  purpose,  and  both  parties 
were  equally  and  innocently  misled. 
Indeed,  it  would  limit  the  rule  much, 
within  the  reason  of  it,  if  it  were  re- 
stricted to  cases  where  there  was  an 
element  of  fraudulent  purpose.  In 
very  manj'  of  the  cases  in  which  the 
rule  has  been  applied,  there  was  no 
more  than  negligence  on  the  part  of 
him  who  was  estopped.  And  it  has 
long  been  held  that  when  it  is  a  breach 
of  good  faith  to  allow  the  truth  to  bo 
known,  there  an  admission  will  estop: 
Gaylord  v.  Van  Loan,  15  Wend,  308. 
There  are  decisions  where  the  rule  has 
been  stated  as  the  plaintiff  claims  it. 
We  have  looked  at  those  cited.  It 
was  not  necessary  to  the  conclusion  of 
the  court  in  them,  that  such  a  restric- 
tion should  be  put  upon  the  rule." 
The  court  further  held  that  it  is  not 
necessary  that  a  party  should  act 
affirmatively  upon  a  declaration,  in 
order  to  claim  an  estoppel.  It  is  suffi- 
cient if  he  had  the  means  in  his  pos- 
session of  protecting  his  rights  or  of 
restoring  himself  to  his  original  posi- 
tion, and  in  reliance  upon  the  declara- 
tion, and  in  consequence  of  it,  he 
refrains  from  using  those  means,  and 
is  thereby  injured;  his  claim  to  the 
estoppel  is  good.  In  Blair  v.  Wait,  69 
N.  Y.  113,  116,  the  court  said:  "It  is 
not  uecessarj'  to  an  equitable  estoppel 
that  the  party  should  design  to  mis- 
lead. It  is  enough  that  the  act  was 
calculated  to  mislead  and  actually  did 
mislead  the  defendants  while  acting 
in  good  faith  and  with  reasonable  care 
and  diligence,  and  that  thereby  they 
might  be  placed  in  a  position  which 
would  compel  them  to  pay  a  demand 
which  they  had  every  reason  to  expect 
was  canceled  and  discharged."  To  ex- 
actly the  same  effect  is  Manufacturers' 
and  Traders'  Bank  v.  Hazard,  30  N.  Y. 
226,  230,  per  Johnson,  J.;  Barnard  v. 
Campbell,  55  N.  Y.  456,  462,  463, 
where  the  real  owner  of  chattels  is 
estopped  from  setting  up  his  own  title 
as  agaiust  a  purchaser  from  a  third 


1119 


CONCERNING    EQUITABLE    ESTOPPEL. 


§  805 


in  the  first  subdivision  should  be  done  with  a  fraudulent 
purpose  or  intent,  or  with  an  actual  and  fraudulent  in- 


person  who  was  in  possession  and  sold 
them  under  a  claim  of  owuership.  Tiiis 
decision  expressly  rests  the  doctrine 
of  equitable  estoppel  upon  tlie  general 
principle  mentioned  in  a  foregoing 
paragraph  (§  802).  Allen,  J.,  said: 
"The  defendants  can  only  resist  the 
claim  of  the  plaintiffs  to  the  merchan- 
dise by  establishing  an  equitable 
estoppel  founded  upon  the  acts  of  the 
plaintiffs,  and  in  application  of  the  rule 
by  which,  as  between  two  persons 
equally  innocent,  a  loss  resulting  from 
the  fraudulent  acts  of  another  shall 
rest  upon  him  by  whose  act  or  omis- 
sion the  fraud  has  been  made  possible. 
....  In  such  a  case,  for  obvious  rea- 
sons, the  law  raises  an  equitable  estop- 
pel. It  is  not  every  parting  with  the 
possession  of  chattels  or  the  documen- 
tary evidence  of  title  that  will  enable 
the  possessor  to  make  good  a  title  to 
one  who  may  purchase  from  him.  The 
owner  must  go  further,  and  do  some  act 
of  a  nature  to  mislead  third  persons  as 
to  the  true  nature  of  the  title.  Two 
things  must  concur  to  create  an  estop- 
pel by  which  an  owner  may  be  de- 
prived of  his  property  by  the  act  of  a 
third  person  without  his  assent,  un- 
der the  rule  now  considered:  1.  The 
owner  must  clothe  the  person  assum- 
ing to  dispose  of  the  property  with  the 
apparent  title  to  or  authority  to  dis- 
pose of  it;  2.  The  person  alleging  the 
estoppel  must  have  acted  and  parted 
with  value  upon  the  faith  of  such  ap- 
parent ownership  or  authority,  so  that 
be  will  be  the  loser  if  the  appearances 
to  which  he  trusted  are  not  real.  In 
this  respect  it  does  not  differ  from 
other  estoppels  in  pais."  See  also,  in 
support  of  the  text  and  of  the  general 
requisites  there  stated,  Waring  v. 
Snmborn,  S2  N.  Y.  604;  Hurd  v. 
Kelly,  78  N.  Y.  588,  597;  34  Am. 
Rep.  567;  Malloney  v.  Horan,  49  N.  Y. 
Ill,  115;  10  Am.  Rep.  135;  Jewett 
V.  Miller,  10  N.  Y.  402,  406;  61  Am. 
Dec.  751;  Shapley  v.  Abbott,  42 
N.  Y.  443,  448;  1  Am.  Rep.  548;  St. 
John  V.  Roberts,  31  N.  Y.  441;  88 
Am.  Bee.  287;  Brown  v.  Bowen,  30 
N.  Y.  519,  541;  86  Am.  Dec.  406; 
Lawrence  v.  Brown,  5  N.  Y.  394,  401 ; 
Frost  V.  Saratoga  Mut.  Ins.  Co.,  5 
Denio,    154,    158;  49   Am.   Dec.   234; 


Welland   Canal   Co.  v.   Hathaway,  8 
Wend.  480,  483;  24  Am.  Dec.  51.    la 
this  connection,  it  will  be  instructive, 
by  way  of  contrast,  to  quote  a  passage 
from   a   very  recent   decision    by  the 
New  York  court  of  appeals,  involving 
a  particular  application  of  estoppel  in 
pais  in  which  a  fraudulent  intent,  or 
what  amounts  to  such  an  intent,  is  an 
essential  element  of  the  conduct  which 
creates   the  estoppel,  in   pursuance  of 
an  equitable  principle  long  settled  by 
such  cases  as  Evans  v.  Bicknell,  6  Ves. 
174,  182,  and  Slim  v.  Croucher,   1   Do 
Gex,  F.  &  J.  518,  — a  principle  which 
has  been  erroneously,  I  think,  regarded 
as  the  foundation  of  all  equitable  es- 
toppel, and  therefore  to  be  extended 
to  every  instance  of  it.     The  case  is 
Trenton    Banking    Co.  v.   Duncan,   86 
N.  Y.  221.     The  estoppel  alleged  would 
affect   the   title   to  land.     The  action 
was  brought  to  charge  certain  land  of 
the  defendant  with  the  payment  of  a 
judgment.     Andrews,  J.,  said:   "Asa 
general  rule,  it  would  seem  to  be  just 
that  if  a  person  does  an  act  at  the  sug- 
gestion of  another,  the  other  shall  not 
be  permitted  to  avoid  the  act  when  it 
turns  out  to  the  prejudice  of  an  ante- 
cedent  right   or   interest  of  his  own, 
although    the    advice   on   which    the 
other  party  acted  was  f/iven  innocently 
and    in   ignorance   of  his  claim.     The 
authorities  establish  the  doctrine  that 
the  owner  of  land    may  by  an  act  in 
pais  preclude   himself   from  asserting 
his  legal  title.     But  it  is  obvious  that 
the   doctrine  should   be  carefully  and 
sparingly   applied,    and   only   on   the 
disclosure   of    clear   and    satisfactory 
grounds  of  justice  and  equity.     It  is 
opposed  to  the  letter  of  the  statute  of 
frauds,  and   it  would  greatly  tend  to 
the   insecurity  of  titles  if   they  were 
allowed   to  be  affected   by  parol  evi- 
dence of  light  or  doubtful  character. 
To  authorize  the  finding  of  an  estop- 
pel  in  pali  against   the  leijal  owner  oj 
lands,  there  must  be  shown,  we  think, 
either  actual  fraud,  or  fault  or  negli- 
gence equivalent  to  fraud,  on  his  part 
in  concealing  his  title;  or  that  he  was 
silent  when  the  circumstances  would 
impel  an  honest  man  to  speak;  or  such 
actual  iiitervention  on   his  part,  as  iu 
Storrs  V.  Barker,  6  Johns.  Ch.  166,  10 


805 


EQUITY   JURISPRUDENCE. 


1120 


tention  of  deceiving  the  other  party;  nor  is  this  meaning 
implied  by  any  of  the  language  which  I  have  used.     The 


Am.  Dec.  316,  —  so  as  to  render  it  just 
that  as  between  him  and  the  party 
acting  upon  his  suggestion  he  should 
bear  the  loss.  Moreover  the  party 
setting  up  the  estoppel  must  be  free 
from  the  imputation  of  laches  in  acting 
upon  the  belief  of  ownership  by  one 
who  has  no  right."  There  is  no  in- 
consistence between  this  view  and  the 
decisions  before  quoted.  In  the  first 
sentence  of  the  extract,  Andrews,  J., 
states  the  rule  ordinarily  applicable  in 
exact  conformity  with  those  authori- 
ties; he  then  passes  to  the  particular 
case  controlled  by  a  special  equity. 
Dezell  V.  Odell,  3  Hill,  215,  38  Am. 
Dec.  628,  is  a  leading  case  on  the 
general  doctrine.  A  sheriflf  levied  on 
goods  by  execution  against  A,  and  de- 
livered them  to  B,  the  latter  giving 
a  receipt  promising  to  redeliver  them 
to  the  sheriff  by  a  certain  day.  Held, 
that  B  was  estopped  from  claiming  as 
against  the  sheriff  that  the  goods  be- 
longed to  himself,  and  not  to  A. 
Bronson,  J,,  dissented,  not  with  re- 
spect to  the  law  of  estoppel,  but  only 
as  to  its  application  to  the  facts.  His 
opinion  contains  an  accurate  risumi  of 
some  necessary  elements  belonging  to 
the  estoppel,  and  I  shall  quote  some 
portions.  He  says  (p.  221):  "When 
a  party,  either  by  his  declaration 
or  conduct,  has  induced  a  third  per- 
son to  act  in  a  particular  manner, 
he  will  not  afterwards  be  permitted 
to  deny  the  truth  of  the  admission,  if 
the  consequence  would  be  to  work  an 
injury  to  such  third  person,  or  to 
some  one  claiming  under  him.  Before 
the  party  is  concluded  it  must  ap- 
pear, —  1.  That  he  has  made  an  admis- 
sion which  is  clearly  inconsistent  with 
the  evidence  he  proposes  to  give,  or 
the  title  or  claim  which  he  proposes 
to  set  up;  2.  That  the  other  party 
has  acted  upon  the  admission;  and 
3.  That  he  will  be  injured  by  allowing 
the  truth  of  the  admission  to  be  dis- 
proved." After  quoting  several  cases, 
he  proceeds  (p.  224):  "  The  conduct  or 
admission  which  precludes  the  party 
must  be  plainly  inconsistent  and  ir- 
reconcilable with  the  right  which  he 
afterwards  sets  up.  If  the  act  can  be 
referred  to  an  honest  and  proper 
motive,    the   party  will   not   be    con- 


cluded: Heane  v.  Rogers,  9  Barn.  & 
C.  577.  So,  too,  the  admission,  how- 
ever unequivocal  it  may  be,  will  not 
operate  as  an  estoppel  unless  the  other 
party  has  acted  upon  it;  and  then  it 
will  only  be  conclusive  in  favor  of  the 
party  who  has  so  acted,  and  persons 
claiming  under  him,  and  not  in  favor 
of  a  stranger:  Heane  v.  Rogers,  9 
Barn.  &  C.  577;  Wallis  v.  Truesdell, 
6  Pick.  455."  The  decisions  of  the 
Pennsylvania  courts  have  generally 
leaned  strongly  in  favor  of  the  theory 
that  an  actual  fraud  is  the  very  es- 
sence of  every  such  estoppel  by  con- 
duct. In  a  very  late  case,  however 
(Bidwell  v.  Pittsburgh,  85  Pa.  St.  412, 
417;  27  Am.  Rep.  662,  per  Mercur,  J.), 
it  is  held:  "It  may  now  be  declared 
as  a  general  rule  that  where  an  act  is 
done  or  a  statement  made  by  a  party, 
the  truth  or  efficacy  of  which  it  would 
be  a  fraud  on  his  part  to  controvert  or 
impair,  the  character  of  an  estoppel 
shall  be  given  to  what  otherwise  would 
be  mere  matter  of  evidence.  It  is  not 
necessary  that  the  party  against  whom 
an  estoppel  is  alleged  should  have  in- 
tended to  deceive;  it  is  sufficient  if  he 
intended  that  his  conduct  should  in- 
duce another  to  act  upon  it,  and  the 
other,  relying  on  it,  did  so  act."  In 
Stevens  v.  Dennett,  51  N.  H.  324,  330, 
Foster,  J.,  after  reciting  the  essential 
elements  according  to  what  he  calls 
"the  common  definitions,"  and  sub- 
stantiallj'  as  given  above  in  the  text, 
adds:  "The  doctrine  seems  to  be  es- 
tablished by  authority  that  the  con- 
duct and  admissions  of  a  part}'  operate 
against  him  in  the  nature  of  an  estop- 
pel, wherever,  in  good  conscience  and 
honest  dealing,  he  ought  not  to  be 
permitted  to  gainsay  them.  Thus 
negligence  becomes  constructive  fraud, 
although,  strictly  speaking,  the  ac- 
tual intention  to  mislead  or  deceive 
may  be  wanting,  and  the  party  may 
be  innocent,  if  innocence  and  negli- 
gence may  be  deemed  compatible.  In 
such  cases,  the  maxim  is  justly  applied 
to  him,  that  when  one  of  two  innocent 
persons  must  suffer,  he  shall  suffer 
who  by  his  own  acts  occasioned  the 
confidence  and  loss."  In  the  last  sen- 
tence the  judge  has  struck  the  "bed- 
rock "   of    universal    principle,    upoa 


1121  CONCERNING    EQUITABLE    ESTOPPEL.  .    §  805 

adoption  of  such  an  element  as  always  essential  would  at 
once  strike  out  some  of  the  most  familiar  and  best  estab- 
lished instances  of  equitable  estoppel.  Undoubtedly  a 
fraudulent  design  to  mislead  is  often  present  as  an  in- 
gredient of  the  conduct  working  an  estoppel;  but  this 
only  renders  the  result  more  clearly  just,  and,  if  I  may 
use  the  expression,  more  conclusive.  There  is,  however, 
a  class  of  cases,  of  which  an  example  is  given  in  the  foot- 
note, where  fraudulent  conduct  is  essential,  —  cases  in 
which  an  owner  of  land  is  precluded  from  asserting  his 
legal  title  by  reason  of  intentionally  false  representations 
or  concealments,  by  which  another  has  been  induced  to 
deal  wdth  the  land.  These  cases  are  at  the  present  day 
sometimes  treated  as  examples  of  equitable  estoppel.  The 
principle,  however,  upon  which  they  depend  was  well 
settled  by  courts  of  equity  long  before  the  doctrine  of 
equitable  estoppel  in  its  modern  form  was  first  announced, 
and  goes  in  its  remedial  operation  far  beyond  that  doc- 
trine, as  will  more  fully  appear  in  subsequent  paragraphs. 
I  would  again  remark  that  although  fraud  is  not  an  es- 
sential element  of  the  original  conduct  working  the  estop- 
pel, it  may  with  perfect  propriety  be  said  that  it  would  be 
fraudulent  for  the  party  to  repudiate  his  conduct,  and  to 

which  all  instances  of  equitable  estop-  controvert  the  representation  and  to 

pel  must  be  founded,  if  they  are  to  get  rid  of  its  effects,  and  thus  to  in- 

stand  with    any   firmness.     See   also  jure  the  one  who  has  relied  on  it.    The 

Horn  V.  Cole,  51  N.  H.  287,  289;  12  same  explanation  would  doubtless  ap- 

Am.    Rep.    Ill,    per    Parley,    C.    J.,  ply  to  and  show  the  real  meaning  of 

(quoted  ante,  note  under  §  802);  Mor-  many  other  decisions  which  have  used 

gan   V.   Railroad   Co.,   06  U.   S.  716;  the  general  formula  that  fraud  is  es- 

Holmesv.  Crowell,  73  N.  C.  613,  627;  sential);    McCabe  v.  Raney,  32  Ind. 

Anderson   v.   Armstead,    69  111.    452,  309;  Simpson  v.   Pearson,   1   Ind.  65; 

454;  Voorhees   v.  Olmstead,   3   Hun,  Hartshorn  v.  Potroff,  89  111.  509;  Tal- 

744;  Clark  v.  Coolidge,   8  Kan.    189,  cott  v.  Brackett,  5  111.  App.  60;  Mich- 

195;  Kuhl  v.  Mayor  etc.,  23  N.  J.  Eq.  igan  etc.  Co.  v.  Parsell,  38  Mich.  475, 

84,   85;  Rice  v.  Bunce,   49  Mo.   231,  480.     [See   also   Chase's    Appeal,    57 

234;    8  Am.    Rep.   129  (in  a  very  in-  Conn.  236,  and  cases  reviewed  in  th& 

structive  opinion,  Wagner,  J.,  while  opinion;  Hill  v.  Blackvvelder,  113  111. 

using  the  general  expression  that  fraud  283;  Galbraith  v.  Lunsford,  87  Tenn. 

is  an  essential  element,  explains  it  by  89.    The  change  in  the  legal  definition 

showing  that  the  "fraud "need  not  be  of  fraud  effected  in  England  by  the 

an  actual  intent  to  deceive  in  the  rep-  decision   in  Derry  v.  Peek,   14   App, 

resentation  which  creates  the  estoppel;  Cas.  (H.  L.)  3.37,  has  not  touched  the 

the  "fraud "may,  and  generally  does,  doctrine  of  estoppel:  Low  v.  Bouveris 

consist  in  the  subsequent  attempt  to  (1891),  3  Ch.  82.] 
2  Eq.  Jue.  — 71 


§  806  EQUITY   JURISPRUDENCE.  1122 

assert  a  right  or  claim  in  contravention  thereof.  Using 
the  term  in  the  sense  frequently  given  to  it  by  courts  of 
equity,  and  as  explained  in  a  preceding  paragraph,  this 
statement  is  not  only  proper,  but  furnishes  an  accurate 
criterion  for  determining  the  existence  of  an  equitable 
estoppel. 

§  8U6.  Theory  that  a  Fraudulent  Intent  is  Essential. — 
There  is,  as  has  already  been  mentioned,  a  theory  approved 
and  adopted  by  the  courts  of  some  states,  which  makes 
the  very  essence  of  every  equitable  estoppel  or  estoppel 
by  conduct  to  consist  of  fraud,  and  affirms  that  an  actual 
fraudulent  intention  to  deceive  or  mislead  is  a  necessary 
requisite  in  the  conduct  of  the  party,  —  whether  acts, 
words,  or  silence,  —  in  order  that  it  may  create  an  equi- 
table estoppel.  I  cannot  better  state  this  theory  than  in 
the  language  of  an  eminent  and  able  judge,  w^hich  has 
frequently  been  adopted  as  being  an  accurate  exposition 
of  the  general  doctrine.'     In  order  to  estop  a  party  by  his 

^  Boggs    V.    Merced    Min.    Co.,    14  leads  another   into  dealing   with   the 

Cal.    279,    367,    368,    per    Field,    J.,  estate  as  if  he  were  not  interested,  he 

adopted  in  Martin   v.   Zellerbach,  38  will  be  postponed  to  the  party  misled, 

Cal.  300,  99  Am.  Dec.  365,  and  cases  and  compelled  to  make  his  representation 

cited.     It  should  be  remarked  that  in  specifically  good."    This  rule  is  illus- 

the  great  case  of  Boggs  v.  Merced  Min.  trated  by  such  cases  as  Evans  v.  Bick- 

Co.,   14   Cal.  279,  Mr.    Justice   Field  nell,  6  Ves.  174;  Philling  v.  Armitage, 

was  not  treating  of  equitable  estoppel  12  Ves.  78,  84;  Williams  v.  Earl   of 

in   general.     He   was   discussing    the  Jersey,  1  Craig  &  P.  91;  Martinez  v. 

particular  question.  When  is  the  owner  Cooper,  2  Russ.  198;  Slim  v.  Croucher, 

of  land  precluded  by  his  conduct  from  1    De  Gex,  F.  &   J.    518,   525,     This 

setting  up  his  legal  title?     In  formu-  equitable  rule  has  been  explained  and 

lating   the   rules  quoted  in  the  text,  illustrated  in  the  foregoing  sections  on 

he  did  not  announce  them  as  govern-  priorities,  §§  686,  731,  and  on  bona  fide 

ing  all  cases  of  equitable  estoppel;  he  purchase,  §§  779-782.     In  the  subse- 

expressly  confined  them  to  the  class  of  quent  case  of  Martin  v.  Zellerbach,  38 

cases  under  consideration  by  saying:  Cal.  300,  99  Am.  Dec.  365,  the  court 

In  order  to  estop  a  person  by  his  ad-  adopted   the  exact  requisites   of   Mr. 

missions  or  declarations  from  setting  Justice  Field,  but  omitted  his  restric- 

up  "title  to  land."     The  authorities  tion  of  them  to  cases  involving   the 

which     he     quoted     were     Adams's  legal  title  to  land,  announced  them  as 

Equity,  151,  and  Story's  Eq.  Jur.,  sec.  governing   all  instances   of  equitable 

391.     The  reference  to  Adams  clearly  estoppel,  and  applied  them  to  a  case 

indicates   the   doctrine   which  Judge  involving  the   ownership  of  chattels. 

Field   was    following.      The    general  [See  also  Griffith  v.  Brown,  76  Cal. 

subject  there  treated  of  by  Adams  is,  260].     The    following    are   additional 

"  the  equity  of  a  party  who  has  been  examples  of   decisions  which   sustain 

misled  is  superior  to  his  who  has  will-  the   same   theory:   Brant  v.  Virginia 

fully   misled    him."     The    particular  Coal  Co.,  93  U.  S.  326,  335,  per  Field, 

rule  referred  to  is:   "If  a  person  in-  J.:  "It  is  difficult  to  see  where  the 

terested  in  an  estate  knowingly  mis-  doctrine  of  equitable  estoppel  comei 


1123 


CONCERNING  EQUITABLE  ESTOPPEL. 


806 


conduct,  admissions,  or  declarations,  the  following  are 
essential  requisites:  It  must  appear,  —  1.  That  the  party 
making  his  admission  by  his  declaration  or  conduct  was 
apprised  of  the  true  state  of  his  own  title;  2.  That  he 
made  the  admission  with  the  express  intention  to  deceive, 
or  with  such  careless  or  culpable  negligence  as  to  amount 
to  constructive  fraud;  3.  That  the  other  party  was  not 
only  destitute  of  all  knowledge  of  the  true  state  of  the 
title,  but  of  all  means  of  acquiring  such  knowledge;  4. 
That  he  relied  directly  upon  such  admission,  and  will  be 
injured  by  allowing  its  truth  to  be  disproved. 

estoppel,  although  the  same  result  ia 
produced."  With  great  deference  to 
the  opinioa  of  so  able  a  judge,  I  think 
his  error  in  this  passage  is  evident.  It 
consists  in  taking  a  special  rule,  estab- 
lished from  motives  of  policy  for  a  par- 
ticular condition  of  fact,  and  raising 
it  to  the  position  of  a  universal  rule. 
Where  an  estoppel  by  conduct  is  al- 
leged to  prevent  a  legal  owner  of  land 
from  asserting  his  legal  title,  courts 
of  equity,  in  order  to  avoid  the  literal 
requirements  of  the  statute  of  frauds, 
were  driven  to  the  element  of  fraud  in 
the  conduct  aa  essential:  See  the 
text,  §§  805,  807.  The  passage  quoted 
from  Judge  Story  is  dealing  with  this 
long-settled  rule  of  equity,  and  not 
with  the  subject  of  equitable  estoppel 
in  general.  When  this  special  rule  ia 
made  universal,  its  inconsistency  with 
many  familiar  instances  of  equitable 
estoppel  becomes  apparent,  and  Judge 
Field  is  forced  to  escape  from  the  an- 
tagonism by  denying  that  these  in- 
stances do  in  fact  belong  to  the  doc- 
trine. If  this  conclusion  be  correct, 
then  some  of  the  most  important  and 
well-settled  species  of  the  estoppel, 
uniformly  regarded  as  such  by  text- 
writers  and  courts,  must  be  abandoned, 
and  the  beneficent  doctrine  itself  must 
be  curtailed  in  its  operation,  to  one 
particular  class  of  cases.  This  result 
ia  in  direct  opposition  to  the  tendency 
of  judicial  decision  and  of  the  dis- 
cussions of  text-writers.  See  alao 
Dorlarque  v.  Cress,  71  111.  380,  381, 
382;  McKinzie  v.  Steele,  18  Ohio  St. 
38,  41  (a  dictum);  Eldred  v.  Hazlett'a 
Adm'r,  33  Pa.  St.  307;  Rhodes  v. 
Childs,  CA  Pa.  St.  18;  White  v.  Lang- 
don,  30  Vt.  599;  [Galbraith  v.  Luna- 
ford,  87  Tenn.  89.] 


in  here.  For  the  application  of  that 
doctrine  there  must  generally  be  some 
intended  deception  in  the  conduct  or 
declarations  of  the  party  to  be  es- 
topped, or  such  gross  negligence  on 
his  part  as  amounts  to  constructive 
fraud,  by  which  another  has  been  mis- 
led to  his  injury.  [He  quotes  a  pas- 
sage from  Story's  Eq.  Jur.,  sec.  391.] 
Thus  it  is  said  by  the  supreme  court 
of  Pennsylvania  that  the  primary 
ground  of  this  doctrine  is,  that  it 
would  be  fraud  in  a  party  to  assert 
what  his  previous  conduct  had  denied, 
when  on  the  faith  of  that  denial  others 
had  acted.  The  element  of  fraud  is 
essential  either  in  the  intention  of  the 
party  estopped,  or  in  the  effect  of  the 
evidence  which  he  sets  up.  It  would 
seem  that  in  the  enforcement  of  an  es- 
toppel of  this  character,  with  respect 
to  the  title  of  property,  such  as  will 
prevent  a  party  from  asserting  his  legal 
rights,  and  the  efifect  of  which  will  be 
to  transfer  the  enjoyment  of  the  prop- 
erty to  another,  the  intention  to  de- 
ceive and  mislead,  or  negligence  so 
gross  as  to  be  culpable,  should  be 
clearly  established.  There  are  un- 
doubtedly cases  where  a  party  may  be 
concluded  from  asserting  his  original 
rights  to  property  in  consequence  of 
his  acts  or  conduct  in  which  the  pres- 
ence of  fraud  actual  or  constructive  is 
wanting;  as  where  one  of  two  innocent 
parties  must  suflFer  from  the  negligence 
of  another,  he  through  whose  agency 
the  negligence  was  occasioned  will  be 
held  to  bear  the  loss;  and  where  one 
has  received  the  profits  of  a  transac- 
tion, he  is  not  permitted  to  deny  its 
validity  while  retaining  its  benefits. 
But  such  cases  are  generally  referable  to 
other  principlea  than  that  of  equitable 


§  807  EQUITY   JURISPRUDENCE.  1124 

§  807.  Fraudulent  Intent  Necessary  in  an  Estoppel 
Affecting  the  Legal  Title  to  Land,  —  The  particular  case 
referred  to  in  the  foregoing  foot-note  requires  a  fuller  ex- 
planation. It  is  a  purely  equitable  doctrine  settled  long 
before  the  modern  rules  of  equitable  estoppel  by  con- 
duct. It  is  confined  to  estates  in  land.  The  general 
rule  is,  that  if  a  person  interested  in  an  estate  knowingly 
misleads  another  into  dealing  with  the  estate  as  if  he  were 
not  interested,  he  will  be  postponed  to  the  party  misled, 
and  compelled  to  make  his  representation  specifically 
good.  It  applies  to  one  who  denies  his  own  title  or  en- 
cumbrance when  inquired  of  by  another  who  is  about  to 
purchase  the  land  or  to  loan  money  upon  its  security;  to 
one  who  knowingly  suffers  another  to  deal  with  the  land 
as  though  it  were  his  own;  to  one  who  knowingly  suffers 
another  to  expend  money  in  improvements  without  giv- 
ing notice  of  his  own  claim,  and  the  like.  This  equity^ 
being  merely  an  instance  of  fraud,  requires  intentional 
deceit,  or  at  least  that  gross  negligence  which  is  evidence 
of  an  intent  to  deceive.  In  the  language  of  a  most  recent 
decision,  to  preclude  the  owner  of  land  from  asserting 
his  legal  title  or  interest  under  such  circumstance,  "  there 
must  be  shown  either  actual  fraud,  or  fault  or  negligence 
equivalent  to  fraud,  on  his  part  in  concealing  his  title;  or 
that  he  was  silent  when  the  circumstances  would  impel 
an  honest  man  to  speak;  or  such  actual  intervention  on 
his  part,  as  in  Storrs  v.  Barker,  6  Johns.  Ch.  166, —  so  as 
to  render  it  just  that,  as  between  him  and  the  party  act- 
ing upon  his  suggestion,  he  should  bear  the  loss."  What 
is  the  reason  of  this  rule  ?  It  is  accurately  explained  in 
the  same  decision.  While  the  owner  of  land  may  by  his 
acts  in  pais  preclude  himself  from  asserting  his  legal 
title,  "  it  is  obvious  that  the  doctrine  should  be  carefully 
and  sparingly  applied,  and  only  on  the  disclosure  of  clear 
and  satisfactory  grounds  of  justice  and  equity.  It  is 
opposed  to  the  letter  of  the  statute  of  frauds,  and  it  would 
greatly  tend  to  the  insecurity  of  titles  if  they  were  allowed 


1126  CONCERNING    EQUITABLE    ESTOPPEL.  §  807 

to  be  affected  by  parol  evidence  of  light  or  doubtful  char- 
acter." The  most  important  "ground  of  justice  and 
equity  "  admitted  by  courts  of  equity  to  uplift  and  dis- 
place the  statute  of  frauds  concerning  legal  titles  to  land, 
by  fastening  a  liability  upon  the  wrong-doer,  is  fraud. 
There  are  many  instances  in  which  equity  thus  compels 
the  owner  of  land  to  forego  the  benefits  of  his  legal  title 
and  to  admit  the  equitable  claims  of  another,  in  direct 
contravention  of  the  literal  requirements  of  the  statute, 
but  they  all  depend  upon  the  same  principle.  The  rule 
under  consideration  is  strictly  analogous  to  another 
familiar  rule  that  a  legal  owner  of  land  cannot  be  turned 
into  a  trustee  ex  delicto  by  any  mere  words  or  conduct.  A 
constructive  trust  ex  delicto  can  never  be  impressed  upon 
land  as  against  the  legal  title  by  any  verbal  stipulation, 
however  definite,  nor  by  any  mere  conduct;  such  trust 
can  only  arise  where  the  verbal  stipulation  and  conduct 
together  amount  to  fraud  in  the  contemplation  of  equity. 
Both  the  rule  under  consideration  and  the  rule  concern- 
ing trusts  rest  upon  the  same  reasons.  The  doctrine  had 
its  origin,  as  has  been  said,  prior  to  and  independently 
of  the  modern  doctrine  of  equitable  estoppel  by  conduct, 
and  was  confined  in  its  operation  to  courts  of  equity. 
Even  at  the  present  day,  this  particular  instance  of  the 
equitable  estoppel  by  which  the  owner  of  land  is  pre- 
cluded from  asserting  his  legal  title  is  distinctively 
equitable;  it  is  not  admitted  and  enforced  at  law,  except 
in  states  where  the  principles  of  equity  are  administered 
through  the  means  of  legal  actions  and  remedies,  and  in 
those  where  legal  and  equitable  rights  and  reliefs  are  com- 
bined in  the  administration  of  justice  under  the  reformed 
procedure.* 

•  Trenton  Banking  Co.  v.  Sherman,  Hooper,  4  Mylne  &  C.  179;  Williams 

24  Alb.  L.  J.  390;  Boggs  v.  Merced  M.  v.  Earl  of  Jersey,  Craig  &  P.  91;  East 

Co.,  14  Cal.  279,  367,  368;  Brant  v.  Va.  India  Co.  v.  Vincent,  2  Atk.  S3;  Hun- 

Coal  Co.,  93  U.  S.  326,  335;  Evans  v.  gerford  v.  Earle,  2  Vern.  261;  Wendell 

Bicknell,    6  Ves.    174;  Pilling  v.  Ar-  v.  Van  Rensselaer,  1  Johns.  Ch.  344; 

mitage,    12   Ves.   78,  84;  Martinez  v.  Storr.s  v.  Barker,  6  Johns.  Ch.  166;  10 

Cooper,   2  Russ.    198;    Nicholaon  v.  Am.  Dec.  316;  (.Breeze  v.  Brooks,  71 


808 


EQUITY    JURISPRUDENCE. 


1126 


§  808.  Requisites  Further  Illustrated  —  The  Conduct. 
—  My  limits  of  space  do  not  permit  a  detailed  discussion 
of  these  general  requisites.  I  can  only  state  them  in  the 
briefest  manner,  and  must  refer  to  the  cases  cited  in  the 
foot-note,  and  to  treatises  upon  estoppel,  for  an  ampler 
treatment.  In  fact,  the  more  specific  rules,  the  varying 
phases  of  opinion,  and  the  partial  conflict  of  decision 
have  arisen  in  actions  at  law  rather  than  in  equity.  The 
treatment  of  the  subject  by  courts  of  equity  has  gener- 
ally been  simple,  uniform,  and  consistent.  The  conduct 
creating  the  estoppel  must  be  something  which  amounts 
either  to  a  representation  or  a  concealment  of  the  exist- 
ence of  facts;  and  these  facts  must  be  material  to  the 
rights  or  interests  of  the  party  affected  by  the  represen- 
tation or  concealment,  and  who  claims  the  benefit  of  the 
estoppel.  The  conduct  may  consist  of  external  acts,  of 
language  written  or   spoken,  or  of  silence.'     The   facts 


CaL  169,  182;  Pitcher  v.  Dove,  99  Ind. 
175;]  actual  intent  to  deceive  not  al- 
ways necessary;  gross  negligence  in 
forgetting  a  fact  contrary  to  the  state- 
ment acted  upon:  Slim  v.Croucher,  1  De 
Gex,  F.  &  J.  518,  525,  528.  [In  Low  v. 
Bouverie  (1891),  3  Ch.  82,  it  was  held 
that  Slim  v.  Croucher,  1  De  Gex,  F. 
&  J.  518,  was  really  an  action  of  dam- 
ages for  deceit,  and  hence  was  over- 
ruled by  the  decision  of  the  house  of 
lords  in  Derry  v.  Peek,  L.  R.  14  App. 
C. ;  post,  §  884;  though  it  is  pointed  out 
that  Derry  v.  Peek  did  not  affect  the 
law  of  estoppel.  See  also  §  912,  note.] 
But  see  Spencer  v.  Carr,  45  N.  Y.  406; 
6  Am.  Rep.  112;  Sulphine  v.  Dunbar, 
55  Miss.  255;  and  see  Southard  v. 
Sutton,  68  Me.  575;  Kirkpatrick  v. 
Brown,  59  Ga.  450;  Stewart  v.  Mix, 
30  La  Ann.,  pt.  2,  1036;  Lippmina 
V.  McCranie,  30  La.  Ann.,  pt.  2, 
1251;  Lamar  Co.  v.  Clements,  49  Tex. 
347;  Bloomstein  v.  Clees,  3  Tenn.  Ch. 
433;  Hart  v.  Giles,  67  Mo.  175;  God- 
frey V.  Thornton,  46  Wis.  677;  Gregg 
V,  Von  Phul,  1  Wall.  274,  per  Davis, 
J.;  Breeding  v.  Stamper,  18  B.  Men. 
175;  Hill  V.  Epley,  31  Pa.  St.  331, 
334.  This  species  of  equitable  estop- 
pel belongs  to  the  jurisdiction  of 
equity,  and  is   not   available   at  law: 


Wimmer  v.    Ficklin,    14  Bush,    193; 

Kelly  V.  Hendricks,  57  Ala.  193; 
Hayes  v.  Livingston,  34  Mich.  384;  22 
Am.  Rep.  533. 

'  Examples  by  acts  or  hy  words: 
Cairncross  v.  Lorimer,  7  Jur.,  N.  S., 
149;  Pulsford  v.  Richards,  17  Beav. 
87;  Bridger's  Case,  L.  R.  9  Eq.  74; 
Mitchell's  Case,  L.  R.  9  Eq.  363; 
Ebbett's  Case,  L.  R.  5  Ch.  302  (cases 
where  a  person  has  allowed  his  name 
to  appear  as  a  stockholder  in  a  com- 
pany); Tilton  V.  Nelson,  27  Barb.  595; 
Horn  V.  Cole,  51  N.  H.  287,  290;  12 
Am.  Rep.  Ill;  Stevens  v.  Dennett,  51 
N.  H.  324;  Zuchtmann  v.  Roberts,  109 
Mass.  53;  12  Am.  Rep.  663;  Continen- 
tal Bank  v.  Bank  of  Commonwealth,  50 
N.  Y.  575;  Barnard  v.  Campbell,  55 
N.  Y.  456;  Dezell  v.  Odell,  3  Hill,  215; 
38  Am.  Dec.  628;  Oakland  P.  Co.  v. 
Rier,  52  Cal.  270;  Dresbach  v.  Minnis, 
45  Cal.  223;  Comstock  v.  Smith,  26 
Mich.  306;  Peters  v.  Jones,  35  Iowa, 
512;  Thomas  v.  Pullis,  56  Mo.  211 ;  Rice 
V.  Groffman,  56  Mo.  434,  435;  People 
V.  Brown,  67  111.  435;  Connihan  v. 
Thompson,  111  Mass.  270  (not  es- 
topped); McKinzie  v.  Steele,  18  Ohio 
St.  38,  41  (not  estopped);  Eaton  v. 
New  England  Tel.  Co.,  68  Me.  523; 
Southard  v.  Sutton,  68  Me.  575;  Reed 


1127 


CONCEENING    EQUITABLE    ESTOPPEL. 


§809 


represented  or  concealed  must,  in  general,  be  either  exist- 
ing or  past,  or  at  least  represented  to  be  so.  A  statement 
concerning  future  facts  would  either  be  a  mere  expression 
of  opinion,  or  would  constitute  a  contract  and  be  governed 
by  rules  applicable  to  contracts.' 

§  809.  Same.  Knowledge  of  the  Truth  by  the  Party 
Estopped.  —  The  truth  concerning  these  material  facts 
represented  or  concealed  must  be  known  to  the  party  at 
the  time  when  his  conduct,  which  amounts  to  a  represen- 
tation or  concealment,  takes  place;  or  else  the  circumstan- 
ces must  he  such  that  a  knowledge  of  the  truth  is  necessarily 
imputed  to  him}  The  rule  has  sometimes  been  stated  as 
though  it  were  universal,  that  an  actual  knowledge  of  the 
truth  is  always  indispensable.  It  is,  however,  subject  to 
so  many  restrictions  and  limitations  as  to  lose  its  charac- 
ter of  universality.  It  applies  in  its  full  force  only  in 
cases  where  the  conduct  creating  the  estoj^pel  consists 
of  silence  or  acquiescence.^     It  does  not  apply  where  the 


V.  Crapo,  127  Mass.  39;  Taylor  v. 
Brown,  31  N.  J.  Eq.  163  (not  estopped); 
Board  of  Trustees  etc.  v.  Serrett,  31 
La.  Ann.  719;  JeflFriea  v.  Clark,  23 
Kan.  448;  Hartshorn  v.  Potroff,  89 
III.  509;  Talcott  v.  Brackett,  5  111. 
App.  60;  LGuffey  v.  O'Reiley,  88  Mo. 
418;  57  Am.  Rep.  424.] 

Examples  by  silence:  Cairncross  v. 
Lorimer,  7  Jur.,  N.  S.,  149;  Gresrg  v. 
Wells,  10  Ad.  &  E.  90;  Gregg  v.^'Von 
Phul,  1  Wall.  274;  Railroad  Co.  v. 
Dubois,  12  Wall.  47;  Rubber  Co.  v. 
Goodyear,  9  Wall.  788;  Niven  v.  Bel- 
knap, 2  Johns.  573;  Hall  v.  Fisher,  9 
Barb.  17,  31;  Hope  v.  Lawrence,  50 
Barb.  258;  Chapman  v.  Chapman,  59 
Pa.  St.  214;  Lawrence  v.  Luhr,  65 
Pa.  St.  236;  Hill  v.  Epley,  31  Pa.  St. 
331,  334;  Ives  v.  North  Canaan,  33 
Conn.  402;  Taylor  v.  Ely,  25  Conn. 
250;  Guthrie  v.  Quinn,  43  Ala.  561; 
Abrams  v.  Scale,  44  Ala.  297;  Young 
V.  Vough,  23  N.  J.  Eq.  325;  Weber  v. 
Weatherby,  34  Md.  656;  Silloway  v. 
Keptunelns.  Co.,  12  Gray,  73;  Society 
etc.  V.  Lehigh  Valley  R.  R.,  32  N.  J. 
Eq.  329;  Viele  v.  Judson,  82  N.  Y.  32, 
39;  Hamlin  v.  Sears,  82  N.  Y.  327; 
[Kirk  V.   Hamilton,    102    U.    S.    68; 


McClare  v.  Lockard,  121  N.  Y. 
308.] 

'  Jordan  v.  Money,  5  H.  L.  Cas. 
185;  Langdon  v.  Doud,  10  Allen,  433; 
6  Allen,  423;  83  Am.  Dec.  641;  White 
V.  Walker,  31  111.  422.  437;  White  v. 
Ashton,  51  N.  Y.  280;  [Maddison  v. 
Alderson,  8  App.  C.  (H.  L.)  467.  See 
also  §  877,  last  note.] 

2  Holmes  v.  Crowell,  73  N.  C.  613; 
Stevens  v.  Dennett,  51  N.  H.  324, 
333;  Smith  v.  Hutchinson,  61  Mo.  83; 
Clarke  V.  Coolidge,  8  Kan.  189;  Second 
Nat.  Bank  v.  Walbridge,  19  Ohio  St. 
419;  2  Am.  Rep.  408;  Adams  v. 
Brown,  16  Ohio  St.  75j  Bank  of  Hin- 
dustan,  L.  R.  6  Com.  P.  54,  222; 
Laverty  V.  Moore,  33  N.  Y.  658;  Reed 
V.  McCourt,  41  N.  Y.  435;  Raynor  v. 
Timerson,  51  Barb.  517;  Strong  v. 
Ellsworth,  26  Vt.  366;  Thrall  v.  La- 
throp,  30  Vt.  307;  73  Am.  Dec.  306; 
Whitaker  v.  Williams,  20  Conn.  98; 
Liverpool  Wharf  v.  Prescott,  7  Allen, 
494;  4  Allen,  22;  Kincaid  v.  Dormey, 
51  Mo.  552;  Rutherford  v.  Tracy,  48 
Mo.  325;  8  Am.  Rep.  104;  Dorlarque 
V.  Cress.,  71  111.  380,  382;  Graves  v. 
Blondell,  70  Me.  190. 

^  See  cases  in  last  note. 


§  810  EQUITY   JURISPRUDENCE.  1128 

party,  although  ignorant  or  mistaken  as  to  the  real  facts, 
was  in  such  a  position  that  he  ought  to  have  known  them, 
so  that  knowledge  will  be  imputed  to  him.  In  such  case, 
ignorance  or  mistake  will  not  prevent  an  estoppel.^  Nor 
does  the  rule  apply  to  a  party  who  has  not  simply  acqui- 
esced, but  who  has  actively  interfered  by  acts  or  words, 
and  whose  affirmative  conduct  has  thus  misled  another.^ 
Finally,  the  rule  does  not  apply,  even  in  cases  of  mere 
acquiescence,  when  the  ignorance  of  the  real  facts  was 
occasioned  by  culpable  negligence.* 

§  810.  Same.  Ignorance  of  the  Truth  by  the  Other 
Party.  —  The  truth  concerning  these  material  facts  must 
be  unknown  to  the  other  party  claiming  the  benefit  of 
the  estoppel,  not  only  at  the  time  of  the  conduct  which 
amounts  to  a  representation  or  concealment,  but  also  at 
the  time  when  that  conduct  is  acted  upon  by  him.  If,  at 
the  time  when  he  acted,  such  party  had  knowledge  of 
the  truth,  or  had  the  means  by  which  with  reasonable 
diligence  he  could  acquire  the  knowledge  so  that  it  would 
be  negligence  on  his  part  to  remain  ignorant  by  not  using 
those  means,  he  cannot  claim  to  have  been  misled  by 
relying   upon   the   representation    or  concealment.*     If, 

>  Irving    Nat.    Bank    v.    Alley,    79  Am.  Rep.   129;   Calhoun  v.  Richard- 

N.  Y.  536,  540;  Pulsford  v.  Richards,  son,  30  Conn.  210;  Preston  v.  Mann, 

17  Beav.   87;   Lefever  v.  Lefever,   30  25  Conn.   118;  Smith  v.   Newton,   38 

N.  Y.  27:  Horn  v.  Cole,  51  N.  H.  287;  111.  230;  Stone  v.  Gr.  West.  Oil  Co., 

12  Am.  Rep.   Ill,  per  Perley,  C.  J.;  41111.85;  Slim  v.  Croucher,  1  DeGex, 

Mut.  Life  Ins.  Co.  v.  Norris,  31  N.  J.  F.    &  J.    518    [see,    as    to   this   case, 

Eq.  583,  585,  586;     [Chase's  Appeal,  notes,  §§  807,  912];  and  see  Adams  v. 

57  Conn.  236.]  Brown,  16  Ohio  St.  75. 

*  In  such  a  case  the  party  might  *  Davenport  v.  Turpin,  52  Cal.  270; 
not  only  be  ignorant  or  mistaken,  but  Brant  v.  Virginia  Coal  etc.  Co.,  9.3 
he  might  even  believe  his  own  state-  U.  S.  326;  Holmes  v.  Crowell,  73 
nients  to  be  true.  This  is  a  plain  ap-  N.  C.  613;  Plummer  v.  Mold,  22 
plication  of  the  principle  that  where  Minn.  15;  Clark  v.  Coolidge,  8  Kan. 
die  of  two  innocent  persons  must  suf-  189;  Bigelow  v.  Toplifif,  25  Vt.  273; 
fer,  the  loss  will  fall  upon  him  whose  60  Am.  Dec.  264;  Odlin  v.  Gove,  41 
conduct  made  it  possible:  Hurd  v.  N.  H.  465;  77  Am.  Dec.  773;  Wallia 
Kelly,  78  N.  Y.  588,  597;  Irving  Nat.  v.  Truesdell,  6  Pick.  455;  Carter  v. 
Bank  V.  Alley,  79  N.  Y.  536,  540;  Champion,  8  Conn.  548,  554;  21  Am. 
Cloud  V.  Whiting,  38  Ala.  57;  Beaup-  Dec.  695;  Rapalee  v.  Stewart,  27 
laud  V.  McKeen,  28  Pa.  St.  124,  131;  N.  Y.  310;  Hill  v.  Epley,  31  Pa.  St. 
70  Am.  Dec.  115;  Millingar  v.  Sorg,  331;  Fishery.  Mossman,  11  Ohio  St. 
65  Pa.  215,  225.  42;  Bales  v.  Perry,  51  Mo.  449;  Ren- 

*  Sweezey  v.  Collins,  40  Iowa,  540;  nie  v.  Young,  2  De  Gex  &  J.  136; 
Rice  V.   Bunce,   49   Mo.  231,  234;   8  Wythe  v.  City  of  Salem,  4  Saw.  88; 


1129  CONCERNING   EQUITABLE   ESTOPPEL.  §  811 

therefore,  at  the  time  of  the  representation  the  party  to 
whom  it  was  made  was  ignorant  of  the  real  facts,  but  be- 
fore he  acted  upon  it  the  statement  was  contradicted  by  its 
author,  or  he  became  informed  of  the  truth,  he  could  not 
claim  an  estoppel.'  It  has  been  said  that,  in  cases  of  alleged 
estoppel  by  conduct  affecting  the  title  to  land,  the  record 
of  the  real  title  would  furnish  a  means  by  which  the  other 
party  might  ascertain  the  truth,  so  that  he  could  not  claim 
to  be  misled,  and  could  not  insist  upon  an  estoppel.*  This 
conclusion,  if  correct  at  all,  is  correct  only  within  very 
narrow  limits,  and  must  be  applied  with  the  greatest  cau- 
tion. It  must  be  strictly  confined  to  cases  where  the  con- 
duct creating  the  alleged  estoppel  is  mere  silence.  If  the 
real  owner  resorts  to  any  affirmative  acts  or  words,  or 
makes  any  representation,  it  would  be  in  the  highest  de- 
gree inequitable  to  permit  him  to  say  that  the  other 
party,  who  had  relied  upon  his  conduct  and  had  been 
misled  thereby,  might  have  ascertained  the  falsity  of  his 
representations.' 

§811.    Same.     Intention  of  the  Party  Who  is  Estopped. 
—  It  has  frequently  been  said,  in  most  general  terms,  that 

Stevens  v.   Dennett,    51   N.   H.  324,  tives  was  absent.  See  also  Kingman  v. 

333;  Rice  v.  Bunce.  49  Mo.  231,  234;  Graham,  51  Wis.  232.] 
8  Am.  Rep.   129;  Mut.  Life  Ins.  Co.         *  The  principle  upon  which  this  ecu- 

V.  Norris,  31  N.  J.  Eq.  583;  [Lux  v.  elusion  depends  is  fully  discussed  in 

Hagsjin,  69  Cal.  255.]  the  subsequent   chapter  upon   fraud, 

^  Freeman  v.  Cooke,  2  Ex.  654;  and  under   the    head   of    representations, 

see  Howard  v.  Hudson,  2  El.  &  B.  1.  See  Storrs  v.  Barker,  6  Johns.  Ch.  166; 

^Hill  V.  Epiey,  31  Pa.  St.  331;  10  Am.  Dec.  316;  Davis  v.  Handy,  37 
Knouff  V.  Thompson,  16  Pa.  St.  357;  N.  H.  65;  Hill  v.  Epley,  31  Pa.  St.  331; 
Goundie  v.  Northampton  W.  Co.,  7  Proctor  v.  Keith,  12  B.  Mon.  252; 
Pa.  St.  233;  Fisher  v.  Mossman,  11  Colbert  v.  Daniel,  32  Ala.  314,  316; 
Ohio  St.  42;  [Schaidt  v.  Bland,  66  Clapham  v.  Shillito,  7  Beav.  146,  149, 
Md.  141;  Stewart  v.  Matheny,  66  150,  per  Lord  Langdale;  Drysdale  v. 
Miss.  21;  14  Am.  St.  Rep.  538;  Thor  Mace,  2  Smale  &  G.  225,  230;  Price  v. 
V.  Oleson,  125  111.  365.  In  Sumner  Macauley,  2  De  Gex,  M.  &  G.  339, 
Seaton,  47  N.  J.  Eq.  103,  it  was  held  346,  per  Knight  Bruce,  L.  J. ;  Wilson 
that  where  the  true  owner  knew  or  v.  Short,  6  Hare,  366,  378;  Harnett  v. 
had  reason  to  know  that  the  other  Baker,  L.  R.  20  Eq.  50;  pH ill  v.  Black- 
was  acting  in  good  faith  on  an  erro-  welder,  113111.  283;  Robbins  v.  Moore, 
neous  supposition  as  to  the  title,  the  129  111.  .30.]  Although  these  cases  are 
fact  that  the  latter  might  have  ascer-  not  decided  upon  the  doctrine  of  estop- 
tained  the  true  state  of  the  title  by  ex-  pel,  yet  they  well  illustrate  the  quea- 
amination  of  the  records  is  no  excuse  tion  how  far  a  person  may  avoid  the 
for  the  former's  silence.  It  is  pointed  effect  of  his  own  positive  representa- 
out  that  in  the  first  four  cases  cited  tions  by  insisting  that  the  other  party 
in  this  note  the  essential  eleti'ient  of  should  not  have  relied  on  them.  [See 
knowledge  of  the  second  party's  mo-  §§  891,  895,  896.] 


§  811  EQUITY    JURISPEUDENCE.  1130 

the  conduct  amounting  to  a  representation,  in  order  to 
constitute  an  estoppel,  must  be  done  with  the  intention, 
by  the  one  who  is  to  be  estopped,  that  it  shall  be  acted 
upon  by  the  very  person  who  claims  the  benefit  of  the 
estoppel,  or,  as  is  sometimes  said,  that  it  shall  be  acted  upon 
by  another  person.  In  short,  there  must  always  be  the 
intention  that  the  conduct  shall  be  ^cted  upon  either  by 
some  person,  or  by  the  very  person  who  afterwards  relies 
upon  the  estoppel.'  While  such  intention  must  sometimes 
exist,  and  while  the  proposition  is  therefore  true  in  cer- 
tain cases,  it  would  be  very  misleading  as  a  universal  rule. 
In  many  familiar  species  of  estoppels  no  intention  can 
possibly  exist.  The  requisite,  as  applicable  to  them,  is 
well  expressed  by  an  eminent  judge  in  a  recent  decision: 
It  is  not  "  necessary,  in  equity,  that  the  intention  should 
be  to  deceive  any  particular  individual  or  individuals. 
If  the  representations  are  such,  and  made  in  such  circum- 
stances, that  all  persons  interested  in  the  subject  have  the 
right  to  rely  on  them  as  true,  their  truth  cannot  be  denied 
by  the  party  that  has  made  them,  against  any  one  who  has 

trusted  to  them  and  acted  on  them Where  a  man 

makes  a  statement  in  a  manner  and  under  circumstances 
such  as  he  must  understand  those  who  heard  the  statement 
would  believe  to  be  true,  and  if  they  had  an  interest  in 
the  subject-matter  would  act  on  as  true;  and  one,  using 
his  own  means  of  knowledge  with  due  diligence,  acts  on 
the  statement  as  true,  the  party  who  makes  the  statement 
cannot  show  that  his  representation  was  false,  to  the  injury 
of  the  party  who  believed  it  to  be  true,  and  acted  on  it  as 
such;  that  he  will  be  liable  for  the  natural  consequences 
of  his  representation,  and  cannot  be  heard  to  say  that  the 
party  actually  injured  was  not  the  one  he  meant  should 

>  Turner   v.    Coffin,   12   Allen,  401;  Clark  v.  Coolidge,  8   Kan.   189,   195; 

Pierce  v.  Andrews,  6  Cush.  4;  52  Am.  Stevens  v.  Dennett,  51  N.  H.  324,  333; 

Dec.  748;  Kuhl  v.  Mayor  etc.,  23  N.  McCabe  v.  Raney,  32  Ind.  309;  Simp- 

J.   Eq.  84,  85;  Wilcox  v.  Howell,  44  son  v.  Pearson,  31  Ind.  1,  5;  99  Am. 

N.  Y.  398;  Brown  v.  Bowen,  30  N.  Y.  Dec.  577;  Eaton  v.  New  Eng.  Tel.  Co., 

519;   86   Am.    Dec.   406;   Holdane   v.  68  Me.  63;  Southard  v.  Sutton,  68  Me. 

Cold  Spring,  21  N.  Y.  474;  Carroll  v.  575. 
Manchester  etc.  R.  R.,  Ill  Mass.   I; 


1131  CONCERNING    EQUITABLE    ESTOPPEL.  §  811 

act."^  This  mode  of  stating  the  doctrine  may  in  equity- 
apply  to  every  kind  of  estoppel,  even  to  those  by  which  an 
owner  of  land  is  precluded  from  asserting  his  legal  title. 
There  is,  however,  a  large  class  in  which  not  only  an  in- 
tention directed  towards  a  particular  individual  or  towards 
individuals  in  general  is  absent,  but  a  contrary  intention 
that  the  party's  representation  is  not  to  be  acted  upon  at 
all  may  be  present.  The  class  includes  all  those  instances 
where  an  owner  of  things  in  action  or  of  chattels  has, 
either  designedly  or  negligently,  clothed  a  third  person 
with  the  apparent  title  and  power  of  disposition,  and  this 
person  transfers  them  to  a  purchaser  in  good  faith  who 
relies  upon  the  apparent  power  of  sale  they  conferred 
upon  him.  The  original  owner  is  estopped  by  his  conduct 
from  asserting  his  right  of  property,  and  the  bona  fide 
purchaser  acquires  a  perfect  title  by  estoppel,  in  direct 
contravention  of  the  rules  of  law  which  would  otherwise 
control.  It  is  a  complete  misconception  to  say  that  these 
instances  do  not  depend  upon  the  doctrine  of  equitable 
estoppel,  but  upon  that  of  negligence.  On  the  contrary, 
they  have  been  uniformly  rested  by  courts  upon  the  theory 
of  estoppel,  and  are  among  the  strongest  and  most  dis- 
tinctive illustrations  of  the  efficacy  of  that  theory.  In 
fact,  it  is  only  by  means  of  the  doctrine  of  estoppel  that  the 
original  owner  can  be  divested  of  his  title  in  opposition 
to  the  rules  of  the  law  concerning  the  transfer  and  acqui- 

1  Horn  V.  Cole,  51  N.  H.  287;  12  Bahia  &  S.  F.  R'y,  L.  R.  3  Q.  B.  584, 
Am.  Rep.  Ill,  per  Perley,  C.  J.  The  per  Cockburn,  C.  J.  As  illustrations, 
same  doctrine  was  laid  down  in  Cor-  see  Young  v.  Grote,  4  Bing.  253;  Bank 
nish  V.  Abington,  4  Hurl.  &  N.  549,  by  of  Ireland  v.  Evans,  5  H.  L.  Cas.  389; 
Pollock,  0.  B. :  "If  any  person,  by  a  Swan  v.  Br.  and  Anstr.  Co.,  7  Com.  B., 
course  of  conduct  or  by  actual  expres-  N.  S.,  400;  7  Hurl.  &  N.  603;  2  Hurl, 
sions,  so  conducts  himself  that  another  &  C.  175;  Halifax  Guardians  v.  Wheel- 
may  reasonably  infer  the  existence  of  wright,  L.  R.  10  Ex.  183;  Carr  v. 
an  agreement  or  license,  whether  the  London  &  N.  W.  R'y>  L.  R.  10  Com. 
party  intends  that  he  should  do  so  or  P.  307,  316,  317;  Anderson  v.  Arm- 
not,  it  has  the  efifect  that  the  party  stead,  69  111.  452,  454;  Rice  v.  Bunce, 
using  that  language,  or  who  has  so  49  Mo.  231,  234;  8  Am.  Rep.  129,  per 
conducted  himself,  cannot  afterwards  Wagner,  J.;  Mut.  Life  Ins.  Co.  v. 
gainsay  the  reasonable  inference  to  be  Norris,  31  N.  J.  Eq.  583,  585;  Mann- 
drawn  from  his  words  or  conduct."  facturers'andTraders'Bank  v.  Hazard, 
To  the  same  effect  are  Freeman  v.  30  N.  Y.  226,  230;  [Trustees  etc.  v. 
Cooke,  2  Ex.  654,  per  Parke,  B,;  How-  Smith,  118  N.  Y.  634j  Hodge  v.  Lad- 
ard  V.  Hudson,  2  El.  &  B.   1;   In  re  lum,  45  Minn.  290.] 


§  812  EQUITY   JURISPRUDENCE.  1132 

sition  of  property.  There  is  no  rule  of  law  or  of  equity  by 
which  an  owner,  through  mere  negligence,  can  be  divested  of 
his  legal  title  to  things  in  action  or  chattels}  The  cases 
where  the  particular  intention  mentioned  in  the  general 
rule  seems  to  be  the  most  essential  are  those  in  which 
an  owner  or  one  having  an  interest  in  property,  especially 
in  land,  deals  concerning  it  directly  with  a  third  person, 
and  by  his  words,  acts,  or  silence,  when  he  ought  to  speak, 
makes  representations  with  respect  to  his  title  or  interest. 
In  order  to  be  estopped  from  asserting  his  title  or  interest, 
he  must  intend  that  his  representation  should  be  acted 
upon  by  the  party  influenced  by  his  co»duct.^ 

§  812.  Same.  The  Conduct  must  be  Relied  upon,  and 
be  an  Inducement  for  the  Other  Party  to  Act.  —  What- 
ever may  be  the  real  intention  of  the  party  making  the 
representation,  it  is  absolutely  essential  that  this  repre- 
sentation, whether  consisting  of  words,  acts,  or  silence, 
should  be  believed  and  relied  upon  as  the  inducement 
for  action  by  the  party  who  claims  the  benefit  of  the 
estoppel,  and  that,  so  relying  upon  it  and  induced  by 
it,  he  should  take  some  action.  The  cases  all  agree  that 
there  can  be  no  estoppel,  unless  the  party  who  alleges  it 
relied  upon  the  representation,  was  induced  to  act  by  it, 
and  thus  relying   and  induced,  did   take  some  action.' 

*  Examples  of  this  rule  as  applied  to  English  cases  there  cited,  and  also  ia 

certificates  of  stock  and  other  things  the  last  preceding  note, 

in  action:  McNeil  v.  Tenth  Nat.  Bank,  *  See  ante,  §  807,  and  cases  cited  in 

46  N.  Y.  325;  7  Am.  Rep.  341;  Moore  note. 

V.  Metropolitan  Bank,  55  N.  Y.  41;  14  *  Howard  v.  Hudson,  2  El.  &  B.  1; 

Am.  Rep.  173;  Combes  v.  Chandler,  33  Curnen  v.  Mayor,  79  N.  Y.  511,  514; 

Ohio   St.    178;    and   see  ante,    §   710,  Waring   v.    Somborn,  82  N.  Y,  604; 

where  these  and  other  cases  are  fully  Grissler  v.  Powers,  81  N.  Y.  57;  37 

Btated.     As  applied  to  other  property:  Am.  Rep.   475;   Kent  v.   Quicksilver 

Barnard  v.  Campbell,  55  N.  Y.  456,  M.  Co.,  78  N.  Y.  159,  187;  Hurd  v. 

462;     Manufacturers'     and     Traders'  Kelly,  78  N.  Y.  588,  597;  34  Am.  Rep, 

Bank  v.  Hazard,  30  N.  Y.  226,  230;  567;  Barnard  v.  Campbell,  55  N.  Y. 

Anderson   v.   Armstead,   69   111.   452,  456,462;  Malloney  v.  Horan,  49  N.  Y. 

454;  Hamlin  v.  Sears,  82  N.  Y.  327.  Ill,  115;  10  Am.  Rep.  335;  Jewett  v. 

This  class  of  estoppels  is  virtually  the  Miller,    10  N.   Y.   402,  406;  61  Am. 

same  as  that  described  by  Sir  James  Dec.  751;  Manufacturers'  etc.  Bank  v, 

Fitzjames     Stephen,    in    the    second  Hazard,  30  N.  Y.  226,  230;  Van  Deu- 

paragraph    of     his     general     formula  sen  v.  Sweet,   51  N.  Y.  378;  Daven- 

quoted  ante,  in  note  under  §  804,  ex-  port    v.    Turpin,    43    Cal.    597,    602; 

cept  that  negligence  of  the  owner  is  not  Wheelock  v.  Town  of  Hardwick,  48 

always  a  necessary  element.     See  the  Vt.  19;  St.  Jo.  Mfg.  Co.  ▼.  Daggett^ 


1133  CONCERNING    EQUITABLE    ESTOPPEL.  §  813 

Finally,  this  action  must  be  of  such  a  nature  tliat  it 
would  have  altered  the  legal  position  of  the  party  for  the 
worse,  unless  the  estoppel  is  enforced.  He  must  have 
placed  himself  in  such  a  situation  that  he  would  suffer  a 
loss  as  the  consequence  of  his  action,  if  the  other  party 
were  allowed  to  deny  the  truth  of  his  representation,  or 
repudiate  the  effects  of  his  conduct.'  Although  this 
action  is  usually  affirmative,  yet  such  affirmative  action 
is  not  indispensable.  It  is  enough  if  the  party  has  been 
induced  to  refrain  from  using  such  means  or  taking 
such  action  as  lay  in  his  power,  by  which  he  might  have 
retrieved  his  position  and  saved  himself  from  loss.^ 

§  813.  Operation  and  Extent  of  the  Estoppel.  —  The 
measure  of  the  operation  of  an  estoppel  is  the  extent  of 
the  representation  made  by  one  party  and  acted  on  by 
the  other.  The  estoppel  is  commensurate  with  the  thing 
represented,  and  operates  to  put  the  party  entitled  to  its 
benefit  in  the  same  position  as  if  the  thing  represented 
were  true.'  With  respect  to  the  persons  who  are  bound 
by  or  who  may  claim  the  benefit  of  the  estoppel,  it  oper- 
ates between  the  immediate  parties  and  their  privies, 
whether  by  blood,  by  estate,  or  by  contract.     A  stranger, 

84  111.  556;  Dorlarque  v.  Cress,  71  111.  mings  v.  Webster,  43  Me.  192;  Holden 

380;   Anderson   v.   Armstead,  .69   111.  v.  Torrey,  31  Vt.  690;  Bitting's  Ap- 

452;  Carroll  V.  Manchester  etc.  R.  R.,  peal,  17  Pa.   St.  211;  Cole  v.  Bolard, 

111  Mass.  1;  Voorhees  v.  Olmstead,  3  22  Pa.  St.  431;  Newman  v.  Edwards, 

Hun,  744;  Horn  v.  Cole,  51  N.  H,  287;  34   Pa.   St.  32;  Tinan   v.  Keiffer,  31 

12  Am.  Rep.  Ill;  Stevens  v.  Dennett,  Ala.  136;  Railroad  Co.  v.  Dubois,  12 

51  N.  H.  324,  333;  Clark  v.  Coolidge,  Wall.  47;  East  v.  Dolihite,  72  N.  C. 

8  Kan.   189,  195;  Kuhl  v.  Mayor,  23  562;  [Nell  v.  Dayton,  43  Minn.  242.] 
N.  J.  Eq.  84;  Rice  v.  Bunce,  49  Mo.         *  Continental  Bank  v.  Bank  of  Com- 

231,  234;   8  Am.   Rep.   129;  State   v.  mon wealth,  50  N.   Y.  575,  and  cases 

Laies,  52  Mo.  396;  McCabe  v.  P^aney,  cited  by  Folger,  J. ;  Voorhees  v.  01m- 

32  Ind.  309;  Simp.son  v.   Pearson,  31  stead,  3  Hun,  744.     [See  also  Wein- 

Ind.  1,  5;  99  Am.  Dec.  577;  McKinzie  stein  v.  Nat.  Bank,  69  Tex.  38;  5  Am. 

V.  Steele,  18  Ohio  St.  38,  41;  Eaton  v.  St.  Rep,  23.] 

N.  E.  Tel.  Co.,  68  Me.  63;  Southard  v.         ^  Grissler  v.  Powers,  81  N.  Y.  57; 

Sutton,  68  Me.  575;  Graves  v.  Blon-  37  Am.  Rep.  475,  per   Andrew.s,  J.; 

dell.  70  Me.   190;  Mut.  Life  Ins.  Co.  Tilton  v.  Nelson,  27  Barb.  595;  Pick- 

V.  Norris,  31   N.   J.  Eq.  583;  Eitel  v.  ett  v.  Merchants'  Nat.  Bank,  32  Ark. 

Bracken,  38  N.  Y.  Snp.  Ct.  7;  [Great  346;    Murray  v.    Jones,    50    Ga.  109; 

West.  Min.  Co.  v.  Woodmas,  12  CoL  Campbell  v.  Nichols,  33  N.  J.  L.  81; 

46;  13  Am,  St.  Rep,  204.]  Philadelphia  v,  Williamson,  10  Phila. 

*  Cases  cited  in  last  note;  also  For-  170;  Dunston  v.  Paterson,  2  Com,  B., 

eyth  V.  Day,  46  Me.  176,  197;  Cum-  N.  S.,  495. 


§  814  EQUITY    JURISPRUDENCE.  1134 

who  is  not  a  party  nor  a  privy,  can  neither  be  "bound  nor 
aided.^  Since  the  whole  doctrine  is  a  creature  of  equity 
and  governed  by  equitable  principles,  it  necessarily  fol- 
lows that  the  party  who  claims  the  benefit  of  an  estoppel 
must  not  only  have  been  free  from  fraud  in  the  transac- 
tion, but  must  have  acted  with  good  faith  and  reasonable 
diligence;  otherwise  no  equity  will  arise  in  his  favor.^ 

§  814.  Same.  As  Applied  to  Married  Women.  —  Upon 
the  question  how  far  the  doctrine  of  equitable  estoppel 
by  conduct  applies  to  married  women,  there  is  some  con- 
flict among  the  decisions.  The  tendency  of  modern  au- 
thority, however,  is  strongly  towards  the  enforcement  of 
the  estoppel  against  married  women  as  against  persons 
sui  juris,  with  little  or  no  limitation  on  account  of  their 
disability.  This  is  plainly  so  in  states  where  the  legisla- 
tion has  freed  their  property  from  all  interest  or  control 
of  their  husbands,  and  has  clothed  them  with  partial  or 
complete  capacity  to  deal  with  it  as  though  they  were 
single.^  Even  independently  of  this  legislation  there  is  a 
decided  preponderance  of  authority  sustaining  the  estop- 
pel against  her,  either  when  she  is  attempting  to  enforce 
an  alleged  right  or  to  maintain  a  defense.*     There  are, 

>  Simpson  v.  Pearson,  31  Ind,  1;  99  Fisher,    77    N.    C.    437;    Godfrey   v 

Am.    Dec.    577,    per    Elliott,    C.    J.;  Thornton,  46  Wis.  677;  [Wilder  v.  Wil- 

Eaton  V.  New   England  Tel,.  Co.,  68  der,  89  Ala.  414;  18  Am.  St.  Rep.  130; 

Me.  63;  Southard  v.   Sutton,  68  Me.  Noel  v.  Kinney,  106  N.  Y.  74;  60  Am, 

575;   Wright   v.   Hazen,  24  Vt.    143;  Rep.    423;    Dobbin    v.    Cordiner,    41 

Parker  v.   Crittenden,  37  Conn.    148;  Minn.  165;  16  Am.  St.  Rep.  683;  and 

McCravey  v.  Remson,  19  Ala.  430;  54  see  Galbraith  v.  Lunsford,  87  Tenn. 

Am.  Dec.  194;  Kinnear  v.  Mackey,  85  89;]  and  even  she  may  thus  be  estopped 

111.  96;  Murray  v.   Sells,  53  Ga.  257;  by  the  acts  of  her   husband:   McCaa 

Peters  v.  Jones,  35  Iowa,  512;  Thistle  v.  Woolf,  42  Ala.  389;  Bodine  v.  Kil- 

V.  Buford.  50  Mo.  278;  Gould  v.  West,  leen,  53  N.  Y.  93;  Treman  v.  Allen, 

32  Tex.  338.  15  Hun,  4;  Hockett  v.  Bailey,  86  111. 

*  Thorne  v.  Mosher,  20  N.  J.  Eq.  74;  but  see,  for  circumstances  in  which 

257;  Royce  v,  Watrous,  73  N.  Y.  597;  she    has    been    held     not     estopped, 

Wilcox  V.  Howell,  44  N.  Y.  398;  Moore  Oglesby  Coal  Co.  v.  Pasco,  79  111.  164; 

V.  Bowman,  47  N.  H.  494.  Upshaw  v.  Gibson,  53  Miss.  341;  Mc- 

'  Wherever  statutes  have  gone  fur-  Beth  v.  Trabue,  69  Mo.  642. 
ther,  and  enabled  married  women  to  *  This  is  certainly  the  effect  of  mod- 
enter  into  contracts  as  though  single,  ern  English  decisions:  Stafford  v. 
there  is,  of  course,  no  reason  why  the  Stafford,  1  De  Gex  &  J.  193;  Skottowe 
doctrine  of  estoppel  should  not  apply  v.  Williams,  7  Jur.,  N.  S.,  118;  Jones 
to  them  without  any  limitation:  Din-  v.  Higgens,  L.  R.  2  Eq.  538,  544; 
gens  V,  Clancey,  67  Barb.  566;  Fryer  Jones  v.  Frost,  L.  R.  7  Ch.  773,  776; 
V.  Rishell,  84  Pa.  St.  521;  Towles  v.  Bigelow  v.  Foss,  59  Me.  162;  Frazier 


1135  CONCERNING    EQUITABLE    ESTOPPEL.  §  815 

however,  decisions  which  hold,  in  effect,  that  since  a 
married  woman  cannot  be  directly  bound  by  her  con- 
tracts or  conveyances,  even  when  accompanied  with 
fraud,  so  she  cannot  be  indirectly  bound  through  means 
of  an  estoppel;  and  the  operation  of  the  estoppel  against 
her  must  be  confined  to  cases  where  she  is  attempting 
affirmatively  to  enforce  a  right  inconsistent  with  her  pre- 
vious conduct,  upon  which  the  other  party  has  relied.* 
These  decisions  seem  to  be  in  opposition  to  the  general 
current  of  authority. 

§  815.  Same.  As  Applied  to  Infants. — The  disability 
of  infancy  seems  to  have  limited  the  operation  of  the 
equitable  estoppel  more  than  that  of  coverture.  Since 
an  infant  is  not  directly  bound  by  his  ordinary  contracts, 
unless  ratified  after  he  becomes  of  age,  so  obligations  in  the 
nature  of  contract  will  not  be  indirectly  enforced  against 
him  by  means  of  an  estoppel  created  by  his  conduct 
while  still  a  minor.  On  the  other  hand,  an  equitable 
estoppel  arising  from  his  conduct  may  be  interposed, 
with  the  same  effect  as  though  he  were  adult,  to  pre- 
vent him  from  affirmatively  asserting  a  right  of  prop- 
erty or  of  contract  in  contravention  of  his  conduct  upon 
which  the  other  party  has  relied  and  been  induced  to 
act.' 

V.  Gelston,  35  Md.  298;  Brinkerhoff  86  Am.  Dec.  606;   88  Am.  Dee.  472. 

V.  Brinkerhoff,  23  N.  J.  Eq.  477,  483;  In  Lowell  v.  Daniels,  2  Gray,  161,  61 

Carpenter  v.  Carpenter,  25  N.  J.  Eq.  Am.   Dec.   448,  this  view  was  main- 

194;    Drake   v.   Glover,  30   Ala.  382;  tained   with  great  force  and  ability. 

Connolly  v.  Branstler,  3  Bush,  702;  96  [See  also  Bank  of  America  v.   Banks, 

Am.    Dec.    278;   Couch   v.    Sutton,   1  101  U.  S.  247;  Innis  v.  Templeton,  95 

Grant  Cas.  114;  McCulIough  v.  Wil-  Pa.  St.  262;  40  Am.  Rep.  643.] 
son,  21  Pa.  St.  436;  and  see  the  cases         '  Dorlarque   v.    Cress,    71    111.    380; 

cited    in   the   last  note;   [also  Brown  McBeth  v.  Trauhe,  69  Mo.  642;  Mont- 

V.  Thomson,  31  S.  C.  436;  17  Am.  St.  gomery  v.  Gordon,  51   Ala.   377;   Up- 

Rep.   40;   Boyd  v.   Turpin,   94  N.  C.  shaw  v.  Gibson,  53  Miss.  341;  Handy 

137;  55  Am.  Rep.  597.]  v.  Noonan,  51  Miss.   166;  Padfield  v. 

'  Lowell  V.  Daniels,  2  Gray,  161;  61  Pierce,  72  111.  500;  Wilkinson  v.  Fil- 

Am.  Dec.  448;  Merriam  v,  Boston  R.  by,  24  Wis.  441;  Wilie  v.  Brooks,  45 

R.,  117  Mass.  241;  Bemis  v.  Call,  10  Miss.  542;  Drake  v.  Wise,  36  Iowa, 

Allen,  512;  Oglesby  Coal  Co.  v.  Pasco,  476;  Tantum  v.  Coleman,  26  N.  J.  Eq. 

79  111.  164;  Kane  Co.   v.  Herrington,  128;  Overton  v.  Banister,  3  Hare,  503: 

50  111.  232;  Williams  v.  Baker,  71  Pa,  Ex  parte  Unity  etc.  Ass'n,  3  De  Gex 

St.  476;  Glidden  v.  Strupler,  52  Pa.  St.  &  J.  63;  Nelson  v.  Stocker,  4  De  Gex 

400;  Rumfelt  v.  Clemens,  46  Pa.  St.  &  J.  458;  Esron  v.  Nicholas,  1  DeGex 

455;  Keen  v.  Hartman,  48  Pa.  St.  497;  &  S.  118;  Stikeman  v.  Dawson,  1  De 


§§  816,  817  EQUITY    JURISrRUDENCE.  113& 

§816.  Important  Applications  in  Equity  —  Acquies- 
cence.—  In  addition  to  the  foregoing  discussion  of  prin- 
ciples, I  shall  state  very  briefly  some  of  the  applications 
which  have  most  frequently  been  made  by  courts  of 
equity.  Acquiescence  is  an  important  factor  in  deter- 
mining equitable  rights  and  remedies,  in  obedience  ta 
the  maxims.  He  who  seeks  equity  must  do  equity,  and 
He  who  comes  into  equity  must  come  with  clean  hands. 
Even  when  it  does  not  work  a  true  estoppel  upon  rights 
of  property  or  of  contract,  it  may  operate  in  analogy  to 
estoppel  —  may  produce  a  quasi  estoppel  —  upon  the 
rights  of  remedy.  These  two  effects  will  be  described 
separately. 

§  817.  Acquiescence  as  Preventing  Rights  of  Remedy. 
—  Acquiescence  in  the  wrongful  conduct  of  another  by 
which  one's  rights  are  invaded  may  often  operate,  upon 
the  principles  of  and  in  analogy  to  estoppel,  to  preclude 
the  injured  party  from  obtaining  many  distinctively  equi- 
table remedies  to  which  he  would  otherwise  be  entitled. 
This  form  of  quasi  estoppel  does  not  cut  off  the  party's 
title,  nor  his  remedy  at  law;  it  simply  bars  his  right  ta 
equitable  relief,  and  leaves  him  to  his  legal  actions  alone. 
In  order  that  this  effect  may  be  produced,  the  acquies- 
cence must  be  with  knowledge  of  the  wrongful  acts  them- 
selves, and  of  their  injurious  consequences;  it  must  be 
voluntary,  not  the  result  of  accident,  nor  of  causes  ren- 
dering it  a  physical,  legal,  or  moral  necessity,  and  it  must 
last  for  an  unreasonable  length  of  time,  so  that  it  will  be 
inequitable  even  to  the  wrong-doer  to  enforce  the  peculiar 
remedies  of  equity  against  him,  after  he  has  been  suffered 
to  go  on  unmolested,  and  his  conduct  apparently  acqui- 
esced in.  It  follows  that  what  will  amount  to  a  sufficient 
acquiescence  in  any  particular  case  must  largely  depend 

Gex  &  S.  90;  Wright  v.  Snowe,  2  De  Spencer,    67    Mich.    89;    Kastner   r. 

Gex  &  S.  321;  Thompson  v.  Simpson,  Pibilinski,  96  Ind.   229;    Wieland  r. 

2  Jones  &  L.  110.     [See  also  Hayes  v.  Kobick,  110  111.  16;  51  Am.  Rep.  676; 

Parker,  41   N.   J.    Eq.    632;   Sims   v.  Burke  v.  Adams,  80  Mo.  504;  50  Am. 

Everhardt,  102  U.  S.  300;  Rundle  v.  Rep.  510.] 


1137  CONCERNING    EQUITABLE    ESTOPPEL.  §  817 

upon  its  own  special  circumstances.  The  equitable  rem- 
edy to  which  this  qicasi  estoppel  by  acquiescence  most 
frequently  applies  is  that  of  injunction,  preliminary  or 
final,  when  sought  by  a  proprietor  to  restrain  a  defendant 
from  interference  with  easements,  from  committing  nui- 
sances, from  trespasses,  or  other  like  acts  in  derogation  of 
the  plaintiff's  proprietary  rights.*  This  effect  of  delay  is 
subject  to  the  important  limitation  that  it  is  properly  con- 
fined to  claims  for  purely  equitable  remedies  to  which  the 
party  has  no  strict  legal  right.  Where  an  injunction  is 
asked  in  support  of  a  strict  legal  right,  the  party  is  enti- 
tled to  it  if  his  legal  right  is  established;  mere  delay  and 
acquiescence  will  not,  therefore,  defeat  the  remedy,  unless 
it  has  continued  so  long  as  to  defeat  the  right  itself.^  The 
same  rule  applies,  and  for  the  same  reasons,  to  a  party 
seeking  purely  equitable  relief  against  fraud,  such  as  the 
surrender  or  cancellation  of  securities,  the  annulling  of 
a  transaction,  and  the  like.  Upon  obtaining  knowledge 
of  the  facts,  he  should  commence  the  proceedings  for  re- 
lief as  soon  as  reasonably  possible.  Acquiescence  con- 
sisting of  unnecessary  delay  after  such -knowledge  will 
defeat  the  equitable  relief.' 

'  See  vol.  1,  §§  418,  419.  and  cases  Attorney-General  v.  Lunatic  Asylum, 

there  cited,  [also  §  1359.]     The  follow-  L.  R.  4  Ch.  146;  Lee  v.  Haley,  L.  R.  5 

ing  cases  furnish  illustrations  of  the  Ch.  155;  Gaunt  v.  Fynney,  L.  R.  8Ch. 

rule  and   of   its   limitations,  when   it  8;  Bassett  v.  Salisbury  Mfg.  Co.,  47  N. 

does   or   does   not   operate:    Coles   v.  H.  426,  439;  Odlin  v.  Gove,  41  N.  H. 

Sims,  5   De   Gex,  M.    &  G.   1;  Great  4IJ5;    77    Am.  Dec.  773;   Peabody   v. 

Western   R'y  v.   Oxford   etc.    R'y,   3  Flint,  6  Allen,  52,  57;  Fuller  v.  Mel- 

De  Gex,  M.  &  G.  341;  Attornev-Gen-  rose,   1    Allen,    160;  Tash  v.   Adams, 

eral   v.  Sheffield  Gas  Co.,  3   De  Gex,  10  Cush.  252;  Briggs  v.  Smith,  5  R.  L 

M.  &  G.  304;  Child  v.  Douglas,  5  De  213;  Grey  v.  Ohio  etc.  R.  R.,  1   Grant 

Gex,   M.  &  G.   739;  Graham  v.  Birk-  Cas.  412;  Little  v.  Price,    1    Md.  Ch. 

enhead  etc.  R'y,  2   Macn.  &  G.   146;  182;  Burden  v.  Stein,  27  Ala.  104;  62 

Buxton  V.  James,  5   De  Gex  &  S.  80;  Am.   Dec.  758;  Pillow  v.   Thompson, 

Attorney-Generalv.Eastlake,  11  Hare.  20  Tex.  206;  Borland  v.  Thornton,  12 

205,  228;  17  Jur.  801;  Wood  v.  Sut-  Cal.  440;  Phelps  v.    Peabody,   7   Cal. 

cliffe,    2   Sim.,    N.  S.,  163;   Rochdale  50;  Wilson  v.  Cobb,  28  N.  J.  Eq.  177; 

Canal  Co.  v.  King,  2  Sim.,  N.  S.,  78;  [Calhoun   v.  Millard,    121    N.  Y.  69; 

Cooper  v.  Hubbuck,  .30  Beav.   160;  7  Powers 's  Appeal,   125  Pa.  St.  175;  11 

Jur.,  N.  S.,  457;  Bankart  v.  Houghton,  Am.  St.  Rep.  882.] 

27  Beav.  425;  Gordon  v.  Cheltenham  -  FuUwood   v.    Fullwood,    L.    R.    9 

R'y,  5   Beav.    229,    237;    Mitchell   v.  Ch.  Div.  176;  and  see  Gaunt  v.  Fyn- 

Steward,  L.   R.  1    Eq.   541;   Western  ney,  L.  R.  8  Ch.  8. 

v.  McDermot,  L.  R.  1  Eq.  499;  2  Ch.  ^  Jennings  v.  Broughton,  5  De  Gex, 

72;   Senior   v.  Pawson,    L.  R.  3   Eq.  M.  &  G.  126:  Farebrother  v.  Gibson, 

330;  Smith  v.  Smith,  L.  R.  20  Eq.  500;  1  De  Gex  &  J.  602;  Kempson  v.  Ash* 
2  Eq.  Jue.  — 72 


I  818  EQUITY   JURISPRUDENCE.  1138 

§  818.  Acquiescence  as  an  Estoppel  to  Rights  of  Prop- 
erty or  of  Contract.  —  Acquiescence  consisting  of  mere 
silence  may  also  operate  as  a  true  estoppel  in  equity  to 
preclude  a  party  from  asserting  legal  title  and  rights  of 
property,  real  or  personal,  or  rights  of  contract.  The 
requisites  of  such  estoppel  have  been  described.  A 
fraudulent  intention  to  deceive  or  mislead  is  not  essen- 
tial. All  instances  of  this  class,  in  equity,  rest  upon  the 
principle:  If  one  maintain  silence  when  in  conscience 
he  ought  to  speak,  equity  will  debar  him  from  speaking 
when  in  conscience  he  ought  to  remain  silent.*  A  most 
important  application  includes  all  cases  where  an  owner 
of  property.  A,  stands  by  and  knowingly  permits  another 
person,  B,  to  deal  with  the  property  as  though  it  were 
his,  or  as  though  he  were  rightfully  dealing  with  it,  with- 
out interposing  any  objection,  as  by  expending  money 
upon  it,  making  improvements,  erecting  buildings,  and 
the  like.  Of  course,  it  is  essential  that  B  should  be  act- 
ing in  ignorance  of  the  real  condition  of  the  title,  and  in 
the  supposition  that  he  was  rightful  in  his  own  dealing.' 

bee,  L.  R.  10  Ch.  15;  Turner  v.  Collins,  6  Jur.,  N.  S.,  1320;  Somersetshire  etc. 

L.  R.  7  Ch.  329;  Payne  v.  Evens,  L.  R.  Co.  v.  Harcourt,  2  De  Gex  &  J.  696; 

18   Eq.  356;   Peek  v.  Gurney,  L.   R.  Duke  of  Beaufort  v.  Patrick,  17  Beav. 

13  Eq.  79;  Kent  v.  Freehold  etc.  Co.,  60;    Schaefer   v.    Gildea,    3   Col.     15; 

L.  R.  3  Ch.  493;  Oakes  v.  Turquand,  Mich.    etc.    Co.   v.    Parcell,   38  Mich. 

L.  R.  2  H.  L.  325;  Parks  v.  Evansville  475;  Cumberland  V.  R.  R,  v.  McLan- 

R.  R..  23  Ind.  567;  Catling  v.  Newell,  ahau,  59  Pa.  St.  23;  Martin  v.  Righter, 

9  Ind.  572;  [Banner  v.  Moulton,    138  10  N.  J.  Eq.  510;  Blackwood  v.  Jones, 

U.  S.  486;  and   see   §§  897,  917,  965,  4  Jones  Eq.  54;  Donovan  v.  Fireman'a 

1376,  note.]     The  same   rule   may  be  Ins.  Co.,   30  Md.    155;  Evansville   v. 

applied   to   other   equitable   remedies  Pfisterer,  34  Ind.  36;  7  Am.  Rep.  214; 

under  analogoiis   circumstances:     See  Millingar   v.    Sorg,    61    Pa.    St.    471; 

Reimers  V.  Druce,  23  Beav.  145;  Hicks  Raritan  Water  P.  Co.   v.  Veghte,  21 

V.    Hunt,    Johns.     372;    Chapman   v.  N.   J.   Eq.    463;  Brooks   v.  Curtis,   4 

Railroad  Co.,  6  Ohio  St.  119;  Hatha-  Lana.   283;   Vicksburg  etc.   R.   R.   v. 

way  V.  Noble,  55  N.  H.  508;  and  see  Ragsdale,    54   Miss.   200;   Broyles   v. 

cases  cited  post,  under  §  819.  Nowlen,  59  Tenn.  191;  Hart  v.  Giles, 

'  Mich.  etc.  Co.  v.  Parcell,  38  Mich.  67  Mo.   175;  Hayes  v.  Livingston,  .34 

475,  480,  per  Cooley,  J.  Mich.  384;  22  Am.  Rep.  533;  Ford  v. 

^  Crook  V.  Corporation  of  Seaford,  L.  Loomis,  33  Mich.   121;  [Alabama  etc. 

R.  6  Ch.  551;  L.  R.  10  Eq.  678;  Thorn-  R.  R.  Co.  v.  S.  &  N.  A.  R.  R.  Co.,  84 

ton  V.  Ramsdeu,  4  Giff.  519;  Nunn  v.  Ala.  570;  5  Am.   St.   Rep.  401;  Bans- 

Fabian,  11  Jur.,  N.  S.,  868;  Rennie  v.  man  v.  Kelley,  38  Minn.   197;  8  Am. 

Young,  2  De  Gex  &  J.   136;  Bankart  St.   Rep.  661.     See  also  §§  731,  1241, 

V.  Tennant,  L.  R.  10  Eq.  141;  Davies  v.  note.] 
Sear,  L.  R.  7  Eq.  427;  Davies  v.  Davies, 


1139  CONCERNING    EQUITABLE    ESTOPPEL.       §§  819,  820 

§  819.  Estoppel  as  Applied  to  Corporations  and  Stock- 
holders,—  This  species  of  estoppel,  as  well  as  other  kinds 
which  consist  of  affirmative  acts  or  representations,  ap- 
plies to  corporations  in  their  dealings  with  third  persons, 
and  with  their  own  stockholders.*  Thus  a  corporation 
may  be  estopped  by  statements  contained  in  a  prospectus 
or  circular,  on  behalf  of  a  stockholder  who  has  purchased 
shares  upon  the  faith  of  such  statements.^  Conversely, 
stockholders  may  be  estopped  by  their  acquiescence  from 
objecting  to  the  acts  of  the  corporation  which  are  not 
illegal  nor  mala  prohibita,  but  ultra  vires,  when  the  rights 
of  innocent  third  persons  have  intervened.  Express  as- 
sent is  not  necessary  to  estop  the  stockholders;  "when 
they  neglect  to  promptly  and  actively  condemn  the  un- 
authorized act,  and  to  seek  judicial  relief  after  knowledge 
of  its  being  done,  they  will  be  deemed  to  have  acquiesced, 
and  will  be  estopped  as  against  innocent  third  persons."' 

§  820.  Other  Instances  of  Acquiescence.  —  It  is  in  con- 
formity with  the  same  principle  that  parties  who  have 
long  acquiesced  in  settlements  of  accounts  or  of  other 
mutual  dealings  are  not  permitted  to  reopen  or  disturb 
them;  and  this  is  true,  even  though  the  parties  stood  in 
confidential  relations  towards  each  other,  as  trustee  and 
cestui  que  trust,  principal  and  agent,  and  the  like,  and  the 
settlement  embraced  matters  growing  out  of  such  rela- 
tions.*    Another  familiar  instance  of  the  estoppel  arises 

*  Curnen  v.  Mayor  etc.,  79  N.  Y.  769;  Brotherhood'a  Case,  31  Beav.  365, 
511,  514;  Continental  Bank  v.  Bank  In  re  Magdalena  etc.  Co.,  6  Jur.,  N.  S.; 
of  the  Commonwealth,  50  N.  Y.  575;  975;  and  see  Sharpley  v.  Louth  etc. 
Wilson  V.  West  Hartlepool  R'y.  11  R'y,  L.  R.  2  Ch.  Div.  663,  681; 
Jur.,  N.  S.,  124;  Hill  v.  South  Staf-  Scholey  v.  Central  etc.  Co.,  L.  R.  9 
ford  R'y,  U  Jur.,  N.  S.,  192;  Ins.  Co.  Eq.  266,  note;  Ashley's  Case,  L.  R.  9 
V.  Eggleston,  96  U.  S.  572.  Eq.   263;  Denton  v.   Macniel,  L.  R.  2 

*  New  Brunswick  etc.  Co.  v.  Mug-  Eq.  352;  Hallows  v.  Fernie,  L.  R.  3 
geridge,  7  Jur.,  N.  S.,  132.  And  it  is  Ch.  467;  [Sheldon  H.  B.  Co.  v.  Eicke- 
not  necessary  that  the  officers  of  the  meyer  H.  B.  Co.,  90  N.  Y.  607;  Mem- 
company  should  have  known  the  falsity  phis  etc.  R.  R.  Co.  v.  Grayson,  88 
of  the  statements,  or  disbelieved  them.  Ala.  572;  16  Am.  St.  Rep.  69.] 

*  Kent  V.  Quicksilver  Min.  Co.,  78  *  Bright  v.  Legerton,  6  Jur.,  N,  S., 
N.  Y.  159,  187,  188,  and  cases  cited;  1179;  Clarke  v.  Hart,  5  Jur.,  N.  S., 
Zabriskie  v.  Cleveland  R.  R.,  23  How.  447.  See  the  remarks  of  Lord  Chelms- 
381,  395,  398;  Parks  v.  Evansville  ford  in  this  case  upon  the  different 
R.  R.,  23  Ind.  567;  Evans  v.  Small-  effects  of  delay  and  acquiescence  upoa 
combe,  L.  R.  3  H.  L.  249;  L.  R.  3  Eq.  executed  and  executory  interests. 


§  821  EQUITY  JURISPRUDENCE.  1140 

from  the  conduct  of  the  debtor  party  towards  the  intended 
assignee  of  a  thing  in  action.  If  a  mortgagor,  obligor,  or 
other  debtor,  by  keeping  silence  under  circumstances 
when  he  ought  to  speak,  leads  the  intended  assignee  to 
believe  that  there  is  no  defense,  he  will  be  estopped  from 
aftewards  setting  up  any  defense  which  might  otherwise 
be  available  as  against  the  assignee  who  has  thus  been 
induced  to  purchase  the  demand.  The  estoppel  will  be 
even  more  obvious  when  the  debtor,  instead  of  simply 
keeping  silent,  resorts  to  affirmative  and  misleading  acts 
or  representations.' 

§  821.  Owner  Estopped  from  Asserting  his  Legal  Title 
to  Land.  —  The  most  striking  instance  of  the  estoppel 
recognized  by  courts  of  equity  is  that  already  described 
in  a  former  paragraph,  wherein  by  intentional  misrepre- 
sentation, misleading  conduct,  or  wrongful  concealment 
a  party  may  preclude  himself  from  asserting  his  legal 
title  to  land,  or  from  enforcing  an  encumbrance  on  or 
maintaining  an  interest  in  real  estate.^  This  doctrine 
was  established  in  equity  long  before  the  modern  rules 
concerning  equitable  estoppel  by  conduct  had  been  de- 
veloped; and  its  operation  is  somewhat  more  extensive 
than  the  effects  produced  by  the  ordinary  forms  of  es- 
toppel. A  person  may  not  only  be  prevented  from  assert- 
ing his  title  or  interest,  he  may  even  be  compelled,  at  the 
suit  of  an  innocent  purchaser,  to  make  good  and  specifi- 
cally perform  his  representations.  Fraud,  actual  or  con- 
structive, is  the  essential  and  central  element. 

■  Lee  V.  Kirkpatrick,  14  N.  J.  Eq.  Miss.    255;    Wilber  v.   Goodrich,    34 

264;  Grissler  v.  Powers,  81  N.  Y.  57;  Mich.  84;  Sherrill  v.  Sherrill,  73  N.  C. 

37  Am.  Rep.  475;  and  see  cases  cited  8;   Mayor   v.   Ramsey,  46  Tex.    371; 

ante,  §  704.  Hayes  v.  Livingston,   34   Mich.    384; 

*  See  ante,  %  807,  and  cases  cited;  22  Am.  Rep.  533;  Willmott  v.  Barber, 

Vicksburg  etc.  R.  R.  Co.  v.  Ragsdale,  L.  K  15  Ch.  Div.  96,  106. 
54  Miss.  200;  Sulphine  v.  Dunbar,  55 


1141  PRIMARY    OR    REMEDIAL    RIGHTS.  §  822 


CHAPTER  THIRD. 

CERTAIN  FACTS  AND  EVENTS  WHICH  ARE  THE 
OCCASIONS  OP  EQUITABLE  PRIMARY  OR  REME- 
DIAL RIGHTS. 

§  822.  Introductory.  —  In  the  first  volume,  while 
speaking  of  the  jurisdiction,  I  stated  that  certain  facta 
and  events  were  most  important  occasions  of  equitable 
rights  and  duties.^  Since  these  same  facts  are  also  recog- 
nized by  courts  of  law  as  giving  rise  to  legal  rights  and 
duties  within  a  limited  extent,  it  has  sometimes  been* 
said  that  they  form  a  part  of  the  concurrent  jurisdiction 
of  equity.  The  erroneous  character  of  this  theory  has 
been  shown  in  earlier  sections.^  The  rights  and  duties 
of  which  they  are  the  occasions,  whether  of  property,  of 
contract,  or  of  remedy,  belong  partly  to  the  exclusive  and 
partly  to  the  concurrent  jurisdiction.  The  facts  and 
events  referred  to,  and  which  form  the  subject-matter  of 
this  chapter,  are  accident,  mistake,  and. fraud.  In  the 
present  discussion  I  shall  not  describe  in  an  exhaustive 
manner  all  their  consequences  and  effects,  for  this  would 
produce  needless  confusion.  I  shall,  in  the  first  place, 
define  them  as  they  are  conceived  of  by  equity,  and  ex- 
plain with  some  care  the  equitable  notions  concerning 
their  nature,  and  the  equitable  doctrines  concerning  their 
essential  elements  and  attributes.  In  the  second  place, 
I  shall  enumerate  their  effects,  the  instances  of  equitable 
jurisdiction  of  which  they  are  the  occasions,  and  the 
equitable  rights  and  duties  which  are  maintained  and 
enforced  by  these  phases  of  the  jurisdiction.  The  doc- 
trines which  determine  and  govern  the  most  important 
of  these  rights  will  be  more  fully  discussed  under  subse- 
quent and  appropriate  heads.' 

'  See  ante,  §§  359,  362.  fonnd  in  the  sections  on  trusts.     All 

*[See§§13S,  140, note,  175, note,  188.]  the  distinctive  remedies,  such  as  caa- 

'  For   example,   many   instances   of  cellation,    reformation,    etc.,    will    ba 

trusts  by  operation  of  law  spring  from  examined  in  the  division  which  deala 

fraud;    their  full   discussion   will   be  with  remedies. 


§  823  EQUITY   JURISPRUDENCE.  1142 


SECTION  I. 

ACCIDENT. 

ANALYSIS. 

§  823.  Definition. 

§  824.  Rationale  of  the  jurisdiction. 

§  825.  General  limitations  on  the  jurisdiction. 

§§  826-829.  Instances  in  which  the  jurisdiction  does  not  exist. 

§  826.  Non-performance  of  contracts. 

§  827.  Supplying  lost  or  destroyed  records. 

§  828.  Other  special  instances. 

§  829.  Parties  against  whom  the  jurisdiction  is  not  exercised. 

§§  830-837.  Particular  instances  of  the  jurisdiction. 

§  831.  1.  Suits  on  lost  instruments. 

§  832.  Same;  instruments  not  under  seaL 

§  833.  2.  Accidental  forfeitures. 

§  834.  3.  Defective  execution  of  powers. 

§  835.  Powers  held  in  trust  will  be  enforced. 

§  836.  4.  Relief  against  judgments  at  law. 

§  837.  5.  Other  special  instances. 

§  823.  Definition.  —  It  is  confessedly  difficult  to  define 
accident  so  as  to  include  all  the  elements  essential  to  the 
equitable  conception,  and  to  exclude  all  others;  and  many 
writers  have  not  attempted  to  give  a  definition.  The  fol- 
lowing expresses,  I  think,  the  true  meaning  given  by 
equity  to  the  term  as  an  occasion  for  the  exercise  of  ju- 
risdiction: Accident  is  an  unforeseen  and  unexpected 
event,  occurring  external  to  the  party  affected  by  it,  and 
of  which  his  own  agency  is  not  the  proximate  cause,  whereby, 
contrary  to  his  own  intention  and  wish,  he  loses  some 
legal  right  or  becomes  subjected  to  some  legal  liability, 
and  another  person  acquires  a  corresponding  legal  right, 
which  it  would  be  a  violation  of  good  conscience  for  the 
latter  person,  under  the  circumstances,  to  retain.*     If  the 

'  Jeremy,  in  his    Equity  Jurisdic-  objects   to   this  definition  as  defect- 

tion,  defines   accident  as  "an  occur-  ive   and   too  narrow.      He  gives   the 

renc'e  in  relation  to  a  contract  which  following:  "By  the  term  'accident 'is 

was   not  anticipated    by    the   parties  intended,  not  merely  inevitable   cas- 

when  the  same  was  entered  into,  and  ualty,  or  the  act   of    Providence,   or 

which  gives  an  undue  advantage   to  what  is  technically  called  vis  major,  or 

one  of  them  over  the  other  in  a  court  irresistible  force;  but  such  unforeseen 

law":  Bk.  3,  pt.  2.    Judge  Story  justly  events,    misfortunes,   losses,   acts,   or 


1143  ACCIDENT.  §  824 

party's  own  agency  is  the  proximate  cause  of  the  event, 
it  is  a  mistake  rather  than  an  accident.  This  definition 
purposely  excludes  all  fortuitous  occurrences  which  do 
not  occasion  any  exercise  of  jurisdiction,  since  they  are 
not  "  accidents  "  within  the  equitable  conception. 

§  824.  Rationale  of  the  Jurisdiction.  —  Accident  is 
one  of  the  oldest  heads  of  equity  jurisdiction.  There  is 
reason  to  believe  that,  at  an  early  day,  this  jurisdiction 
was  much  more  undefined  and  comprehensive  than  it  is 
at  present;  but  for  a  long  time  it  has  been,  and  is  now, 
settled  within  certain  and  somewhat  narrow  limits.  Its 
existence  and  exercise  involve  two  essential  requisites. 
The  first  and  principal  requisite  is,  that,  by  the  event  not 
expected  nor  foreseen,  one  party,  A,  has  without  fault  and 
undesignedly  undergone  some  legal  loss  or  liability,  and 
the  other  party,  B,  has  acquired  a  corresponding  legal 
right,  which  it  is  contrary  to  good  conscience  for  him 
to  retain  and  enforce  against  A.  In  other  words,  because 
of  the  unexpected  character  of  the  occurrence  by  which 
A's  legal  relations  towards  B  have  been  unintentionally 
changed,  A  is  in  good  conscience  entitled  to  relief  which 
shall  restore  those  relations  to  their  original  character, 
and  replace  him  in  his  former  position.  In  the  second 
place,  this  relief,  to  which  A  is  conscientiously  entitled, 
must  be  such  as  cannot  be  adequately  conferred  by  courts 
of  law.  Upon  these  two  essential  requisites  the  jurisdic- 
tion was  based:  the  party's  conscientious  right  to  relief; 
and  the  impossibility  of  obtaining  adequate  remedy  at. 
law.     If  the  party,  although  clearly  entitled  to  relief,  can 

omissions,  as  are  not  the  result  of  any  equity,  calls  it  "an  unforeseen  and 
negligence  or  misconduct  of  the  injurious  occurrence  not  attributable- 
party ":  Story's  Eq.  Jur.,  sec.  78.  to  mistake,  neglect,  or  misconduct": 
This  definition  is  more  inaccurate  than  Smith's  Manual  of  Eq.  Jur.  36.  Few 
that  of  Mr.  Jeremy.  It  not  only  in-  judges  have  attempted  any  definition, 
eludes  cases  which  are  not  accidents  In  Earl  of  Bath  v.  Sherwiu,  10  Mod. 
at  all,  but  mistakes,  but  it  omits  the  1,  3,  Lord  Chancellor  Cowper  said: 
very  central  element  of  the  equitable  "By  accident  is  meant,  when  a  case  ia 
conception.  So  far  as  it  is  a  defini-  distinguished  from  others  of  a  like 
tion,  it  is  one  of  the  word  in  its  popu-  nature  by  usual  circumstances."  This 
lar  and  not  its  technical  sense,  statement  as  a  definition  is  so  imper- 
Another  author,  with  a  nearer  ap-  feet  and  inaccurate  as  to  be  entirely 
preach    to    its    true    eigaification  in  worthless. 


§  825  EQUITY   JURISPRUDENCE.  1144 

obtain  adequate  and  certain  remedy  at  law,  then,  in  ac- 
cordance with  the  fundamental  principles  of  equitable 
jurisdiction,  the  concurrent  jurisdiction  does  not  exist, 
and  the  exclusive  jurisdiction  is  not  exercised.*  This 
doctrine,  it  should  be  remembered,  refers  to  the  origin 
of  the  equity  jurisdiction,  and  not  to  its  subsequent  and 
present  condition.  Its  operation  is  controlled  and  modi- 
fied by  the  other  most  important  principle,  fully  dis- 
cussed heretofore,  that  when  the  equitable  jurisdiction, 
either  concurrent  or  exclusive,  has  once  been  established 
with  respect  to  any  subject-matter,  it  is  not  destroyed  or 
abridged  by  a  jurisdiction  subsequently  acquired  by  the 
courts  of  law  to  give  the  same  or  other  adequate  relief 
under  the  same  circumstances.  The  jurisdiction  of 
equity  originally  existing  and  exercised  on  the  occasion 
of  accident  has  not,  therefore,  been  theoretically  affected 
by  the  powers  given  to  or  assumed  by  the  courts  of  law 
to  confer  complete  remedy  in  many  cases  which  formerly 
belonged  to  the  cognizance  of  equity  alone.^ 

§  825.  Limitations.  —  AVhile  the  jurisdiction  occa- 
sioned by  accident  is  clearly  limited,  and  the  instances  in 
which  it  is  and  is  not  exercised  are  well  defined,  it  is 
difficult  to  formulate  any  general  criterion  which  shall 
consistently  express  the  extent  of  the  limitation,  and 
account  for  all  these  instances.  It  must  be  conceded,  I 
think,  that  the  conclusions  of  the  equity  courts  on  this 
subject  are  somewhat  arbitrary.  In  the  very  earliest  pe- 
riod of  equity  jurisprudence,  before  doctrines  had  been 
fully  developed  and  defined,  the  jurisdiction  was  undoubt- 
edly understood  as  embracing  every  kind  of  case  in  which 
an  unexpected  result  had  been  produced  by  accident, — 
every  kind   of  misfortune;   and   the  rule    is   even   laid 

*  See    vol.    1,  §§    216-222.     As  Sir  and  a  multitude  of   other  contingen- 

Wiliiam  Blackstoue  shows,  courts  of  cies":  3  Black.  Com.  431;  the  equitable 

law  could  always  give  adequate  relief  jurisdiction    has   never    extended    to 

in  certain  instances  of  accident,  viz.,  such  cases. 

in  cases  of  "  loss  of  deeds,  mistakes  in  '■'  See  vol.  I,  §§  276-281,  where  this 

receipts  and    payments,   wrong    pay-  doctrine  is  fully  considered:  People  v, 

ments,   deaths  which  make  it  impos-  Houghtaling,  7  CaL  348.  351, 
Bible  to  perform  a  condition  literally. 


1145 


ACCIDE^"T. 


§  826 


down  in  this  manner  by  Lord  Coke.*  It  is  now  the  firmly 
settled  doctrine,  with  respect  to  many  legal  obligations, 
that  there  is  no  equitable  jurisdiction  to  relieve  parties 
from  their  non-performance  caused  by  accident  in  its  ordi- 
nary and  popular  meaning.  The  following  are  the  im- 
portant instances  in  which  the  jurisdiction  does  not  exist 
or  will  not  be  exercised. 

§  826.  Contracts.  —  As  a  general  rule,  where  the  obli- 
gation arises  from  an  express  contract  created  by  the 
stipulations  of  the  parties,  and  a  non-performance  is 
wholly  the  result  of  accident,  or  a  party  without  fault  has 
been  accidently  prevented  from  completing  the  execution 
of  the  agreement,  and  deriving  full  benefits  therefrom,  in 
either  case  equity  does  not  exercise  its  jurisdiction  to 
give  him  any  relief,  whether  by  way  of  defense  against 
the  enforcement  of  the  obligation,  or  by  way  of  afiirma- 
tive  remedy.  The  exception  is  confined  to  agreements 
providing  for  a  penalty  or  a  forfeiture,  in  which  the  juris- 
diction to  relieve  is  settled  within  defined  and  narrow 
limits.'^ 


^4  Inst.  84:  "Accident,  as  when  a 
servant  of  an  obligor,  mortgagor,  etc., 
is  sent  to  pay  the  money  on  the  day, 
and  he  is  robbed,  remedy  is  to  be  had 
in  this  court  against  the  forfeiture." 
This  statement  by  Lord  Coke  is  prob- 
ably due,  in  great  measure,  to  his 
ignorance  of  equity.  A  case  in  the 
Introduction  to  the  Calendars  of 
Proceedings  in  Chancery  (vol.  1,  p. 
cxlii.)  illustrates  the  early  view  of  the 
jurisdiction.  A  B  had  entered  into  a 
bond,  with  a  heavy  penalty,  to  repair 
certain  river  banks  near  the  town  of 
Stratford-at-Bow  within  a  specified 
time.  He  had  been  prevented  from 
completing  the  contract  within  the  re- 
quired time  by  sudden  and  unexpected 
floods;  and  the  obligee  in  the  bond  had 
sued  him  at  law  to  recover  the  penalty. 
He  thereupon  filed  a  bill  in  chancery 
to  restrain  the  action  at  law,  and  to 
be  relieved  from  the  consequences  of 
the  accident. 

'  This  doctrine  may  be  illustrated 
by  a  simple  supposed  case.  If  A  has 
contracted  to  build  a  house  by  a  cer- 


tain day  named,  and  in  the  course  of 
completing  the  agreement  has  collect- 
ed a  quantity  of  materials  all  pre- 
pared and  necessary  for  the  building, 
and  all  these  materials  are,  without 
A's  fault,  by  a  mere  accident,  —  a 
stroke  of  lightning  and  consequent 
fire,  —  destroyed,  so  that  it  becomes 
physically  impossible  to  replace  them 
and  to  finish  the  house  withm  the 
specified  time,  there  is  no  jurisdiction 
in  equity  to  relieve  A  in  any  manner 
from  the  liability  caused  by  the  non- 
performance of  liis  contract.  Courts 
of  equity,  as  well  as  courts  of  law,  say 
that  parties  must  guard  against  the 
possible  efi'ect  of  such  misfortunes  by 
express  stipulations  inserted  in  their 
agreements.  Among  the  illustrations 
of  this  doctrine,  the  most  frequent 
are  covenants  by  lessees  to  pay  rent, 
to  keep  the  buildings  in  repair,  and 
the  like;  if  the  premises  are  consumed 
by  accidental  fire,  or  destroyed  by 
other  inevitable  accident,  the  lessee  is 
not  relieved  from  the  obligation  of  his 
covenant  at  law  or  in  equity:  Ballook 


§§  827,  828  EQUITY  JUmSPRUDENCB.  1146 

§827.  Supplying  Lost  Records.  —  It  has  been  held 
that  there  is  no  jurisdiction  in  equity  to  supply  or  estab- 
lish the  records  of  a  court  of  law  which  have  been  lost  or 
accidentally  destroyed/  It  seems,  however,  that  a  court 
of  equity  may,  by  a  suit  between  the  persons  interested, 
confirm  the  title  of  a  party,  vest  it  in  him  by  decree,  and 
grant  him  all  needed  relief,  when  the  records  of  a  court 
ordering  a  judicial  sale  upon  which  that  title  depends 
have  been  lost.^ 

§  828.  Other  Instances  in  Which  the  Jurisdiction  is  not 
Exercised.  —  The  jurisdiction  will  not  be  exercised  on 
behalf  of  a  party  when  the  accident  is  the  result  of  his 
own  culpable  negligence  or  fault.^  Nor  will  the  jurisdic- 
tion ever  be  exercised  on  behalf  of  a  person  who  has  not 
a  vested  right,  but  whose  onl}'  claim  is  a  mere  expectancy 
or  hope  resting  upon  the  volition  or  discretion  of  another. 
As,  for  example,  if  a  testator  was  prevented  by  pure  acci- 
dent from  making  an  intended  bequest  in  favor  of  A, 
equity  has  no  jurisdiction  to  relieve  A  from  the  disap- 
pointment.* 

V.  Donimitt,  6  Term  Rep.  650;  Breck-  P.  Wms.  61;  Mortimer  v.  Capper,  1 

nock  Can.  Co.  v.  Pritchard,  6  Term  Brown.  Ch.  156. 

Kep.  750;  Belfour  v.  Weston,  1  Term  *  Keen  v.  Jordan,  13  Fla.  327,  333- 

Rep.  310;  Pym  v.  Blackbourn,  3  Ves.  335;  Clingman  v.  Hopkie,  78  111.  152 

34,  38;   Fowler  v.  Bott,    6  Mass.   63;  (records  of  a  justice's  court);  [Welch 

Hallett  V.  Wylie,  3  Johns.  44;  3  Am.  v.  Smith,  65  Miss.  394.] 

Dec.  457;  Wood  v.  Hubbell,  10  N.  Y.  »  Garrett  v.  Lynch,  45  Ala.  204. 

479;  5  Barb.  601.     This  does  not  at  all  »  Ex   parte  Greenway,  6  Ves.   812j 

interfere  with  the  jurisdiction  which  Penny  v.  Martin,  4  Johns.  Ch.  566, 

•may  exist  to  relieve  the  lessee  from  a  569;   Marine  Ins.  Co.  v.  Hodgson,  7 

forfeiture  of  his  estate  by  the  non-per-  Cranch,  336;  Barnet  v.  Turnp.  Co.,  15 

formance  of  his  covenant.     See  ante,  Vt.  757.     For  cases  where  the  courts 

vol.  1,  §§  453,  454.     The   same   doc-  refuse     to    relieve     from     forfeitures 

trine   applies   to  other   kinds  of   con-  caused  by  the  negligence  or  fault  of 

tracts,  although  both  parties  may  be  the  party  himself,  see  vol.   1,  §  452. 

wholly  and  equally  free  from   blame.  See,    however,    Chase    v.    Barrett,    4 

Illustrations:  Agreements  for  the  sale  Paige,  148,  with  respect  to  an  agree- 

and   purchase   of  land,   where    build-  meut  the  fulfillment  of  which,  accord- 

ings    thereon   had    been   accidentally  ing  to  the  intention  of  the  parties,  is 

burned:   Brewer  v.  Herbert,    30  Md.  prevented  by  the  act  of  God. 

301;  96  Am.  Dec.  582;  McKecknie  v,  «  Whitton   v.  Russell,  1    Atk.  448. 

Sterling,   48  Barb.   330,  335;   but  see  For  the  same  reason  a  court  of  equity 

Smith   V.    McCluskey,  45   Barb.  610,  cannot  relieve  by  supplying  the  total 

613;   agreements   the   performance  of  non-execution  of  an  ordinary  power, 

which  is  prevented  by  the  death  of  a  no  matter   how  accidental:   Toilet  v. 

person  upon   whose  act  the  perform-  Toilet,    2   P.    Wms.    489;   Pierson  v. 

ance  depended:  Blundell  v.  Brettargh,  Garnet,  2  Brown  Ch.  38,  226;  Harding 

17  Ves.  232,  240;  White  v.  Nutts,  1  v.  Glyn,  1  Atk.  469;  Brown  v.  Higgs, 


1147  ACCIDENT.  §§  829-831 

§  829.  Parties  against  Whom  the  Jurisdiction  is  not 
Exercised.  —  There  are  also  limitations  with  respect  to 
the  situation  of  the  parties  against  whom  the  jurisdiction 
is  invoked.  It  will  not  be  exercised  in  behalf  of  any  per- 
son against  a  bona  fide  purchaser  for  a  valuable  considera- 
tion and  without  notice.^  And  generally,  the  jurisdiction 
will  not  be  exercised  against  a  party  who  has  an  equal 
equity,  and  is  equally  entitled  to  protection  with  the  one 
who  seeks  to  be  relieved  from  the  effects  of  an  accident.^ 

§  830.  Particular  Instances  of  the  Jurisdiction.  —  I 
pass  now  to  the  affirmative  side  of  the  subject,  and  briefly 
describe  those  cases  in  which  a  jurisdiction  occasioned  by 
accident  exists  and  is  exercised.  It  will  be  found  by  ex- 
amining and  comparing  these  instances,  that  in  all  of 
them  the  party  in  whose  behalf  the  jurisdiction  is  exer- 
cised has  an  unmistakable  right  to  relief,  an  equity  in- 
trinsically superior  to  that  of  his  adversary,  and  unaffected 
by  his  own  negligence  or  other  fault,  and  that  the  relief 
to  which  he  was  entitled  could  not  be  adequately  conferred 
by  courts  of  law,  at  the  time  when  the  equitable  jurisdic- 
tion was  first  established.  The  following  are  the  impor- 
tant examples  of  this  jurisdiction. 

§831.  1.  Suits  on  Lost  Instruments.  —  It  has  long 
been  settled  that  courts  of  equity  have  jurisdiction  of 
suits  brought  to  recover  the  amount  due  on  lost  bonds 
and  other  sealed  instruments.  The  original  grounds  of 
this  jurisdiction  were  two.  In  the  first  place,  by  the  com- 
mon-law pleading  and  procedure,  profert  of  the  sealed 
instrument  was  necessary  in  an  action  at  law  thereon; 
and  as  no  profert  was  possible  when  the  writing  was  lost, 
the  action  could  not  be  maintained.  Profert  was  never 
necessary  in  a  suit  in  equity.  In  the  second  place,  the 
court  of  equity  could  require  an  indemnity  from  the  plain- 

8  Vea.  561.     [See  also  §  590.]    If  the        '  See  ante,  §  776,  and  cases  cited, 
power  is  accompanied  with  a  trust,  so         *  Weal  v.  Lower,   1  Eq.   Cas.  Abr. 

that  its  execution  is  a  matter  of  obliga-  266;  Powell  v.  Powell,  Prec.  Ch.  278; 

*ioD,  equity  may  relieve   against  its  Jenkins  v.  Kemis,   1  Ch.  103;  1  Fon- 

non-execution,  as  in  the  case  of  any  blanque's  Equity,  bk.  1,  o.  4,  aec  26, 

other  obligatory  trust.     [See  §  1002.]  and  notes. 


§  832  EQUITY    JURISPRUDENCE.  1148 

tiff,  and  could  by  its  decree  adjust  tlie  rights  of  the  two 
litigants,  by  securing  and  indemnifying  the  defendant 
against  all  further  liability  and  harm,  —  a  power  which  was 
not  possessed  by  the  courts  of  law.  In  order  to  protect 
the  defendant  in  this  manner,  the  rule  became  settled 
that  in  all  suits  praying  for  relief,  and  not  merely  for  a 
discovery,  —  that  is,  in  all  suits  where  a  recovery  of  the 
amount  due  was  sought,  —  the  plaintiff  must  make  an  affi- 
davit of  the  loss  accompanying  his  bill  of  complaint,  and 
must  offer  indemnity.  The  fact  that  the  common-law 
requisite  of  a  profert  has  long  been  abolished,  and  that 
actions  at  law  may  now  be  maintained  on  sealed  instru- 
ments, has  not  theoretically  affected  the  equitable  juris- 
diction.* 

§  832.  On  Lost  Unsealed  Instruments. — Where  a  nego- 
tiable bill,  note,  or  check,  whether  payable  to  bearer,  in- 
dorsed in  blank,  or  not  indorsed,  is  lost  before  maturity, 
it  is  held  in  England  that  no  action  at  law  can  be  main- 
tained upon  it  by  the  real  owner,  and  that  his  remedy  is 
in  equity.'^  According  to  these  decisions,  the  only  juris- 
diction in  such  case  was  that  in  equity  prior  to  the  mod- 
ern legislation  which  permitted  actions  in  courts  of  law. 
Without  inquiring  whether  this  view  of  the  jurisdiction 
at  law  be  correct,  the  jurisdiction  in  equity  of  suits 
brought  by  the  real  owner  to  recover  the  amount  due  on 
lost  negotiable  instruments  has  been  long  and  firmly 
settled  upon  the  ground  of  the  indemnity  which  can  be 
given  by  a  court  of  equity  to  the  defendant,  and  which  is 
a  necessary  feature  of  such  suits.     An  offer  of  indemnity 

1  Walmsley  V.  Child,  1  Ves.  Sr.  341,  liams,  50  Mo.  407;  Livingston  v.  Liv- 

344;  Kemp  v.  Pryor,  7  Ves.  237,  249,  ingston,  4  Johns.  Ch.  294;  8  Am.  Dec. 

250;  East  India  Co.  v.  Boddam,  9  Vea.  5(32;   Thornton   v.   Stewart,  7   Leigh, 

464,  406-469;  Ex  parte  Greenway,  6  128;  and  see  Hudspeth  v.  Thomason, 

Ves.  812,  813;  Toulmin  V.  Price,  5  Ves.  46  Ala.  470;   Lawrence  v.  Lawrence, 

235,    238;    Atkinson    v.    Leonard,    3  42  N.  H.  109;  [Bohart  v.  Chamberlain, 

Brown  Ch.  218,  224;  England  v.  Tre-  99  Mo.  622;  Griffin  v.  Fries,  23  Fla. 

degar,  L.   R.    I   Eq.    344;   Patton   v.  173;  11  Am.  St.  Rep.  351;  Lyttle  v. 

Campbell,  70  111.  72;  Howe  v.  Taylor,  Cozad,  21  W.  Va.  183.] 
6   Or.   284,   291;   Allen   v.  Smith,   29         '^  Hansard  v.  Robinson,  7  Barn.  &  C. 

Ark.  74;  Hickman  v.  Painter,  11  W.  90;  Crowe  v.  Clay,  9  Ex.  604;  Ramuz 

Va.  386;  Force  v.  City  of  Elizabeth,  v.  Crowe,  1  Ex.  167. 
27  N.  J.  Eq.  408;  Donaldson  v.  Wil- 


1149  ACCIDENT.  §  832 

by  the  plaintiff  is  therefore  required,  as  the  general  rule; 
but  even  without  it  a  recovery  may  be  had,  since  the  de- 
fendant can  always  be  protected  by  the  provisions  of  the 
decree  making  a  recovery  conditional  upon  his  being 
fully  indemnified.*  Able  judges  have  denied  that  the 
equitable  jurisdiction  extends  to  suits  upon  non-negoti- 
able instruments  and  other  unsealed  contracts,  since  an 
action  at  law  could  always  be  maintained,  and  no  indem- 
nity was  necessary.^  The  jurisdiction  is  sustained,  how- 
ever, by  the  decided  weight  of  authority  in  suits  upon 
lost  non-negotiable  instruments  and  simple  contracts,  as 
well  as  in  suits  upon  negotiable  and  sealed  instruments. 
The  reason  seems  to  be  that  the  remedy  at  law  is  not 
adequate;  a  court  of  equity  alone  can  fully  protect  the 
defendant  by  its  decree  from  all  liabilities  which  may 
arise.'  It  has  been  held  that  the  equitable  jurisdiction 
does  not  extend  to  destroyed  bills,  notes,  and  other  con- 
tracts, because  the  remedy  at  law  was  always  adequate.* 
All  these  instances  of  suits  upon  lost  contracts  plainly 
belong  to  the  concurrent  jurisdiction  of  equity,  because 
the  plaintiff's  primary  right  of  contract  which  is  the 
foundation  of  his  cause  of  action  is  purely  legal,  and  his 
remedy  is  legal,  being  the  ordinary  judgment  for  the  re- 
covery of  money .^     Although  this  particular  jurisdiction 

*  Walmsley  v.  Child,  1  Ves.  Sr.  341,  icau  courts  have  generally  followed 
344,  345;  Glynn  v.  Bank  of  England,  this  distinction:  See  the  American 
2  Ves.  Sr.  281;  Bromley  v.  Holland,  7  cases  cited  ante,  under  this  paragraph. 
Ves.  3,  19-21;  Mossop  v.  Eadon,  16  *  Equity  does  not  acquire  jurisdic- 
Ves.  430,  433,  434;  Savannah  Nat.  tion  merely  because  a  deed  of  land  has 
Bank  v.  Haskins,  101  Mass.  370;  3  been  lost,  since  in  a  legal  action  the 
Am.  Rep.  373;  [City  of  Bloomington  deed  and  its  contents  could  always  be 
V.  Smith,  123  Ind.  41;  18  Am.  St.  proved.  To  give  rise  to  the  equitable 
Rep.  310.]  jurisdiction  on  the  occasion  of  a  lost 

*  See  Mossop  v.  Eadon,  16  Ves.  430,  deed,  it  must  appear  that  there  is  no 
433,  434.  remedy  at   all,   or   else   no   adequate 

*  Macartney  v.  Graham,  2  Sim.  285;  remedy  at  law:  Whitfield  v.  Fausset, 
Hardeman  v.  Battersby,  53  Ga.  36,  1  Ves.  Sr.  387,  392.  If  the  owner  of 
38  (suit  on  a  lost  warehouseman's  re-  land  is  in  possession,  and  has  lost  his 
ceipt);  Hickman  v.  Painter,  11  W.  title  deed,  there  is  no  remed}'  at  all  at 
Va.  386;  Allen  v.  Smith,  29  Ark.  74;  law,  for  ejectment  clearly  will  not  lie. 
Force  v.  City  of  Elizabeth,  27  N.  J.  Equity,  then,  has  jurisdiction  by  a 
Eq.  408.  suit  in  the  nature  of  an  action  to  quiet 

*  Wright  V.  Lord  Maidstone,  1  Kay  title,  and  can  establish  the  owner's 
&  J.  701,  708,  per  Page  Wood,  V.  C.  title  and  possession:  Dalston  v.  Coats- 
It  may  be  doubted  whether  the  Amer-  worth,    1    P.    Wms.    731.     The   same 


§  833  EQUITY    JURISPRUDENCE.  1150 

is  theoretically  unchanged,  yet  the  cases  under  it  are  very 
few.  Actions  on  lost  negotiable  instruments  and  other 
contracts  are  ordinarily  brought  at  law,  in  pursuance  of 
modern  permissive  statutes.  This  is  especially  true  in 
the  states  which  have  adopted  the  reformed  procedure; 
since  the  action,  even  if  not  professing  to  be  based  upon 
the  statute,  would  be  subject  to  the  rules  which  govern 
all  legal  actions  for  the  recovery  of  money;  it  would  not 
in  any  way  be  distinguished  from  actions  confessedly  legal. 
§  833.  2.  Accidental  Forfeitures.  —  It  was  shown  in  a 
former  chapter  that  the  jurisdiction  to  relieve  from 
pecuniary  penalties  is  well  settled  and  general;'  and  that 
it  also  extends  to  some,  though  not  to  all,  cases  of  for- 
feiture as  distinguished  from  penalties.  It  is,  however, 
well  settled,  as  a  branch  of  the  jurisdiction  occasioned 
by  accident,  that,  although  the  agreement  is  not  wholly 
pecuniary,  and  is  not  one  measured  by  pecuniary  com- 
pensation, still  if  the  party  bound  by  it  has  been  pre- 
vented from  an  exact  fulfillment,  so  that  a  forfeiture  is 
thereby  incurred,  by  unavoidable  accident,  without  his 
own  negligence  or  fault,  a  court  of  equity  will  interpose 
and  relieve  him  from  the  forfeiture  so  caused,  upon  his 
making  compensation,  if  necessary,  or  doing  everything 
else  within  his  power  to  satisfy  the  equitable  rights  of 
the  other  party.''     This  jurisdiction  may  be  exercised  in 

kind  of  suit  seems  to  be  proper,  and  this  entire  jurisdiction  over  penalties 

for  the  same  reasons,  when  the  records  and  forfeitures  ia  based  upon  accident, 

of    the   owner's   title    are    lost:     See  It   may  be  true  that,  in  the  earliest 

Garrett  v.  Lynch,  45  Ala.  204.    When  period  of  equity,  the  chancellors  re- 

the  owner   is   out   of   possession,  the  ferred  cases  of  relief  against  penalties 

action    of    ejectment    will    ordinarily  to  the  general  head  of  accident;  but  to 

furnish  an  adequate  remedy.     There  explain  the  whole  jurisdiction  as  now 

may,    however,    be    special     circum-  administered,  by  treating  it  as  based 

etances,    and    other    equities    besides  on  accident,  is  to  disregard  the  plain 

that  arising   from  the  loss  of  a  title  facts  and  meaning  of  words, 
deed,  which  furnish  a  suflficient  ground         *  See  vol.  ],  §451;  Hill  v.  Barclay, 

for  the  cognizance  of  a  court  of  equity  18  Ves.  56,   58,   62,   per  Lord  Eldon; 

in  establishing  the  title  and  decreeing  Eaton  v.   Lyon,  3  Ves.  690,  693,   per 

possession.     Something   more  than   a  Lord    Alvanley;    Hannam    v.    South 

loss    of    deeds   would    be    necessary:  London  W.  Co..  2  Mer.  61;  Bamford 

Dormer  v.  Fortescue,  3  Atk.  124,  132;  v.  Creasy,  3  Giflf.  675;  Wing  v.  Har- 

Whitfield  V.  Fausset,   1  Ves.  Sr.  387,  vey,  5  De  Gex,  M.  &  G.  265;  Duke  of 

392.  Beaufort  v.  Neeld,  12  Clarke  &  F.  248; 

1  See   vol.    1,    §§   432-460.     It    has  Bridges    v.    Longman,    24    Beav.    27; 

sometimes  been  said  by  writers  that  Meek  v.   Carter,  6  Week.   Rep.  852; 


1151  ACCIDENT.  §  834 

any  manner,  by  any  form  of  suit,  and  by  granting  any 
kind  of  relief  made  necessary  by  the  circumstances  of 
the  particular  case.  Thus  the  relief  may  be  conferred 
by  a  suit  to  enjoin  the  prosecution  of  an  action  at  law 
brought  to  enforce  the  forfeiture,  or  to  enjoin  proceed- 
ings on  the  judgment  recovered  in  such  an  action,  or  to 
set  aside  the  forfeiture  itself,  or  to  redeem  from  it,  or  to 
obtain  several  of  these  remedies  in  combination.  In  all 
those  states  which  have  adopted  the  reformed  procedure, 
the  jurisdiction  may  be  exercised  and  the  relief  obtained, 
as  it  seems  to  me  upon  every  sound  principle  of  construc- 
tion, by  means  of  an  equitable  defense  interposed  in  a 
legal  action  brought  to  enforce  the  forfeiture.* 

§834.  3.  Defective  Execution  of  Powers. — This  subject 
has  already  been  treated  of,  and  the  grounds,  extent,  and 
limitations  of  the  peculiar  doctrine  have  been  explained.'' 
It  is  unnecessary  to  repeat  the  observations  there  made. 
It  is  well  settled,  as  a  general  rule,  that  the  non-execution 
—  the  entire  failure  to  execute  —  of  a  mere  power  not  a 
trust  will  not  be  aided  in  equity.'     When,  however,  the 

Wheeler  v.  Conn.  Mutual  L.  Ins.  Co.,  the    sale.     This    decision    should    be 

82  N.  Y.  543,  559;  37  Am.  Rep.  594;  considered  in  connection  with  the  dis- 

Giles  V.  Austin,  62  N.  Y.  486;  Wit-  cussion  in  §  439  (vol.  1),  and  the  cases 

beck  V.  Van  Rensselaer,  64  N.  Y.  27;  there  cited.     It  seems  to  be  opposed 

2  Hun,  55;  4  Thomp.  &  C.  28"2;  Palmer  to  the  general  tendency  of  those  cases. 

V.  Ford,  70  111.  369;  Orr  v.  Zimmer-  '  See  Giles  v.  Austin,  62  N.  Y.  486; 

man,  63  Mo.  72;  Eveleth  v.  Little,  16  and  other  American  cases  cited  in  the 

Me.    374,    377;   Atkins   v.    Rison,    25  last  note;  also  see  Miesell  v.  Globe  Ins. 

Ark.     138;     Bostwick    v.     Stiles,    35  Co.,  76  N.  Y.   115,   120,  and  Shaw  v. 

Conn.   195;  [Kopper  v.  Dyer,  59  Vt.  Republic  Ins.  Co.,  69  N.  Y.  286,  which 

477;  59  Am.  Rep.  742.]     In  Whelan  hold  that  when  a  life  policy  becomes 

V.  Reilly,  61  Mo.  565,  a  deed  of  trust,  accidentally  forfeited,  the  holder  need 

given  in  place  of  a  mortgage  to  secure  not  at  once  bring  an  equity  suit  for 

a  debt,  provided  that  if  the  interest  the  purpose  of  re-establishing  it;  but 

was  not  punctually  paid  as  it  became  may  tender  the  premiums  as  they  fall 

due,    the   whole  principal   should   be  due,  and  then  sue  on  it  at  law  when 

due    and    payable,    and    the    trustee  the  person  whose  life  is  assured  dies, 

might  sell.     The  debtor  made  default  *  See  ante,  §S  589,  590. 

in   paying   a   portion  of   the   interest  '  Toilet  v.  Toilet,  2  P.  Wms.  489; 

when  it  fell  due,  and  the  trustee  there-  1  Lead.  Cas.  Eq.,  4th  Am.  ed.,  365, 

upon  took  the  proper  steps  to  sell,  and  and  notes;    Arundell    v.    PhiUpot,    2 

did  sell  in  the  regular  manner.    Before  Vern.  69;  Bull  v.  Vardy,  1  Ves.  270; 

the    sale,    the    debtor    tendered    the  Johnson  v.  Cushing,  15  N.  H.  298;  41 

amount    of    interest    due   and   costs.  Am.  Dec.  694;  Lippencott  v.  Stokes, 

which  the  trustee  refused  to  accept,  6  N.  J.  Eq.  122;  Howard  v.  Carpenter, 

but   went   on   with   the   sale.     Held,  11  Md.  259;  Lines  v.  Darden,  5  Fla. 

upon  these  facts,  that  the  debtor  could  51;  Mitchell  v.   Denson,  29  Ala.  327; 

maintain  a  suit  in  equity  to  be  relieved  65  Am.  Dec.  403;  Wilkinson  v.  Getty, 

from  the  forfeiture,  and  to  set  aside  13  Iowa,  157;  81  Ara.  Dec.  428. 


§  834  EQUITY   JURISPRUDENCE.  1152 

party  clothed  with  such  a  mere  power,  by  a  deed,  settle- 
ment, or  will,  has  attempted  and  begun  to  execute  it,  and 
the  execution  is  defective  through  accident  or  mistake,  or 
where  he  has  made  an  agreement  to  execute  it  which  is  re- 
garded as  a  kind  of  defective  execution,  equity  may  inter- 
pose its  aid  by  decreeing  a  complete  and  perfect  execution.' 
As  has  already  been  explained,  this  extraordinary  juris- 
diction is  only  exercised  on  behalf  of  classes  of  persons  who 
are  considered  as  possessing  a  certain  meritorious  or  moral 
consideration,  and  against  a  party  who  has  no  equally 
meritorious  equity.  Its  operation  is  confined  to  pur- 
chasers, including  mortgagees,  lessees,  and  creditors, 
wives,  legitimate  children,  and  those  to  whom  the  party 
executing  stands  in  loco  parentis,  and  charities;  it  does  not 
include  husbands,  illegitimate  children,  distant  relatives, 
nor  volunteers.^  As  to  the  defects  in  the  execution  of  a 
power  which  equity  will  thus  aid  and  complete  in  proper 
cases,  they  must  be  in  matters  of  form,  and  not  of  the 
very  substance  and  essence  of  the  power, —  such  as  the 
want  of  a  seal,  or  of  witnesses,  or  of  signatures,  or  omis- 
sions and  imperfections  in  the  limitations  of  the  prop- 
erty.*    The  doctrine  is  confined  to  powers  created  by  the 

» Toilet  V.  Toilet,  2  P.  Wms.  489;  Dowell  v.  Dew,  1  Younge  &  C.  345; 
1  Lead.  Cas.  Eq.,  4th  Am.  ed.,  365,  and  Hughes  v.  Wells,  9  Hare,  749;  Shan- 
notes;  Chapm&£iv.  Gibson,  3  Brown  Ch.  non  v.  Bradstreet,  1  Schoales  &  L.  52; 
229;  Shannon  v.  Bradstreet,  1  Schoalea  Taylor  v.  Wheeler,  2  Vern.  564; 
&  L.  52,  63;  Sayer  v.  Sayer,  7  Hare,  Campbell  v.  Leach,  Amb.  740;  Bix- 
377;  and  see  ante,  §§  589,  590.  bey  v.  Eley,  2  Brown  Ch.  325;  Medwin 

»  See  ante,  §  589;  Toilet  v.  Toilet,  1  v.  Sandham,  3  Swanst.  685;  Proby  v. 

Lead.  Cas.  Eq.  365,  and  notes;  Pother-  Landor,    28     Beav.    504;     Beatty    v. 

gill   V.    Fothergill,    Freem.    Ch.    256;  Clark,  20  Cal.  11;  Love  v.  Sierra  etc. 

Barker  v.  Hill,  2  Ch.  Rep.  113;  Reid  Co.,  32  Cal.  639,  653;  Thorp  v.  McCul- 

V.  Shergold,   10  Ves.  370;   Pollard  v.  Inm,  1    Gilm.  614;  Hout  v.   Hout,  20 

Greenvil,   1    Cas.    Ch.    10;   Wilkes  v.  Ohio  St.  119;  Schenck  v.  EUingwood, 

Holmes,  9  Mod.  485;  Clifford  v.  Bur-  3   Edw.     Ch.    175;    Pepper's   Will,    I 

lington,  2  Vern.  379;  Sneed  v.  Sneed,  Pars.  Cas.  436,  446;  Porter  v.  Turner, 

Amb.  64;   Bruce  v.    Bruce,  L.  R.   11  3  Serg.  &  R.   108,    114;    Dennison  v. 

Eq.  371;    Hervey  v.  Hervey,   1    Atk.  Goehring,  7  Pa.  St.  175;  47  Am.  Dec. 

561;   Innes  v.  Sayer,  7  Hare,  377;   3  505;  Huss  v.   Morris.  63  Pa.  St.  367. 

Macn.  &  G.  606;  Attorney-General  v,  [See  also  American  Freehold  L.  Mfg. 

Sibthorp,  2  Russ.  &  M.  107;  Ellison  v.  Co.    v.    Walker,    31    Fed.    Rep.    103; 

Ellison,  6  Ves.  656;  Watt  v.  Watt.  3  Freeman  v.  Eacho,  79  Va.  43.] 

Ves.  244;  Tudor  v.  Anson,  2  Ves.  Sr.  »  Toilet  v.  Toilet,  1  Lead.  Cas.  Eq. 

582;  Watts  v.  Bullas,  1  P.  Wms.  60;  365,  and  notes.     Where  a  power  was 

Affleck  V.  Affleck,  3  Smale  &  G.  394;  required  to  be  executed  by  means  of 

In  re  Dyke's  Estate,  L.  R.  7  Eq.  337;  a  deed  or  other  instrument  inter  vivos, 


1153  ACCIDENT.  §  835 

voluntary  act  of  persons  in  wills,  deeds,  and  settlements;  it 
does  not  extend  to  those  created  and  regulated  by  statute. 
The  defective  execution  of  statutory  powers,  in  the  failure 
to  comply  with  the  prescribed  requisites,  cannot  be  aided 
by  equity.^ 

§  835.  Powers  in  Trust  will  be  Enforced.  —  The  gen- 
eral rule  that  equity  refuses  to  aid  the  non-execution  of 
powers,  and  only  corrects  their  defective  execution,  relates 
only  to  bare,  naked,  or  mere  powers;  it  does  not  apply  to 
powers  coupled  with  a  trust.  Mere  powers  create  no  ob- 
ligation resting  on  the  donee,  nor  any  right  in  a  person 
who  may  be  benefited  by  their  execution.  Powers  in  trust, 
or  coupled  with  a  trust,  like  any  other  trust,  are  impera- 
tive; they  create  a  duty  in  the  trustee,  and  a  right  in  the 
beneficiary.  Equity  will  not  suffer  this  right  of  the 
beneficiary  to  be  defeated,  either  by  accident  or  by  de- 
signs of  the  trustee,  and  will  therefore  carry  into  effect 
the  intention  of  the  donor,  and  give  all  needed  relief  to 
the   beneficiary,  whenever  there   has  been  a  total  or  a 

an  execution  of  it  by  a  will  is  a  defect  be  some  writing  attempting  or  showing 

which  equity  will  aid:  Toilet  v.  Toilet,  an  intention  to  execute:  Carter  v.  Car- 

1  Lead.  Cas.  Eq.  365,  and  notes;  but,  ter,  Mos.  .305;  Shnnnon  v.  Bradstreet, 

conversely,  when  it  was  required   to  1  Schoales  &  L.  52;  Innes  v.  Sayer,  7 

be  executed  only  by  a  will,  an  execu-  Hare,  377;  Do  well  v.  Dew,  1  Younge 

tion  by  an  absolute  deed  will  not  be  &  C.  345;  Vernon  v.  Vernon,  Amb.  3; 

aided:   Reid  v.  Shergold,  10  Ves.  370;  Campbell   v.  Leach,  Amb.    740;  Wil- 

Adney  v.   Field,  Amb.   654.     The  de-  son  v.  Piggott,  2  Ves.  351;  Mitchell 

fects   which   equity   may   aid   consist  v.  Denson,  29  Ala.  327;  65  Am.  Dec. 

either  of  the  use  of  an  inappropriate  403;    Barr    v.    Hatch,    3    Ohio,    527. 

instrument,  although  it   is  duly  exe-  See   also,    on    the    general    doctrine, 

cuted,  as  in  Toilet  v.   Toilet,  1  Lead.  Bradish  v.  Gibbs,  3   Johns.  Ch.  523, 

Cas.  Eq.  365,  and  notes;  In  re  Dyke's  550;    Long  v.  Hewitt,  44   Iowa,  363; 

Estate,    L.   R.    7    Eq.  337;   Garth   v.  Porter  v.  Turner,  3  Serg.  &   R.   108, 

Townsend,  L.  R.  7  Eq.  220;  or  in  the  111,  114;  Bakewell  v.  Ogdeii,  2  Bush» 

improper  and  insufficient  mode  of  exe-  265;  Stewart  v.   Stokes,  33  Ala.  494;; 

cuting  an  appropriate  kind  of  instru-  73  Am.  Dec.  429;  Kearney  v.  Vaughan, 

ment, — as,    for   example,  omitting  a  50  Mo.  284;    [American  Freehold  Land 

seal:  Morse  v.  Martin,  34  Beav.  500.  Mortgage    Co.    v.    Walker,    31    Fed. 

SeePiattv.  McCuUough,  1  McLean,  69,  Rep.  103;  Freeman  v.  Eacho,  79  Va.. 

where  relief  was  refused  on  the  ground  43.] 

that  the  ilefect  was  inherent,  and  not         '  Smith  v.  Bowes,  38  Md.  463;  Earl 

merely  formal.     In  order  to  admit  the  of  Darlington  v.  Pulteney,  Cowp.  260; 

exercise   of    the    jurisdiction   and    to  and   see  Stewart   v.  Stokes,  33    Ala. 

grant  relief,  there  must  be  something  494;  73  Am.  Dec.  429;  Gridley's  Heirs 

more  than  a  mere  verbal  promise  to  v.    Phillips,  5  Kan.  349;  Kearney  v. 

execute  the  power;  there  must  always  Vaughan,  50  Mo.  284. 
2EQ.JUE.  — 73 


§§  836,  837  EQUITY   JURISPRUDENCE.  1154 

partial  failure  to  execute  the  power  according  to  the 
terms  of  the  trust.^ 

§  836.  4.  Judgments  at  Law. —  Accident  is  also  one 
of  the  grounds  for  the  exercise  of  the  most  important  ju- 
risdiction with  respect  to  actions  and  judgments  at  law. 
Where  the  defendant  in  an  action  at  law  has  a  good  de- 
fense on  the  merits,  which  he  is  prevented  by  accident 
from  setting  up  or  making  available  without  any  negli- 
gence or  inattention  on  his  part,  and  a  judgment  is  re- 
covered against  him,  equity  will  exercise  its  jurisdiction 
on  his  behalf  by  enjoining  further  proceedings  to  enforce 
the  judgment,  or  by  setting  it  aside  so  that  a  new  trial 
can  be  had  on  the  merits,^  In  many  states,  especially  in 
those  which  have  adopted  the  reformed  procedure,  this 
particular  relief  is  usually  obtained  by  means  of  a  motion 
for  a  new  trial,  and  the  necessary  occasions  for  a  resort 
to  equity  have  been  lessened;  the  equitable  jurisdiction, 
however,  has  not  been  abrogated  even  in  those  states,  and 
it  is  constantly  invoked  in  the  other  commonwealths. 

§  837.  5.  Other  Special  Instances.  —  There  are  other 
specific  instancesof  the  jurisdiction  which  must  be  referred 
to  accident  as  their  occasion.  It  will  be  sufficient  to  men- 
tion them  in  the  briefest  manner,  and  it  will  be  seen  that 
they  all  fall  under  the  general  principle  stated  in  the  intro- 
ductory paragraphs  of  this  section.  An  executor  or  admin- 
istrator will  be  relieved  in  equity  from  many  liabilities  aris- 
ing from  unforeseen  and  unexpected  circumstances  in  the 
nature  of  accidents,  where  he  has  acted  in  good  faith  and 
with  reasonable  care,  although  no  remedy  was  given  by 

•  Warneford   v.  Thompson,  3  Ves.  Gmbb  v.  Kolb,  55  Ga.  630;  Robinsoa 

513;  Brown  v.  Higgs,  8  Ves.  561,  574;  v.  Wheeler,    51   N.   H,  384;  Craft  v. 

Gibbsv.  Marsh,  2  Met.  243,  251;  With-  Thompson,  51  N.  H.  536;  Holland  v, 

ers  V.  Yeadon.   1  Rich.  Eq.  324,  329;  Trotter,  22  Gratt.  136;  N.  Y.  etc.  R. 

Norcnm  v.  D'OSnch,  17  Mo.  98;  Thorp  R.  v.  Haws,  56  N.  Y.  175;  Richmond 

V.  McCuUum,   1  Gilm.  614,  625,  630.  Enquirer  v.  Robinson,  24  Gratt.  548; 

[See  also  §  1002.]  Shields  v.    McClung,    6   W.    Va.   79; 

^  Cairo  etc.  R.  R.  v.  Titus,  27  N.  J.  [Buchanan  v.  Griggs,  18  Neb.  121  (de- 

Eq.  102;  Darling  V.  Baltimore,  51  Md.  fense  abandoned   by  mistake).]      See 

1;  Alford  v.   Moore,   15  W.  Va.  597;  Earl  of  Oxford's  Case,  1    Ch.  Rei^.  1; 

Barber   v.    Rukeyser,    39    Wis.    590;  2  Lead.  Cas.  Eq.,  4th  Am.   ed.,  1291, 

Thomaaoa    v.   Fannin,   54    Ga.    301;  and  notes;  [also  j^oii,  §  1364.] 


1155 


ACCIDENT. 


§  837 


the  common  law.  Thus  where  an  executor  or  administra- 
tor has  paid  debts  or  legacies  in  full,  supposing  the  assets 
were  sufficient,  and  it  turns  out  that  there  is  a  deficiency 
of  assets,  equity  will  grant  the  remedies  necessary  to  re- 
lieve him  from  the  legal  liability.'  In  another  class  of 
cases,  where  the  consideration  contracted  to  be  rendered 
in  return  for  the  payment  of  a  large  sum  of  money  en- 
tirely fails  from  accident,  and  where  the  dispositions  of 
the  principal  or  income  of  public  securities  directed  by 
will  to  be  made  among  successive  beneficiaries  become 
impossible  from  accident,  equity  has  interposed  for  the 
purpose  of  working  substantial  justice.*  Again,  if  a  party 
to  a  suit  in  equity  is  obliged  to  make  a  tender,  and, 
through  accident  or  mistake,  he  tenders  less  than  the  re- 
quired amount,  the  relief  to  which  he  is  entitled  will  still 
be  conferred;  the  decree  will  be  so  shaped  as  to  be  con- 
ditional upon  his  paying  the  proper  sum.'  Other  instances 
which  are  partly  referable  to  accident  are  mentioned  in 
the  foot-note.* 


1  Edwards  v.  Freeman,  2  P.  Wms. 
435,  447;  Hawkins  v.  Day,  Amb.  160. 
See  also,  as  further  illustrations,  Jones 
V.  Lewis,  2  Ves.  Sr.  240;  Clough  v. 
Bond,  3  Mylne  &  C.  490;  Pooley  v. 
Ray,  1  P.  Wms.  355.  As  to  the  relief 
given  by  equity  to  an  unpaid  legatee 
against  other  legatees  who  have  been 
paid  in  full,  when  there  was  an  origi- 
nal deficiency  of  assets,  see  Orr  v. 
Kaines,  2  Ves.  Sr.  194;  Moore  v. 
Moore,  2  Ves.  Sr.  596,  600;  Noel  v. 
Robinson,  1  Vera.  90,  94;  Edwards  v. 
Freeman,  2  P.  Wms.  435,  447;  Walcot 
V.  Hall,  2  Brown  Ch.  305.  The  specific 
instances  mentioned  in  the  text  and 
note  have  certainly  become  obsolete  or 
been  abrogated  in  very  many  of  the 
states.  The  whole  subject  of  admin- 
istration has,  to  a  great  extent,  been 
regulated  by  statute  and  committed  to 
the  control  of  probate  courts.  These 
statutes  difi'er  in  their  details,  but 
most,  if  not  all,  of  them  define  the 
rights  and  liabilities  of  administrators, 
executors,  legatees,  and  creditors,  and 
prescribe  modes  of  proceeding,  under 
the  circumstances  above  mentioned  in 
the  text,  viz.,  where  some  legatees  or 
creditors  have   been  paid  in  full,  or 


more  than  their  just  proportion,  and 
there  turns  out  to  be  a  deficiency  of 
assets. 

"  As  an  illustration  of  the  first  case: 
If  a  minor  is  bound  as  an  apprentice, 
and  pays  or  agrees  to  pay  a  large 
premium,  and  the  master  becomes 
bankrupt  before  the  apprenticeship 
has  expired,  equity  will  relieve  the 
disappointed  apprentice  by  apportion- 
ing the  premium:  Hale  v.  Webb,  2 
Brown  Ch.  78.  As  illustrations  of  the 
second  case:  If  an  annuity  is  directed 
by  a  will  to  be  secured  by  an  invest- 
ment in  public  stock,  and  an  invest- 
ment is  made  sufficient  at  the  time 
for  the  income  to  produce  the  amount 
of  the  annuity,  and  afterwards  the 
stock  is  reduced  by  statute  so  that  its 
income  becomes  insufficient,  equity 
will  relieve  the  annuitant  by  directing 
the  deficiency  to  be  made  up  by  the 
residuary  legatees:  Davies  v.  Wattier, 
1  Sim.  &  St.  463;  May  v.  Bennett,  1 
Russ.  370;  for  another  illustration,  see 
Hachett  v.  Pattle,  6  Madd.  4. 

3  Clark  v.  Drake,  63  Me,  354. 

*  The  well-settled  jurisdiction  for 
the  adjustment  of  disiputed  boundaries 
between    adjoining  proprietors   rests 


§  838  EQUITY    JURISPRUDENCE.  1156 

SECTION  IL 

MISTAKE. 

ANALYSIS. 

§  838.     Origin  and  purpose  of  this  jurisdiction. 
§839.     I.    Definition. 
§§  840-856.     II.    Various  kinds  of  mistakes  which  furnish  an  occasion  for  re- 
lief. 
§§  841-851.     First.     Mistakes  of  law. 

§  842.     The  general  rule  and  its  limitations. 
§  843.     Mistake  as  to  the  legal  import  or  effect  of  a  transaction. 
|§  844-851.     Particular  instances  in  which  relief  will  or  will  not  be  granted. 
§  845.     Reformation  of  an  instrument  on  account  of  a  mistake  of  law. 
§  846.     Mistake  common  to  all  the  parties:  mistake  of  a  plain  rule. 
§  847.     Mistake  of  law  accompanied  with   inequitable  conduct  of   the 

other  party. 
§  848.     Same:  between  parties  in  relations  of  trust. 
§  849,     Relief  where  a  party  is  mistaken  as  to  his  own  existing  legal 

rights,  interests,  or  relations. 
§  850.     Compromises  and  voluntary  settlements  made  upon  a  mistake  a» 

to  legal  rights. 
§  851.     Payments  of  money  under  a  mistake  of  law. 
§§  852-856.     Second.     Mistakes  of  fact. 

§  853.     How  mistakes  of  fact  may  occur. 

§  854.     In  what  mistakes  of  fact  may  consist. 

§  855.     Compromises  and  speculative  contracts. 

§  856.     Requisites  to  relief:   mistake   must  be  material  and  free  from 

culpable  negligence. 
§§  857-867.     ni.    How  mistake  may  be  shown:  when  by  parol  evidence. 

§  858.     Parol  evidence  in  general  in  cases  of  mistake,  fraud,  or  surprise. 
§  859.     In  suits  for  a  reformation  or  cancellation:  character  and  effect  of 

the  evidence. 
§  860.     Parol  evidence  in  defense  in  suits  for  a  specific  performance. 
§  861.     Parol  evidence  of  mistake  on  the  plaintiff's  part  in  suits  for  a 

specific  performance:  English  rule. 

partly  upon  the  occasion  of  accident:  be  indorsed,  but  through  accident  or 

Wake  V.  Conyers,  1  Eden,  331;  2  Cox,  mistake  the  indorsement  is  omitted, 

360;  Miller  v.    Warmington,   1  Jacob  equity  will  compel  the  transferrer,  or, 

&   W.  484;  Perry  v.  Pratt,  31  Conn,  in  case  of  his  death,  his  executor  or 

433;  De  Veney  v.  Gallagher,  20  N.  J.  administrator,  toafiix  his  indorsement, 

Eq.    33;   Norris's  Appeal,  64   Pa.    St.  at  the  suit  of  the  holder.     This  is  in 

275;  Tillmes  v.  Marsh,  67  Pa.  St.  507;  fact  a  simple  case  of  reformation  and 

Wetherbee  v.  Dunn,  36  Cal.  249.    This  re-execution.    The  holder  is  an  equita- 

Bubject  is  discussed  in   a  subsequent  ble  assignee,  and  is  entitled  to  obtain 

chapter.     Where  a  note  or  bill  of  ex-  a  full  legal  right  and  title:  Watkinsv. 

change  is  transferred  and  intended  to  Maule,  2  Jacob  &  W.  237,  242. 


1157  MISTAKE.  §  838 

§  862.     Same:  American  rule:  evidence  admissible. 
9  863.     Evidence  of  a  parol  variation  which  has  been  part  performed. 
§§  864-867.     Effect  of  the  statute  of  frauds  upon  the  use  of  parol  eTideace  in 

equitable  suits. 
§  865.     Two  classes  of  cases  in  which  the  use  of  parol  evidence  may  be 

affected  by  the  statute. 
§  866.     General  doctrine:  parol  evidence  of  mistake  or  fraud  admissible 

in  both  these  classes  of  cases. 
§  857.     Glass  V.  Hulbert:  examination  of  proposed  limitations  upon  this 

general  doctrine. 
§§  868-871.     IV.   Instances  of  equitable  jurisdiction  occasioned  by  mistake. 
§  868.     When  exercised  by  way  of  defense. 
§  869.    By  way  of  affirmative  relief:  recovery  of  money  paid  by  mis* 

take. 
§  870.     Affirmative  relief:  reformation  and  cancellation. 
§  871.     Conditions  of  fact  which  are  occasions  for  affirmative  relief. 

§  838.     Origin  and  Purpose  of  This  Jurisdiction.  — 

From  the  time  when  jurisdiction  was  first  formally  dele- 
gated to  the  chancellor  by  the  crown,  mistake  has  played 
a  most  important  part  as  the  occasion  of  equitable  rights 
and  duties,  and  for  the  exercise  of  the  jurisdiction  in 
awarding  equitable  remedies.  In  the  earlier  periods, 
when  the  domains  of  the  law  courts  and  of  the  court  of 
chancery  were  sharply  discriminated,  when  the  common- 
law  judges  were  not  influenced  by  equitable  notions,  this 
branch  of  equitable  jurisprudence  and  jurisdiction  con- 
sisted entirely  in  the  means  by  which  certain  parties 
were  prevented  from  holding  and  enjoying  legal  rights, 
and  certain  other  parties  were  relieved  from  the  burden 
of  legal  duties  and  liabilities,  which  had  originated  un- 
der a  mistake,  and  which  were  complete  and  unassailable 
at  law.  In  the  progress  of  time,  as  the  common  law  be- 
came more  and  more  conformed  to  equitable  principles, 
the  legal  tribunals  assumed  a  partial  cognizance  and 
gave  a  partial  relief  in  cases  involving  mistake.  All  the 
possible  modes  in  which  the  remedial  jurisdiction  occa- 
sioned by  mistake  can  be  exercised  are  the  following: 
1.  Negatively,  as  a  ground  of  defense  either  in  actions  at 
law  or  in  suits  in  equity,  to  defeat  an  enforcement  of  and 
recovery  upon  either  liegal  or  equitable  rights  of  action; 


§  839  EQUITY   JURISPRUDENCE.  1158 

2.  Affirmatively,  as  a  ground  for  rescinding  a  transac- 
tion, and  restoring  the  mistaken  party  to  his  original 
position  by  means  of  an  appropriate  legal  action  and  a 
recovery  therein  of  money  or  property;  3.  Affirmatively, 
as  a  ground  for  the  equitable  relief  of  rescinding  a 
transaction,  or  canceling  an  agreement  or  other  written 
instrument;  4.  Affirmatively,  as  a  ground  for  the  equi- 
table relief  of  reforming  or  re-executing  a  written  instru- 
ment. The  final  object  of  the  present  discussion  is  to 
ascertain  when  these  various  remedies  may  be  obtained 
in  equity;  and  incidentally  to  ascertain  when  and  to 
what  extent  some  of  them  may  be  conferred  by  courts  of 
law.  The  discussion  itself  will  be  conducted  under  the 
following  divisions:  1.  Definition;  2.  A  statement  of  the 
various  kinds  of  mistakes  both  of  law  and  of  fact  which 
do  or  do  not  furnish  an  occasion  for  relief,  with  an  ex- 
amination of  the  equitable  conception  and  the  essential 
elements  of  a  mistake  in  order  that  it  may  be  a  ground 
for  the  exercise  of  jurisdiction;  3.  The  mode  of  showing 
a  mistake,  and  especially  how  far  may  parol  evidence 
be  resorted  to  for  the  purpose  of  showing  mistakes  in 
written  instruments;  4.  An  enumeration  of  the  Instances 
and  forms  of  equitable  jurisdiction  and  reliefs  occasioned 
by  mistake. 

§  839.  I.  Definition.  —  It  is  very  difficult  to  formulate 
a  definition  which  shall  contain  the  essential  elements  of 
the  conception  as  distinguished  from  its  effects,  and  which 
shall  accurately  discriminate  between  mistake  and  acci- 
dent on  the  one  side,  and  fraud  and  negligence  on  the 
other.  The  definitions  given  by  some  American  and 
English  text-writers  describe  the  effects  of  mistake,  —  the 
consequences  resulting  from  it, —  rather  than  its  essential 
features.^     It  was   shown  in  the  preceding  section  that 

1  Thus  Judge  Story  says:  Mistake  of  Equity,  370;  and  by  Kerr:  Fraud 

"is  some  unintentional  act,  or  omis-  and  Mistake,  396.     This  definition  is 

sion,  or  error,  arising  from  ignorance,  erroneous,  as  it  seems  to  me,  in  two 

surprise,  imposition,  or  misplaced  con-  most  important  particulars:  1.   It  sub- 

fidence":    Eq.    Jur.,    sec.    110.      His  stitutes  the  consequences  of  the  thing 

language  ia  copied  by  Suell:  Principles  in  place  of  the  thing  itself,  —  the  act  or 


1159  MISTAKE.  §  839 

accident  is  an  unexpected  occurrence  external  to  the  party 
affected  by  it;  and  its  operation  is  ordinarily  to  prevent 
that  party  from  doing  some  act  whereby  he  becomes 
subjected  to  a  liability  which  would  not  otherwise  have 
arisen.  Mistake,  on  the  other  hand,  is  internal;  it  is  a  men- 
tal condition,  a  conception,  a  conviction  of  the  understand- 
ing,—  erroneous,  indeed,  but  none  the  less  a  conviction, — 
which  influences  the  will  and  leads  to  some  outward  physi- 
cal manifestation.  Its  operation  is  ordinarily,  though  not 
always,  afiirmative,  —  the  doing  of  some  act  which  would 
not  have  been  done  in  the  absence  of  the  particular  con- 
ception or  conviation  which  influenced  the  free  action 
of  the  will.^  Its  essential  prerequisite  is  ignorance.  It  is 
distinguished  from  fraud,  fraudulent  representations,  or 
fraudulent  concealments  by  the  absence  of  knowledge 
and  intention,  which  in  legal  fraud  are  actually  present, 
and  in  constructive  fraud  are  theoretically  present,  as 
necessary  elements.  It  is  also  distinguished  from  that 
inattention  or  absence  of  thought  which  are  inherent  in 
negligence.  The  erroneous  conception  or  conviction  of 
the  understanding  which  constitutes  the  equitable  notion 
of  mistake  has  nothing  in  common  with  negligence; 
equity  will  not  relieve  a  person  from  his  erroneous  acts 
or  omissions  resulting  from  his  own  negligence.^  Mis- 
omission  done  through  mistake;  2.  said  to  exist,  in  a  legal  sense,  where  a 
The  language  is  so  broad  that  it  not  person,  acting  upon  some  erroneous 
only  embraces  in  its  very  terms  acts  conviction,  either  of  law  or  of  fact, 
and  omissions  which  are  the  results  of  executes  some  instrument  or  does 
fraud,  but  it  fails  to  exclude  those  some  act  which  but  for  that  erroneous 
which  are  occasioned  through  negli-  conviction  he  would  not  have  executed 
gence.  The  modern  commentators  or  done."  He  here  correctly  appre- 
upon  the  Roman  law,  who  have  gen-  hends  that  the  mental  condition — the 
erally  investigated  the  nature  of  legal  "  erroneous  conviction  "  —  constitutes 
relations  much  more  accurately  and  the  mistake,  and  not  the  act  done  in 
profoundly  than  the  common-law  writ-     pursuance  of  it. 

ers,  do  not  fall  into  this  error.  They  ^  This  analysis  is  not  a  mere  matter 
correctly  describe  mistake  as  essen-  of  words.  Upon  the  accurate  notion 
tially  a  mental  or  intellectual  condi-  of  what  is  essential  to  the  legal  cou- 
tion  interfering  with  the  free  operation  ception  of  mistake  depends  the  an- 
of  the  will,  and  not  as  the  acts  or  swer  to  the  question.  When  may  a 
omissions  produced  by  that  condition,  person  be  relieved  from  the  conse- 
Mr.  Haynes,  in  his  lectures  on  equity,  qunces  of  his  mistakes  of  law? 
gives  a  definition  which  much  more  ^  Leuty  v.  Hillas,  2  De  Gex  &  J.  110, 
nearly  embodies  the  true  conception.  121;  Duke  of  Beaufort  v.  Neeld,  12 
He   says    (p.  80):    "Mistake  may   be     Jlark  &  F.  248,  286;  Wild  v.  Hillas. 


§  839  EQUITY    JURISPRUDENCE.  1160 

take,  therefore,  within  the  meaning  of  equity,  and  as  the 
occasion  of  jurisdiction,  is  an  erroneous  mental  condi- 
tion, conception,  or  conviction,  induced  by  ignorance, 
misapprehension,  or  misunderstanding  of  the  truth,  but 
without  negligence,  and  resulting  in  some  act  or  omis- 
sion done  or  suffered  erroneously  by  one  or  both  the  par- 
ties to  a  transaction,  but  without  its  erroneous  character 
being  intended  or  known  at  the  time.  I  add  the  two  fol- 
lowing definitions,  which  originally  appeared  in  the  pro- 
posed Civil  Code  of  New  York,  and  were  thence  adopted 
by  the  existing  Civil  Code  of  California,  because  they  em- 
body the  essential  notions  which  I  have  attempted  to 
explain,  and  are  both  accurate  and  comprehensive:  "Mis- 
take of  fact  is  a  mistake  not  caused  by  the  neglect  of  a 
legal  duty  on  the  part  of  the  person  making  the  mistake, 
and  consisting  in,  —  1.  An  unconscious  ignorance  or  for- 
getfulness  of  a  fact,  past  or  present,  material  to  the  con- 
tract; or  2.  Belief  in  the  present  existence  of  a  thing 
material  to  the  contract  which  does  not  exist,  or  in  the 
past  existence  of  such  a  thing  which  has  not  existed."^ 

28  L.  J.  Ch.   170;  Gregory  v,  Wilson,  230,  238;  70  Am,  Dec.  406;  Elwell  v. 

9  Hare,  683,  689;  Drewry  v.  Barnes,  Chamberlain,  4  Bosw.  320.    Ignorance: 

3   Russ.    94;    Bateman   v.    Willoe,    1  Bell  v.  Gardiner,  4  Man.  &  G.    11;   4 

Schoales  &  L.  201;  Ware  v.  Harwood,  Scott  N.  R.  621;  Hore  v.  Becher,  12 

14  Ves.  28,  31;    Stevens  v.  Praed,  2  Sim.  465;  East  India  Co.  v.  Donald,  9 

Ves.    519;    Stephenson   v.   Wilson,    2  Ves.  275;  East  India  Co.  v.  Neave,  5 

Vern.    325;    Trigge    v.     Lavallee,    15  Ves.  173;  Cocking  v.  Pratt,  1  Ves.  Sr. 

Moore  P.  C.C.  270;  Marquis  of  Breadal-  400;   Briggs  v.    Vanderbilt,   19   Barb, 

bane  v.  Marquis  of  Chandos,  2  Mylne  222.  Forgetfulness:  Kelly  v.   Solari,  9 

&  C.  711,  719;  Henderson  v.  Cook,  4  Mees.  6i  W.  54;  Lucas  v.  Worswick,  1 

Drew.  306;  Diman  v.  Providence  etc.  Moody  &  ri..  293.  /''acf  posi."  McCarthy 

R,.  R.  Co.,  5  R.  I.  130;  Western  R.  R.  v.  Decaix,  2  Russ.   &  M.  614;  WiUan 

Co.  V.  Babcock,  6  Met.  346;  Wood  v.  v.  Willan,   16  Ves.  72;  East  I.  Co. 

Patterson,    4    Md.    Ch.   335;   Kite   v.  Donald,    9   Ves.    275;  East  I.  Co.    v, 

Lumpkin,  40  Ga.  506;  Lamb  v.  Harris,  Neave,  5  Ves.    173;   Durkin  v.  Crans 

8   Ga.    546;    Capehart   v.    Mhoon,    5  ton,  7  Johns.  442.  Fartpresent:  Brough 

Jones  Eq.  178.  ton  v.  Hutt,  3  De  Gex  &  J.  501;  Col 

1  N.  Y.  Civil   Code  (proposed),  sec.  yer  v.    Clay,    7   Beav.    188;    Hore  v 

76-2;  Cal.  Civil  Code,  sec.  1577.     The  Becher,  12  Sim.  465;  Cocking  v.  Pratt, 

authors  of  the  New  York  code  cite  the  1  Ves.  Sr.  400;  Huthmacher  v.  Harris's 

following  authorities  in  support  of  the  Adm'r,  38  Pa.  St.  491.    Subd.  2.  Thing 

material  items  of  their  definition:    In-  inhich  does  not  exist:  Hitchcock  v.  Gid- 

troductory   part.      Absence  of  neglect:  dings,  4  Price,  135;  Hastie  v.  Coutu- 

U.  S.  Bank  v.  Bank  of   Georgia,    10  rier,   9   Ex.   102;   5   H.  L.    Cas.    673; 

Wheat.    333.      Sul)d.    1.    Unconscious:  Strickland  v.  Turner,  7  Ex.  208;  Coch- 

Kelly  V.  Solari,  9  Mees.  &  W.  54;  Mc-  rane  v.  Willis,  L.  R.  1  Ch.  58;  Rheel 

Daniels  v.  Bank  of  Rutland,   29  Vt.  v.  Hicks,  25  N.  Y.  289;  Ketchum  v. 


1161 


MISTAKE. 


§  840 


"  Mistake  of  law  constitutes  a  mistake  only  when  it  arises 
from,  —  1.  A  misapprehension  of  the  law  by  all  parties, 
all  supposing  that  they  knew  and  understood  it,  and  all 
making  substantially  the  same  mistake  as  to  the  law;  or 
2.  A  misapprehension  of  the  law  by  one  part}^  of  which 
the  others  are  aware  at  the  time  of  contracting,  but  which 
they  do  not  rectify."*  "  Mistake  of  foreign  law  is  a  mis- 
take of  fact."  ' 

§  840.  II.  Various  Kinds  of  Mistakes  Which  Furnish 
an  Occasion  for  Relief. —  Under  this  most  important  head 
I  purpose  to  examine  more  in  detail  the  equitable  con- 
ception of  mistake;  to  ascertain  its  essential  elements,  in 
order  that  it  may  be  the  ground  of  any  equitable  inter- 
position; and  to  describe  the  various  kinds  of  mistakes, 
both  of  law  and  of  fact,  which  do  or  do  not  furnish  an  oc- 
casion for  relief.  We  are  met  at  the  outset  by  a  natural 
line  of  division.     A  party  may  enter  into  a  transaction 


Bank  of  Commerce,  19  N.  Y.  499,  502; 
Belknap  v.  Sealey,  14  N.  Y,  143;  67 
Am.  Dec.  120;  Martin  v.  McCormick, 
8  N.  Y.  331,  335;  Kip  v.  Monroe,  29 
Barb.  579;  Brings  v.  Vanderbilt,  19 
Barb.  222,  239;  Gardner  v.  Mayor  etc., 
26  Barb.  423;  Wheadoa  v.  Olds,  20 
Wend.  174;  Mowatt  v.  Wright,  1 
Wend.  355,  360;  19  Am.  Dec.  508;  Al- 
len  V.  Mayor  etc.,  4  E.  D.  Smith,  404. 
Thing  which  has  not  existed:  Martin  v. 
McCormick,  8  N.  Y.  331,  335.  The 
same  authors  add:  "The  dicta  found 
in  some  cases  to  the  effect  that  a  mis- 
take in  respect  of  matters  as  to  which 
the  party  had  '  means  of  knowledge ' 
does  not  avoid  a  contract:  See  Mut.  L. 
Ins.  Co.  V.  Wager,  27  Barb.  354; 
Clark*  V.  Dutcher,  9  Cow.  674;  Milnes 
V.  Duncan,  6  Barn.  &  C.  671;  are  not 
sustained  by  the  decisions:  See  Allen 
V.  Mayor,  4  E.  D.  Smith,  404;  Kelly 
V.  Solari,  9  Mees.  &  W.  54;  and  have 
been  finally  overruled:  Townsend  v. 
Crowdy,  8  Com.  B.,  N.  S.,  477;  Bell  v. 
Gardiner,  4  Man.  &  G.  11;  Dails  v. 
Lloyd,  12  Q.  B.  531." 

'  N.  Y.  Civ.  Code,  sec.  763;  Cal. 
Civ.  Code,  sec.  1588.  The  authors  of 
the  New  York  code  cite,  in  support  of 
this  definition, — Subd.  1:  Many.  v. 
Beekman  Iron  Co.,  9  Paige,  188;  Hall 


V.  Reed,  2  Barb.  Ch.  500;  Pitcher  v. 
Turin  Plank  Road  Co.,  10  Barb.  436; 
Wake  v.  Harrop,  6  Hurl.  &  N.  768. 
Subd.  2:  Cooke  v.  Nathan,  16  Barb. 
342.  On  the  general  subject  of  relief 
in  equity  from  mistakes  of  law,  they 
refer,  in  addition  to  Stone  v.  Godfrey, 
5  De  Gex,  M.  &  G.  76,  90;  Broughton 
V.  Hutt,  3  De  Gex  &  J.  501;  Evants 
V.  Strode,  11  Ohio,  480;  38  Am.  Dec. 
744;  Wheeler  v.  Smith,  9  How.  55; 
Champlin  v.  Laytin,  18  Wend.  407, 
422;  31  Am.  Dec.  .382. 

i'N.  Y.  Civ.  Code,  sec.  764;  Cal. 
Civ.  Code,  sec.  1579;  citing  McCormick 
V.  Garnett,  5  De  Gex,  M.  &  G.  278; 
Leslie  v.  Baillie,  2  Younge  &  C.  Ch.  91; 
Patterson  v.  Bloomer,  35  Conn.  57;  95 
Am.  Dec.  218;  Haven  v.  Foster,  9 
Pick.  112;  19  Am.  Dec.  353;  Bank  of 
Chillicothe  v.  Dodge,  8  Barb.  233; 
Merchants' Bank  V.  SpaldiuLr,  12  Barb. 
302.  It  should  be  added 'that  the 
three  definitions  given  in  the  text 
occur  in  the  chapter  of  the  codes  which 
treats  of  the  consent  necessary  to  the 
completion  of  a  contract,  so  that  they 
primarily  relate  to  mistakes  in  con- 
tracts; they  may  be  readily  applied, 
however,  to  mistakes  in  any  other 
transaction. 


§  841  EQUITY   JURISPRUDENCE.  1162 

altering  his  legal  relations  for  the  better  or  the  worse, 
with  full  knowledge  of  all  the  facts  connected  therewith, 
but  ignorant  or  mistaken  concerning  either  the  general 
law  of  the  land  governing  the  case,  or  concerning  his  own 
personal  legal  rights  affected  by  or  resulting  from  the 
transaction.  On  the  other  hand,  he  may  be  cognizant  of 
the  general  law  and  of  his  own  legal  rights,  but  be  igno- 
rant  or  mistaken  as  to  some  material  fact  of  the  transac- 
tion which  forms  an  important  factor  in  determining  his 
action.  All  possible  mistakes  are  therefore  separated  into 
those  of  law  and  those  of  fact,  although  it  is  sometimes 
very  difiBcult  to  ascertain  in  a  particular  instance  whether 
the  mistake  is  purely  one  of  law,  or  is  of  law  and  of  fact 
in  combination.  As  the  cases  in  which  persons  are  re- 
lieved from  their  mistakes  of  law  are  somewhat  excep- 
tional, it  will  be  convenient  to  examine  them  first  in 
order. 

§841.  First.  Mistakes  of  Law.  —  It  is  very  impor- 
tant to  form  an  accurate  notion  of  the  various  conditions 
included  within  this  general  term;  much  confusion  and 
apparent  conflict  of  opinion  have  resulted  from  a  failure 
to  recognize  these  distinctions.  Mistake  of  law  may  be 
an  ignorance  or  error  with  respect  to  some  general  rules 
of  the  municipal  law  applicable  to  all  persons,  which 
regulate  human  conduct,  determine  rights  of  property, 
of  contract,  and  the  like;  such  as  the  rules  making  cer- 
tain acts  criminal,  and  those  controlling  the  devolution, 
acquisition,  and  transfer  of  estates,  and  those  prescribing 
the  modes  of  entering  into  agreements.  On  the  other 
hand,  the  term  may  mean  the  ignorance  or  error  of  a 
particular  person  with  respect  to  his  own  legal  rights  and 
interests  which  are  affected  by  or  which  result  from  a 
certain  transaction  in  which  he  engages.  This  applica- 
tion of  the  term  may  present  two  entirely  different  con- 
ditions. The  person  about  to  enter  into  the  transaction 
may  be  ignorant  of  or  mistaken  about  his  own  antece- 
dent existing  legal  rights  and  interests  which  are  to  be 


1163  MISTAKE.  §  841 

affected  by  what  he  does,  although  he  correctly  appre- 
hends and  fully  understands  the  legal  import  of  the 
transaction  itself  and  its  true  effects  upon  his  supposed 
legal  rights;^  or  the  person  may  be  correctly  informed 
as  to  his  existing  legal  rights,  interests,  or  relations,  and 
may  be  ignorant  ox  mistaken  with  respect  to  the  legal 
import  of  the  transaction  in  which  he  engages,  and  its 
legal  effect  upon  those  rights,  interests,  or  relations.  Fi- 
nally, in  any  one  of  the  foregoing  instances  the  ignorance 
or  error  may  be  confined  to  one  party,  or  it  may  extend 
to  both  parties;  all  the  parties  may  alike  enter  into  the 
transaction  under  a  common  ignorance  or  error  concern- 
ing the  general  rules  of  the  law,  or  concerning  the  indi- 
vidual legal  interests  affected  by  or  resulting  from  it.  An 
ancient  and  familiar  maxim  of  the  common  law  is,  Igno- 
rantia  juris  non  excusat.  This  maxim  confessedly  has  its 
primary  application  to  cases  of  the  first  class  above  de- 
scribed,—  ignorance  or  error  concerning  the  general  rules 
of  law  controlling  human  conduct,  and  especially  in 
criminal  prosecutions.^  The  real  question  for  discussion 
is,  How  far  does  it  apply  to  the  two  species  contained  in 
the  second  class,  —  mistakes  as  to  individual  legal  rights? 
The  principle  embodied  in  the  maxim  was  derived  from 
the  Roman  law;  little  aid,  however,  can  be  derived  from 
the  uncertain  and  conflicting  opinions  of  the  Roman  law 
jurists  and  commentators.' 

*  For  example,  a  person  about  to  It  -will  be  found,  I  think,  that  a  great 
give  a  release  might  erroneously  sup-  majority  of  the  cases  in  which  mis- 
pose  that  he  held  only  a  life  estate,  takes  of  law  have  been  relieved  be- 
while  in  fact  he  was  the  owner  in  fee;  long  to  this  species, 
and  might  know  that  the  legal  opera-  ^  See  1  Plowd.  342,  per  Manwood, 
tion  of  the  conveyance  was  to  release  J.:  "It  is  to  be  presumed  that  no  sub- 
all  the  interest  which  he  had.  Com-  ject  of  this  realm  is  miscognizant  of 
promises  are  the  most  common  illus-  the  law  whereby  he  is  governed.  Ig- 
tration  of  this  species,  when  the  par-  norance  of  the  law  excuseth  none." 
ties  correctly  understand  the  legal  *  In  the  digest,  title  De  juris  et 
efifect  of  the  agreement  itself  which  /acti  ignorantia,  the  general  rule  is 
they  make,  and  of  the  instruments  stated:  "  Reijula  eat,  juris  qiiidem  ig- 
which  they  execute,  and  the  mistake  nwantiam  cuique  nocere,  facti  vero  ig- 
consists  of  their  ignorance  or  error  as  norantiam  non  nocere":  Dig.,  xxii., 
to  the  nature  of  the  prior  legal  rights  tit.  vi.,  1,  9.  The  following  illustra- 
which  they  possessed,  and  which  they  tion  is  given:  "If  a  man  be  ignorant 
surrender  by  means  of  the  compromise,  of  the  death  of  a  kinsman  whose  es- 


§  842 


EQUITY   JURISPRUDENCE. 


1164 


§  842.  The  General  Rule,  and  its  Limitations.  —  The 
doctrine  is  settled  that,  in  general,  a  mistake  of  law, 
pure  and  simple,  is  not  adequate  ground  for  relief. 
Where  a  party  with  knowledge  of  all  the  material  facts, 
and  without  any  other  special  circumstances  giving  rise 
to  an  equity  in  his  behalf,  enters  into  a  transaction  afifect- 


tate  is  to  be  administered,  time  shall 
not  run  against  him  and  bar  his  claim 
to  inherit;  otherwise  if  he  be  aware 
of  the  death  and  of  his  own  relation- 
ship, but  ignorant  of  his  own  right  to 
inherit,  time  will  bar  his  claim,  because 
the  error  is  one  of  law."  The  digest 
admitted  certain  classes  of  persons  to 
whom  relief  would  be  allowed  from 
the  consequences  of  ignorance  or  error 
of  law,  — Quibus  permissum  est  jus  igno- 
rare,"  —  namely,  women,  soldiers,  and 
persons  under  the  age  of  twenty-five. 
It  was  presumed  that  they  had  not 
had  opportunities  to  become  ac- 
quainted with  the  law.  This  permis- 
sion was  not  universal;  they  were  not 
allowed  to  allege  their  ignorance  as 
defense  for  acts  in  violation  of  rules 
based  upon  the  jus  gentium,  since 
these  rules  were  founded  upon  natural 
reason  and  equity,  and  were  appre- 
hended naturali  ratione,  and  did  not 
require  any  special  knowledge  or 
study:  Dig.,  ubi  supra.  The  ques- 
tion how  far  relief  may  be  given  for 
a  mistake  of  law  has  given  rise  to  a 
great  conflict  of  opinion  among  the 
modern  commentators  upon  the  Ro- 
man law.  It  waa  a  settled  doctrine 
that  where  one,  through  error,  had 
paid  what  was  not  due,  he  might  re- 
cover it  back  by  an  action  called  con- 
dictio  indebiti.  The  importance  of 
this  action  is  shown  by  the  fact  that  a 
whole  title  is  devoted  to  it  in  the 
digest  and  also  in  the  code.  A  text 
of  the  code  seems  to  deny  restitution 
■where  the  money  has  been  paid  under 
an  error  of  law:  "  ^mmto  quis  jus  ig- 
norans  indebitam  pecuniam  solverit,  ces- 
sat  repetitio.  Per  ignorantiam  eniin 
facti  tantum  repetUionem  indebiti  soluti 
compelere  tibi  notum  est":  Code,  lib. 
I.,  tit.  18,  1.  10.  Upon  this  text  and 
some  others,  certain  jurists,  including 
Cujas,  Donellus,  Voet,  and  Pothier, 
maintain  that  no  action  ever  lies  to 
recover  back  money  paid  by  mistake 
of    law.     Another    class   of    writers, 


equally  eminent,  among  whom  are 
Vinnius,  Ulric  Huber,  Milhlenbruch, 
and  D'Aguessean,  hold  that  the  action 
can  be  maintained  in  all  cases  of  error, 
whether  of  fact  or  of  law.  They  con- 
tend that  the  action  is  eminently  equi- 
table, and  can  be  defeated  only  by  a 
defense  which  is  equally  equitable; 
that  in  the  whole  title  on  condictio 
indebiti  in  the  digest,  there  is  no  text 
confining  the  action  to  error  of  fact, 
but  the  language  everywhere  speaka 
of  "error"  generally;  and  that  the 
passages  in  the  code  which  seem  to 
confine  the  remedy  to  errors  of  fact 
are  not  general  rules,  but  are  all  taken 
from  imperial  ' '  rescripts  "  applicable 
only  to  special  cases  in  which  a  nat- 
ural, though  not  a  legal,  obligation  to 
make  the  payment  existed,  so  as  to 
afiford  an  equitable  ground  for  retain- 
ing the  money.  This  reasoning  is 
certainly  very  powerful.  A  similar 
opinion,  based  entirely  upon  a  com- 
parison of  texts  in  the  digest  and 
code,  is  maintained  by  a  recent  French 
writer,  Professor  Demangeat,  in  his 
Cours  Elementaire  du  Droit  Ro- 
main  (vol.  2,  pp.  370-372).  Savigny, 
in  his  great  work  on  the  Roman  law, 
reaches  the  conclusion  that  money 
paid  by  a  mistake  of  law  cannot  be 
recovered  back,  unless  it  can  be 
proved  that  the  ignorance  was  excus- 
able under  the  circumstances,  and  not 
the  result  of  gross  negligence:  3 
Traite  de  Droit  Romain,  Append.  8, 
sec.  35,  p.  415.  The  modern  European 
codes  based  upon  the  Roman  law  ex- 
hibit the  same  diversity.  The  French 
and  the  Austrian  codes  permit  a  re- 
covery of  money  paid  under  a  mis- 
take either  of  law  or  of  fact;  the 
Prussian  code  permits  it  only  when 
paid  through  a  mistake  of  fact:  See 
Studies  in  Roman  Law,  by  Lord  Mac- 
kenzie, 338-340;  2  Austin's  Lectures 
on  Jurisprudence,  168-170.  The  fore- 
going resume  shows  that  the  question 
is  one  of  great  and  inherent  difficulty. 


1165 


MISTAKE. 


§842 


ing  his  interests,  rights,  and  liabilities,  under  an  igno- 
rance or  error  with  respect  to  the  rules  of  law  controlling 
the  case,  courts  will  not,  in  general,  relieve  him  from  the 
consequences  of  his  mistake.'  The  reasons  are  obvious. 
The  administration  of  justice,  the  law  itself  as  a  practical 
system  for  the  regulation  of  human  conduct,  require  that 
some  fundamental  assumptions  should  be  made  as  postu- 
lates. The  most  important,  perhaps,  of  all  these,  is  the 
assumption  that  all  persons  of  sound  and  mature  mind 
are  presumed  to  know  the  law.  If  ignorance  of  the  law 
were  generally  allowed  to  be  pleaded,  there  could  be  no 
security  in  legal  rights,  no  certainty  in  judicial  investi- 
gations, no  finality  in  litigations.  While  this  general 
doctrine  prevails  in  equity  as  well  as  at  law,  its  operation 


^  The  leading  case  of  Bilbie  v.  Lum- 
ley,  2  East,  469,  furnishes  a  good  il- 
lustration of  the  general  rule  and  of 
its  reasons.  An  insurer,  with  knowl- 
edge of  all  the  facts  which  destroyed 
his  liability  on  a  policy  of  insurance 
which  he  had  signed,  but  in  ignorance 
of  the  legal  rights  resulting  from  those 
facts,  paid  the  amount  he  had  assured; 
and  afterwards  he  brought  an  action 
to  recover  back  the  money  as  paid 
under  a  mistake.  The  court  held  that 
the  action  could  not  be  maintained. 
Lord  Ellenborough  said:  "  Every  man 
must  be  taken  to  be  cognizant  of  the 
law;  otherwise  there  is  no  saying  to 
what  extent  the  ignorance  might  not 
be  carried.  It  would  be  urged  in  al- 
most every  case."  If  a  legal  question 
could  be  settled  by  numbers  of  judi- 
cial dicta  expressed  in  the  most  general 
terms,  there  could  be  no  doubt  of  the 
universality  of  the  doctrine  stated  in 
the  test.  The  following  are  some  of 
the  cases  by  which  it  is  sustained: 
Suell  V.  Atlantic  Ins.  Co.,  98  U.  S. 
85;  De  Give  v.  Healey,  60  Ga.  391; 
Ottenheimer  v.  Cook,  10  Heisk.  309; 
Jenkins  v.  German  Luth.  Cong.,  58 
Ga.  125;  Hardigree  v.  Mitchum,  51 
Ala.  151;  Heavenridge  v.  Mondy,  49 
Ind.  434;  Gebb  v.  Rose,  40  Md.  387; 
Thurmond  v.  Clark,  47  Ga.  500;  Bled- 
soe V.  Nixon,  68  N.  C.  521 ;  Smith  v. 
Penn,  22  Gratt.  402;  Jacobs  v.  Mo- 
range,  47  N.  Y.  57;  ZoUman  v.  Moore, 
21  Gratt.  313:  Goltra  v.  Sanasack,  53 
111.  456;  Bryant  v.  MansHeld,  22  Me. 


360;  Mellishv.  Robertson,  25  Vt.  603; 
Proctor  V.  Thrall,  22  Vt.  'J62;  Shotwell 
V.  Murray,  1  Johns.  Ch.  512;  Lyon  v. 
Puchmoud,  2  Johns.  Ch.  51,  60;  Storr3 
V.  Barker,  6  Johns.  Ch.  166;  10  Am. 
Dec.  316;  Gilbert  v.  Gilbert,  9  Barb. 
5.32;  Garnar  v.  Bird,  57  Barb.  277; 
Stoddard  v.  Hart,  23  N.  Y.  556; 
Hinchman  v.  Emans,  1  N.  J.  Eq.  100; 
Wintermute  v.  Snyder.  3  N.  J.  Eq.  489; 
Peters  V.  Florence,  38  Pa.  St.  194;  Good 
V.  Herr,  7  Watts  &  S.  253;  State  v. 
Reigart,  1  Gill,  1;  Davis  v.  Bagley,  40 
Ga.'lSl;  2  Am.  Rep.  570;  Dill  v.  Sha- 
han,  25  Ala.  694;  60  Am.  Dec.  540; 
Gwynn  v.  Hamilton,  29  Ala.  233; 
Lyon  V.  Sanders,  23  Miss.  530;  State 
v.  Paup,  13  Ark.  129;  56  Am.  Dec. 
303;  McMurray  v.  St.  Louis  etc.  Co., 
33  Mo.  377;  Rochester  v.  Alfred  Bank, 
13  Wis.  432;  80  Am.  Dec.  746;  Smith 
V.  McDougal,  2  Cal.  586;  Kenyon  v. 
Welty,  20  Cal.  637;  81  Am.  Dec.  137; 
Bank  of  United  States  v.  Daniel,  12 
Pet.  32;  Hunt  v.  Rousmanier,  8 
Wheat.  174;  1  Pet.  1;  2  Mason,  342; 
Maiden  v.  Menil,  2  Atk.  8;  Cann  v. 
Cann,  1  P.  Wms.  723,  727;  Currie  v. 
Goold,  2  Madd.  163;  Smith  v.  Jackson, 
1  Madd.  618;  Goodman  v.  Sayers,  2 
Jacob  &  W.  249,  203;  Marshall  v.  Col- 
lett,  1  Younge  &  C.  232;  Denys  v. 
Shuckburgh,  4  Younge  &  C.  42;  Mellers 
v.  Duke  of  Devonshire,  16  Beav.  252; 
Midland  Gr.  W.  Co.  v.  Johnson,  6  H. 
L.  Cas.  798;  [Allen  v.  Galloway,  30 
Fed.  Rep.  466;  Hamblin  v.  Bishop,  41 
Fed.  Rep.  74.] 


§  842  EQUITY   JURISPRUDENCE.  1166 

is  not  there  universal;  it  is  subject  to  modifications  and 
limitations;  equity  does  sometimes  exercise  its  jurisdiction 
on  the  occasion  of  mistakes  of  law.  If  the  mistake  of  law 
is  not  pure  and  simple,  but  is  induced  or  aecompanied 
by  other  special  facts  giving  rise  to  an  independent 
equity  on  behalf  of  the  mistaken  person,  such  as  inequi- 
table conduct  of  the  other  party,  there  can  be  no  doubt 
that  a  court  of  equity  will  interpose  its  aid.  Even  when 
the  mistake  of  law  is  pure  and  simple,  equity  may  inter- 
fere. The  difiiculty  is  to  ascertain  any  general  criterion 
which  shall  determine  and  include  all  such  cases.  Many 
judges  have  attempted  to  formulate  a  criterion  for  all  in- 
stances of  pure  mistakes  of  law  which  will  be  relieved  in 
equity,  but  their  conclusions  are  conflicting,  and  none  is 
sustained  by  the  authority  of  judicial  decisions.  It  has 
been  said  by  judges  of  the  highest  ability  that  the  general 
doctrine  heretofore  stated,  and  embodied  in  the  maxim, 
Ig nor antia  juris  non  excusat,  is  confined  to  mistakes  of  the 
general  rules  of  law, — the  first  class  of  mistakes  described 
in  the  preceding  paragraph;  that  it  has  no  application  to 
the  mistakes  of  persons  as  to  their  own  private  legal 
rights  and  interests,  —  the  second  class  before  described; 
that  "jus,"  in  the  maxim,  denotes  the  general  law,  the  law 
of  the  country,  and  never  means  private  legal  rights.^ 

*  This  view  is  supported  by  the  au-  ties  contract  under  a  mutual  mistaJce  and 
thority  of  Lord  Westbury,  certainly  misapprehension  as  to  their  relative  and 
one  of  the  ablest  judges  that  ever  sat  respective  riglds,  the  result  is  that  that 
in  the  English  court  of  chancery,  and  agreement  is  liable  to  be  set  aside  as 
distinguished  for  the  remarkable  grasp  having  proceeded  upon  a  common  mis- 
and  clear  enunciation  of  principles  in  take.  Now,  that  was  the  case  with 
all  l^is  opinions.  In  Cooper  v.  Phibbs,  these  parties;  the  respondents  believed 
L.  R.  2  H.  L.  149,  170,  he  said:  "In  themselves  to  be  entitled  to  the  prop- 
such  a  state  of  things  there  can  be  no  erty,  the  petitioner  believed  that  he 
doubt  of  the  rule  of  a  court  of  ec^uity  M'as  a  stranger  to  it,  the  mistake  is 
with  regard  to  the  dealing  with  that  discovered,  and  the  agreement  cannot 
agreement.  It  is  said  ignorantia  ju-  stand."  It  is  proper  to  observe  that 
ris  haud  excusat;  Ijut  in  that  maxim  although  Lord  Westbury's  general 
the  word  '  j?£s '  is  used  in  the  sense  of  language  is  broad  enough  to  cover 
denoting  general  law,  —  the  ordinary  both  species  embraced  in  my  second 
law  of  the  country.  But  ■when  the  class  as  described  in  the  preceding 
word 'jMs' is  used  in  the  sense  of  denot-  paragraph,  where  the  mistake  is  con- 
ing a  private  right,  that  maxim  has  no  cerning  a  private  legal  right,  yet  the 
application.  Private  right  of  owner-  facts  to  which  he  applies  his  language 
ship  is  a  matter  of  fact;  it  may  be  the  fall  exclusively  under  the  first  species 
result  also  of  matter  of  law;  hut  if  par-  of  that  class,  namely,  where  the  party 


1167  MISTAKE.  §  843 

§  843.  Mistake  as  to  the  Legal  Import  or  Effect  of  a 
Transaction.  —  That  this  rule,  as  suggested  by  Lord  AVest- 
bury,  would  furnish  a  clear,  definite,  and  in  some  resiDects 
a  desirable  criterion  cannot  be  doubted;  but  it  is  not,  in 
its  full  extent,  sustained  by  authority;  indeed,  a  portion 
of  its  conclusions  is  directly  opposed  to  the  overwhelming 
w^eight  of  judicial  decisions.  The  rule  is  well  settled  that 
a  simple  mistake  by  a  party  as  to  the  legal  effect  of  an 
agreement  which  he  executes,  or  as  to  the  legal  result 
of  an  act  wdiich  he  performs,  is  no  ground  for  either  de- 
fensive or  affirmative  relief.  If  there  were  no  elements  of 
fraud,  concealment,  misrepresentation,  undue  influence, 
violation  of  confidence  reposed,  or  of  other  inequitable 
conduct  in  the  transaction,  the  party  who  knew,  or  had 
an  opportunity  to  know,  the  contents  of  an  agreement  or 
other  instrument  cannot  defeat  its  performance  or  obtain 
its  cancellation  or  reformation  because  he  mistook  the 
legal  meaning  and  effect  of  the  whole  or  of  any  of  its  pro- 
is  mistaken  concerning  his  antecedent  veyanceg  were  executed  carrying  out 
existing  legal  right  which  is  to  be  this  arrangement.  The  result  was,  of 
affected  by  the  agreement  which  he  of  course,  that  the  plaintiff,  through  a 
makes,  and  not  concerning  the  legal  mistake  of  law,  conveyed  away  land 
import  of  the  agreement  itself.  The  which  clearly  belonged  to  himself, 
sams  view  will  completely  explain  "Discovering  his  error  subsequently,  he 
Lord  King's  decision  in  the  celebrated  filed  a  bill  to  be  relieved.  Lord  Chan- 
case  of  Lansdowne  v.  Lansdowne,  2  cellor  King  held  that  the  conveyances 
Jacob  &  W.  205;  Mos.  364,  365;  al-  were  made  through  a  mistake  and  mis- 
though  the  grounds  were  not  so  accu-  representation  of  the  law,  and  decreed 
rately  stated  by  him  as  by  Lord  that  they  should  be  surrendered  up 
Westbury.  The  facts  of  this  often-  and  canceled.  He  is  reported  to  have 
quoted  case  briefly  were:  The  plaintiff  said:  "The  maxim  of  law,  Ignorantia 
was  the  only  son  of  the  eldest  brother  of  juris  non  excusat,  was,  in  regard  to 
a  deceased  intestate.  He  had  a  dis-  the  public,  that  ignorance  cannot  be 
pute  with  his  uncle,  a  younger  brother  pleaded  in  excuse  of  crimes,  but  did 
of  the  deceased,  concerning  their  re-  not  hold  in  civil  cases."  This  dictum, 
spective  rights  to  inherit  the  land  of  when  taken  literally,  is  much  too  broad, 
the  deceased.  It  was  agreed  by  them  and  is  clearly  incorrect;  but  the  real 
to  consult  a  schoolmaster,  one  Hughes,  doctrine  lying  beneath  it,  and  what  the 
Hughes  went  for  instruction  to  a  book  chancellor  plainly  had  in  his  mind,  is 
called  the  Clerk's  Remembrancer,  identical  with  the  view  expressed  by 
and  there  found  the  law  laid  down  Lord  Westbury.  This  case,  as  it  seems 
that  "land  could  not  ascend,  but  al-  to  me,  has  created  a  great  deal  of  un- 
ways  descended,"  and  he  thereupon  necessary  difficulty  and  criticism.  It 
informed  the  parties  that  the  land  falls  directly  within  the  first  species 
went  to  the  younger  brother,  the  of  my  second  class  of  mistakes,  and  is 
plaintiff's  uncle.  Upon  this  decision,  a  striking  example  of  that  species. 
the  plaintiff  and  his  uncle  agreed  to  See  also  Blakeniaii  v.  Blakeinau,  39 
share  the  land  between  them,  and  con-     Conn.  320. 


843 


EQUITY    JURISPRUDENCE. 


1168 


visions.  Where  the  parties,  with  knowledge  of  the  facts, 
and  without  any  inequitable  incidents,  have  made  an 
agreement  or  other  instrument  as  they  intended  it  should 
be,  and  the  writing  expresses  the  transaction  as  it  was 
understood  and  designed  to  be  made,  then  the  above  rule 
uniformly  applies;  equity  will  not  allow  a  defense,  or 
grant  a  reformation  or  rescission,  although  one  of  the 
parties  —  and  as  many  cases  hold,  both  of  them  —  may 
have  mistaken  or  misconceived  its  legal  meaning,  scope, 
and  effect.*     The  principle  underlying  this  rule  is,  that 


*  The  circumstancea  mentioned  in 
the  text  are  the  same  as  the  second 
species  of  the  second  class  described 
before  in  §  841,  where  a  person  know- 
ing correctly  his  existing  legal  rights 
and  relations  is  mistaken  as  to  the 
legal  import  of  the  transaction  in 
which  he  engages,  and  of  its  legal 
effect  upon  those  rights  or  relations. 
In  Powell  V.  Smith,  L.  R.  14  Eq.  85, 
90,  Lord  Romilly  accurately  states 
the  doctrine  of  the  text,  and  its  rea- 
sons. The  defendant  endeavored  to 
defeat  the  enforcement  of  an  agree- 
ment to  give  a  lease,  on  the  ground 
that  he  was  mistaken  as  to  the  legal 
meaning  and  effect  of  an  important 
provision.  The  master  of  rolls,  in 
overruling  the  defense,  said:  "All 
those  cases  which  have  been  cited  on 
the  argument  are  cases  where  there 
was  either  a  dispute  or  doubt  as  to  the 
thing  sold,  or  where  the  words  of  the 
agreement  expressed  certain  things  in 
an  ambiguous  manner,  which  might 
be  misunderstood  by  one  of  the  par- 
ties. [In  such  cases  a  decree  for  per- 
formance might  be  refused,  because  it 
did  not  appear  with  sufficient  certainty 
what  the  parties  had  agreed.]  But  here 
the  words  of  the  agreement  are  quite 
certain,  and  the  only  thing  that  was 
not  understood  was  the  legal  effect  of 
certain  words  which  it  'contained. 
Now,  that  is  no  ground  of  mistake  at 
all.  It  is  a  question  upon  the  construc- 
tion of  an  agreement  agreed  to  by 
everybody  concerned."  Hu)ptv.  Rous- 
manier,  8  Wheat.  174,  1  Pet.  1,  is  the 
leading  American  case  upon  this  phase 
of  the  doctrine,  in  which  the  rule  and 
its  limitations  are  most  carefully  ex- 
amined; and  the  decision  has  been 
regarded  as  one  of  the  highest  author- 


ity. See  also  Gerald  v.  EUey,  45  Iowa, 
322;  Glenn  v.  Statler,  42  Iowa,  107; 
Nelson  v.  Davis,  40  Ind.  366;  Fellows 
V.  Heermans,  4  Laus.  230;  Moorman 
V.  Collier,  32  Iowa,  138;  Hoover  v. 
Reilly,  2  Abb.  471;  Norrisv.  Laberee, 
58  Me.  260;  Kennard  v.  George,  44 
N.  H.  440;  Mellish  v.  Robertson,  25 
Vt.  003;  Pettes  v.  Bank  of  Whitehall, 
17  Vt.  4.35;  Goodell  v.  Field,  15  Vt. 
448;  Molony  v.  Rourke,  100  Mass. 
190;  Haven  v.  Foster,  9  Pick.  112;  19 
Am.  Dec.  353;  Wheaton  v.  Wheaton, 
9  Conn.  96;  Leavitt  v.  Palmer,  3  N.  Y. 
19;  51  Am.  Dec.  333;  Lanning  v.  Car- 
penter, 48  N.  Y.  408;  Pitcher  v.  Hen- 
nessey, 48  N.  Y.  415;  Story  v.  Conger, 
36  N.  Y.  673;  93  Am.  Dec.  546;  O'Don- 
nell  V.  Harmon,  3  Daly,  424;  Champ- 
lin  V.  Lay  tin,  18  Wend.  407;  31  Am. 
Dec.  382;  Crosier  v.  Acer,  7  Paige, 
137;  Hall  v.  Reed,  2  Barb.  Ch.  500 j 
Dupre  V.  Thompson,  4  Barb.  279;  Bent- 
ley  V.  Whittemore,  18  N.  J.  Eq.  366; 
Hawralty  v.  Warren,  18  N.  J,  Eq. 
124;  90  Am.  Dec.  613;  Durant  v,  Ba- 
cot,  13  N.  J.  Eq.  201;  Garwood  v.  El- 
dridge,  2  N.  J.  Eq.  145;  34  Am.  Dec. 
195;  Wintermute  v.  Snyder,  3  N.  J. 
Eq.  489;  Light  v.  Light,  21  Pa.  St. 
407;  Rankin  v.  Mortimere,  7  Watts, 
372;  McEIderry  v.  Shipley,  2  Md.  25; 
56  Am.  Dec.  703;  Showman  v.  Miller, 
6  Md.  479;  Watkins  v.  Stockett,  6 
Har.  &  J.  435;  Alexander  v.  Newton, 
2  Gratt.  266;  Dill  v.  Shahan,  25  Ala. 
694,  702;  60  Am.  Dec.  540;  Clayton 
V.  Freet,  10  Ohio  St.  544;  Evants  v. 
Strode,  1 1  Ohio,  480;  38  Am,  Dec.  744; 
McNaughten  v.  Partridge,  11  Ohio, 
223;  38  Am.  Dec.  731;  Martin  v. 
Hamlin,  18  Mich.  354;  100  Am.  Dec. 
181;  Barnes  v.  Bartlett,  47  Ind.  98; 
Heavenridge  v.  Mondy,  49  Ind.  434; 


1169  MISTAKE.  §  844 

equity  will  not  interfere  for  the  purpose  of  carrying  out 
an  intention  which  the  parties  did  not  have  when  they  en- 
tered into  a  transaction,  but  which  they  might  or  even 
would  have  had  if  they  had  been  more  correctly  informed 
as  to  the  law,  —  if  they  had  not  been  mistaken  as  to  the 
legal  scope  and  effect  of  their  transaction.  If  an  agree- 
ment or  written  instrument  or  other  transaction  ex- 
presses the  thought  and  intention  which  the  parties  had 
at  the  time  and  in  the  act  of  concluding  it,  no  relief, 
affirmative  or  defensive,  will  be  granted  with  respect  to 
it,  upon  the  assumption  that  their  thought  and  intention 
would  have  been  different  if  they  had  not  been  mistaken 
as  to  the  legal  meaning  and  effect  of  the  terms  and 
provisions  by  which  such  intention  is  embodied  or  ex- 
pressed, even  though  it  should  be  incontestably  proved 
that  their  intention  would  have  been  different  if  they 
had  been  correctly  informed  as  to  the  law.  These  rules 
are  settled  with  perfect  unanimity  where  one  party  has 
been  mistaken  in  such  a  manner;  they  are  also  applied 
by  very. many  cases  where  the  same  mistake  is  common 
to  both  the  parties. 

§  844.  Particular  Instances  in  Which  Relief  will  or 
will  not  be  Granted.  —  Firmly  settled  as  are  the  foregoing 
general  rules,  it  is  equally  well  settled  that  there  are  par- 
ticular instances  in  which  equity  will  grant  defensive  or 
affirmative  relief  from  mistakes  of  law  pure  and  simple, 
as  well  as  from  those  accompanied  by  other  inequitable 
incidents.  The  only  difficulty  consists,  as  has  already 
been  mentioned,  in  drawing  any  sharply  defined  lines  by 

Wood  V.  Price,  46  111.  439;  Adams  v.  30;  Mildmay  v.  Hungerford,  2  Vern. 

Robertson,  37  111.  45;  Montgomery  v.  243;   Irnhara  v.  Child,  1    Brown  Ch. 

Shockey,  37  Iowa,  107;  Heatonv.  Fry-  92;  Gibbons  v.  Cauat,  4Ves.  840,  849; 

berger,  38  Iowa,  185,  190,  201;  Hearst  Marquis  of  Townshend  v.  Stangroom, 

V.  Pujol,  44  Cal.  2.30;  Great  West.  R'y  6  Ves.  328,  3:32;  Price  v.  Dyer,  17  Ves. 

V.  Cripps,  5  Hare,  91;  Croome  v.  Led-  356;  [Rector  v.  Collins,  46  Ark.  167; 

iard,  2  Mylne  &  K.  251:  Cockerell  v.  55  Am.  Rep.  571;  Hicks  v.  Coody,  49 

Cholmeley,   1   Russ.   &  M.  418;  Mar-  Ark.    429;    Corrigan  v.  Tiernay,    100 

shall  V.  CoUett,   1  Younge  &  C.  2.S2,  Mo.    276;  Wilson  v.  McLaughlin,   11 

238;  PuUeu  v.  Ready,  2  Atk.  587,  591;  Col.  465;  Kelly  v.  Turner,  74  Ala.  513; 

Stockley  v.  Stockley,  1  Ves.  &  B.  23,  Caldwell  v.  Depew,  40  Minn.  628.] 
2  Eq.  Juk.  — 74 


§  845  EQUITY   JURISPRUDENCE.  1170 

which  all  these  instances  may  be  accurately  determined.* 
I  shall  endeavor  to  state  those  conclusions  which  seem  to 
be  based  upon  principle  as  well  as  sustained  by  authority; 
although  it  must  be  conceded  that  no  results  can  be 
reached  which  shall  represent  the  unanimous  concurrence 
of  decisions  and  dicta.  It  is  certain,  however,  that  no 
mistake  of  law  will  be  relieved  from  unless  it  is  material, 
and  the  court  is  certain  that  the  conduct  of  the  parties 
has  been  determined  by  it.^ 

§  845.  Reformation  of  an  Instrument  on  Account  of  a 
Mistake  of  Law.  —  The  fiyst  instance  which  I  shall  men- 
tion is  closely  connected  with  the  doctrine  stated  in  the 
last  paragraph  but  one.  It  was  there  shown  that  if  an 
agreement  is  what  it  was  intended  to  be,  equity  would 
not  interfere  with  it  because  the  parties  had  mistaken  its 
legal  import  and  effect.  If,  on  the  other  hand,  after  mak- 
ing an  agreement,  in  the  process  of  reducing  it  to  a  writ- 
ten form  the  instrument,  by  means  of  a  mistake  of  law, 
fails  to  express  the  contract  which  the  parties  actually 
entered  into,  equity  will  interfere  with  the  appropriate 
relief,  either  by  way  of  defense  to  its  enforcement,  or  by 
cancellation,  or  by  reformation,  to  the  same  extent  as  if 
the  failure  of  the  writing  to  express  the  real  contract  was 
caused  by  a  mistake  of  fact.  In  this  instance  there  is  no 
mistake  as  to  the  legal  import  of  the  contract  actually  made; 
but  the  mistake  of  law  prevents  the  real  contract  from 
being  embodied  in  the  written  instrument.  In  short,  if 
a  written  instrument  fails  to  express  the  intention  which 
the  parties  had  in  making  the  contract  which  it  purports 
to  contain,  equity  will  grant  its  relief,  affirmative  or  de- 
fensive, although  the  failure  may  have  resulted  from  a 
mistake  as  to  the  legal  meaning  and  operation  of  the 
terms  or  language  emplo^'^ed  in  the  writing.     Among  the 

1  Rogers  v.  Ingham,   L.  R.   3  Ch.  frey,  5  De  Gex,  M.   &  G.  76,  90,  per 

Div.  .351,  355,  356,  per  James,  L.  J.;  Turner,  L.  J.;  Broughton  v.  Hutt,  3 

p.  358,  per  Mellish,  L.  J.;  Ex  parte  De  Gex  &  J.  501,  504. 
James,  L.  R.  9  Ch.  609;   Bullock  v.         ^  stone  v.  Godfrey,  5  De  Gex,  M.  & 

Downes,  9  H.  L.  Cas.  1;  Stoue  v.  God-  G.  76,  90,  per  Turner,  L.  J. 


1171 


MISTAKE. 


§846 


ordinary  examples  of  such  errors  are  those  as  to  the  legal 
effect  of  a  description  of  the  subject-matter,  and  as  to  the 
import  of  technical  words  and  phrases;  but  the  rule  is 
not  confined  to  these  instances.* 

§  846.  Mistakes  Common  to  All  the  Parties — Mistake 
of  a  Plain  Rule.  —  It  has  been  said  that  whenever  a  mis- 
take of  law  is  common  to  all  the  parties,  where  they  all 
act  under  the  same  misapprehension  of  the  law,  and 
make  substantially  the  same  mistake  concerning  it,  this 
is  a  sufficient  ground,  without  any  other  incidents,  for 
the  interposition  of  equity.^  No  such  general  rule,  in 
my  opinion,  can  be  regarded  as  established,  or  even  sug- 
gested, by  the  weight  of  authority;  and  it  is  certainly 
contradicted  by  well-considered  decisions  of  most  able 
courts.'     It  will  be  found,  I  think,  that  the  instances  of 


*  Hunt  V,  Rousmanier,  8  Wheat. 
174;  1  Pet.  1;  Pitcher  v,  Hennessey, 
48  N.  Y.  415;  Lanning  v.  Carpenter, 
48  N.  Y.  408;  O'Donnell  v.  Harmon, 
3  Daly,  424;  Gillespie  v.  Moon,  2 
Johns.  Ch.  585,  596;  7  Am.  Dec.  559; 
Canedy  v.Marcy,  13  Gray,  373-377; 
Steclwell  V.  Anderson,  21  Conn.  1.39; 
Huss  V.  Morris,  63  Pa.  St.  367;  Mo- 
ser  V.  Libenguth,  2  Rawie,  428;  Cooke 
V.  Husbands,  11  Md.  492;  Springs  v. 
Harven,  3  Jones  Eq.  96;  Larkins  v. 
Biddle,  21  Ala.  252;  Stone  v.  Hale, 
17  Ala.  557;  52  Am.  Deo.  185;  Clop- 
ton  V.  Martin,  11  Ala.  187;  Clayton  v. 
Freet,  10  Ohio  St.  544;  Young  v. 
Miller,  10  Ohio,  85;  McNaughten  v. 
Partridge,  11  Ohio,  223;  38  Am.  Dec. 
731;  Worley  V.  Tuggle,  4  Bush,  168; 
Smith  V.  Jordan,  13  Minn.  264;  97 
Am.  Dec.  232;  Sparks  v.  Pittman,  51 
Miss.  511;  Stockbridge  Iron  Co.  v. 
Hudson  Iron  Co.,  107  Mass.  290; 
Oliver  v.  Mut.  etc.  Ins.  Co.,  2  Curt. 
277;  [Minot  v.  Tilton,  64  N.  H.  371; 
Corrigan  v.  Tiernay,  100  Mo.  276; 
Cake  V.  Peet,  49  Conn.  501 ;  Shaw  v. 
Williams,  100  N.  C.  272;  Knight  v. 
Glasscock,  51  Ark.  390;  Stafford  v. 
Fetters,  55  Iowa,  484;  Denver  Brick 
etc.  Mfg.  Co.  V.  McAlli.'^ter,  6  Col. 
261;  Lant'a  Appeal,  95  Pa.  St,  279; 
40  Am.  Rep.  646;  Benson  v.  Markoe, 
37  Minn.  30;  5  Am.  St.  Rep.  816;  but 
see  Hicks  v.  Coody,  49  Ark.  425.] 


*  The  authors  of  the  New  York 
Civil  Code  lay  down  this  rule  as  the 
leading  element  in  their  definition  of 
"mistake  of  law,"  claiming  it  to  be 
declaratory  merely,  and  not  new  legis- 
lation: See  anfe,  §  839.  In  support  of 
it  they  cite  Many  v.  Beekman  Iron 
Co.,  9  Paige,  188-;  Hall  v.  Reed,  2 
Barb.  Ch.  500.  Mr.  Kerr  also  states 
the  same  rule  in  a  somewhat  more 
limited  form,  and  cites  in  its  support 
only  Cooper  v.  Pliibba,  L.  R.  2  H.  L. 
149.  This  case  utterly  fails  to  sustain 
any  such  conclusion.  The  decision  of 
the  court  was  based  solely  upon  an  as- 
sumed mistake  of  fact.  The  head-note 
correctly  states  the  rule  on  which  the 
decision  was  placed:  *'  Where  two 
parties,  under  a  mistake  of  fact,  enter 
into  an  agreement,"  equity  may  set 
it  aside.  See  also  opinion  of  Lord 
Cranworth  (p.  164).  Lord  Westbury's 
opinion  dealt  with  the  mistake  as  one 
of  law,  but  he  did  not  even  hint  at 
any  such  rule,  and  reached  a  very  dif- 
ferent conclusion,  as  already  explained: 
See  ante,  §  842. 

'  In  the  recent  case  of  Eaglesfield 
V.  Marquis  of  Londonderry,  L.  R.  4 
Ch.  Div.  693,  709,  the  court  of  appeal, 
so  far  from  recognizing  any  such  rule, 
placed  their  decision  entirely  upon  the 
ground  that  both  parties  acted  under 
a  common  misapprehension  and  mis- 
take of  the  law,  and  therefore,  with- 


§  846  EQUITY   JURISPRUDENCE.  1172 

relief  ,]^here  the  mistake  of  law  was  mutual  fall  under 
the  particular  rule  stated  in  the  last  preceding  para- 
graph. It  has  also  been  asserted,  as  a  general  criterion, 
that  where  the  mistake  is  concerning  a  clear,  unques- 
tioned, unequivocal  rule  of  the  law,  a  court  of  equity  will 
relieve  the  party  from  its  consequences;  but  where  the 
mistake  is  concerning  a  doubtful,  obscure,  or  unsettled 
rule,  no  relief  will  be  granted.  In  the  first  place,  this 
proposition,  if  taken  as  a  general  rule,  is  directly  opposed 
to  the  fundamental  principle  upon  which  the  entire  doc- 
trine concerning  mistakes  of  law  is  based.  The  presump- 
tion that  every  person  knows  the  law  must  necessarily 
extend  to  all  rules  of  the  law  alike.  To  permit  a  distinc- 
tion between  rules  said  to  be  clear  and  those  claimed  to 
be  doubtful  would  at  once  open  the  door  for  all  the  evils 
in  the  administration  of  justice,  which  the  presumption 
itself  is  intended  to  exclude.  In  the  second  place,  the 
proposition  finds  no  support,  as  a  general  rule,  from  the 
decisions  of  authority.  All  the  cases  in  which  such 
language  was  originally  used  by  the  judges,  either  as  a 
dictum  or  as  the  ratio  decidendi,  were  cases  arising  upon 
family  compromises  and  settlements,  which,  as  will  ap- 
pear hereafter,  are  governed  by  special  considerations, 
whether  they  involve  mistakes  of  law  or  of  fact.  The 
rule,  so  far  as,  it  may  be  called  a  rule,  has  a  very  restricted 
application,  and  cannot  be  raised  to  the  position  of  a 
general   criterion.'     There   are   undoubtedly    cases,    not 

out  other  circumstances,  equity  coulc!  ing  it  to  cases  of  family  compromises: 
not  relieve.  Undoubtedlj-,  in  many  Adams's  Equity,  190.  The  important 
cases  where  equity  has  interfered  there  case  of  Stone  v.  Godfrey,  5  De  Gex, 
has  been  a  mutual  mistake;  but  the  M.  &.  G.  76,  cited  in  the  notes  to  the 
interference  must  be  referred  to  some  American  edition  of  Adams  (pp.  3S6, 
other  cause  than  the  mere  existence  387)  in  support  of  this  rule,  does  not 
of  that  fact.  even  allude  to  it.  It  will  be  found 
'Judge  Story  seems  to  lay  down  that  the  cases  referred  to  —  at  least 
this  rule  as  one  of  the  most  prominent  the  original  authorities — as  sustain- 
and  important  means  for  determining  ing  such  a  general  proposition  are 
whether  equity  will  or  will  not  grant  either  cases  arising  upon  family  com- 
relief:  Story's  Eq.  Jur.,  sees.  121-126.  promises,  in  which  judges  have  used 
He  is  followed  by  Mr.  Snell:  Snell's  language  applicable  only  to  the  par- 
Equity,  371,  372.  Mr.  Adams  states  ticular  facts  before  them,  and  explain- 
the  proposition  in  a  guarded,  and  in  ing  why  the  settlement  in  controversy 
my  opinion  accurate,  manner,  confin-  should  or  should   not   be  allowed  to 


Ii73  MISTAKB.  §  847 

arising  out  of  family  compromises,  in  which  parlies 
ignorant  or  mistaken  concerning  their  own  clear  legal 
rights  have  been  relieved;  but  these  will  all  find  another 
explanation  more  consonant  with  principle  than  the  fore- 
going alleged  general  rule. 

§  847.  Mistake  of  Law  Accompanied  with  Inequitable 
Conduct  of  the  Other  Party.  — Whatever  be  the  effect  of  a 
mistake  pure  and  simple,  there  is  no  doubt  that  equitable 
relief,  affirmative  or  defensive,  will  be  granted  when  the 
ignorance  or  misapprehension  of  a  party  concerning  the 
legal  effect  of  a  transaction  in  which  he  engages,  or  con- 
cerning his  own  legal  rights  which  are  to  be  affected,  is 
induced,  procured,  aided,  or  accompanied  by  inequitable 
conduct  of  the  other  parties.  It  is  not  necessary  that 
such  inequitable  conduct  should  be  intentionally  mislead- 
ing, much  less  that  it  should  be  actual  fraud;  it  is  enough 
that  the  misconception  of  the  law  was  the  result  of,  or 
even  aided  or  accompanied  by,  incorrect  or  misleading 
statements,  or  acts  of  the  other  party.  When  the  mistake 
of  law  is  pure  and  simple,  the  balance  held  bj^  justice 
hangs  even;  but  when  the  error  is  accompanied  by  any 

stand,  or  else  they  were  cases  decided  their  differences  by  dividing  the  stake 

upon  entirely  different   grounds,  and  between    them,    in    the    proportions 

not  involving  the  alleged  general  rule,  which   may   be   agreed   upon."     The 

—  cases  in  which   the  ratio  decidendi  vice-chancellor  is  clearly  referring,  in 

as  stated  by  the  court  did  not  in  the  this  language,  to  family  compromises, 

least  turn  upon  the  question  whether  and  is  not  laying  down  a  general  rule 

the  misapprehended  rule  of   law  was  for  all  forms  of  mistakes  of  law.     See 

clear  or  doubtful.     Of  the  first  class,  also  Clifton  v.  Cockburn,  3  Mylne  & 

Naylor  v.  Winch,   1   Sim.  &  St.  555,  K.  76.     See   also,  on   the  subject   of 

5(54,  is  a  leading  and  striking  example,  doubtful  rules,  Freeman  v.  Curtis,  51 

It  was  a  suit  upon  a  family  compro-  Me.  140;  81  Am.  Dec.  564;  Jordan  v. 

mise  which  had  been  entered  into  in  Stevens,  51  Me.  78;  81  Am.  Dec.  5.56; 

settlement  of  a  family  controversy  as  Reservoir  Co.  v.  Chase,  14  Conn.  123; 

to  the  construction  and  meaning  of  a  Champlin  v.  Laytin,   18    Wend.  407; 

will.     Sir   John   Leach,   V.   C,   said:  31    Am.    Dec.    382;   6    Paige,    189;    1 

"If  a  party,  acting  in  ignorance  of  a  Edw.  Ch.  467;  Cooke  v.  Nathan,   16 

plain  and  settled  principle  of  law,  is  Barb.  342;  Green  v.  Morris  etc.  R.  R., 

induced  to  give  up   a   portion  of   his  12  N.  J.  Eq.   165;    Cumberland  Coal 

indisputable  property  to  another  un-  Co.  v.   Sherman,  20   Md.    117;   Lam- 

der  the  name  of  compromise,  a  court  mott  v.  Maulsby,  8  Md.  5;  Garner  v. 

of   equity  will   relieve   him   from  the  Garner,  1  Desaus.  Eq.  437;  Lowndes  v. 

effect  of   his   mistake.     But  where   a  Chisolm,  2  McCord  Eq.  455;  16  Am. 

doubtful  question  arises,  such  as  this  Dec.  667;    Mortimer   v.    Pritchard,   1 

question  of  construction  upon  the  will  Bail.    Eq.    505;    Hadon   v.    Ware,   15 

of   the   testator,  it  is   extremely  rea-  Ala.    149;   Moreland   v.  Atchison,   19 

Bonable  that  parties  should  terminate  Tex.  303. 


§  847  EQUITY    JURISPRUDENCE.  1174 

inequitable  conduct  of  the  other  party,  it  inclines  in 
favor  of  the  one  who  is  mistaken.  The  scope  and  limi- 
tations of  this  doctrine  may  be  summed  up  in  the  proposi- 
tion that  a  misapprehension  of  the  law  by  one  party,  of 
which  the  others  are  aware  at  the  time  of  entering  into 
the  transaction,  but  which  they  do  not  rectify,  is  a  suffi- 
cient ground  for  equitable  relief.  A  court  of  equity  will 
not  permit  one  party  to  take  advantage  and  enjoy  the 
benefit  of  an  ignorance  or  mistake  of  law  by  the  other, 
which  he  knew  of  and  did  not  correct.  While  equity 
interposes  under  such  circumstances,  it  follows  a  fortiori 
that  when  the  mistake  of  law  by  one  party  is  induced, 
aided,  or  accompanied  by  conduct  of  the  other  more  pos- 
itively inequitable,  and  containing  elements  of  wrongful 
intent,  such  as  misrepresentation,  imposition,  conceal- 
ment, undue  influence,  breach  of  confidence  reposed, 
mental  weakness,  or  surprise,  a  court  of  equity  will  lend 
its  aid  and  relieve  from  the  consequences  of  the  error. 
The  decisions  illustrating  this  general  rule  are  numerous, 
and  it  will  be  found  that  many  of  the  cases  in  which  re- 
lief has  been  granted  contained,  either  openly  or  im- 
plicitly, some  elements  of  such  inequitable  conduct.^ 

I  Fane  v.  Fane,  L.  R.  20  Eq.  698;  Light,  21  Pa.  St.  407,  412;  Snyder  v. 

Gee  V.  Spencer,  1  Vern.  32;  Miklmay  May,  19  Pa.  St.  235;  Tyson  v.  Pass- 

V.  Hungerford,  2  Vern.  243;  Willan  v.  more,  2  Pa.  St.  122;  44  Am.  Dec.  181; 

Willan,  16  Ves.  72,  82;  Ramsden  v.  Watts   v,  Cummins,    59   Pa.    St.    84; 

Hylton,  2   Ves.   Sr.    304;    Cocking  v.  Phillips    v.    HoUister,    2    Cold.    2G9; 

Pratt,   1  Ves.   Sr.  400;    McCarthy   v.  Bryan  v.   Masterson,  4  J.  J.  Marsh. 

Decaix,  2  Russ.  &  M.  614;  Scholetield  225;   Hardigree  v.   Mitchum,   51   Ala, 

V.  Templar,  Johns.   155,  166;  Coward  151;    Metropolitan   Bank  v.  Godfrey, 

V.  Hughes,  1  Kay  &  J.  443;  Sturge  v.  23  111.  579;  Cathcart  v.  Robinson,   5 

Sturge,   12  Beav.  229;   Broughton   v.  Pet.    264,    276;  Wheeler   v.  Smith,  9 

Hutt,  3  De  Gex  &  J.  501;  In  re  Saxon  How.    55;    [Insurance    Companies    v, 

etc.   Co.,   1    De   Gex,    J.    &    S.   29;   2  Raden,  87  Ala.  311;  13  Am.  St.  Rep. 

Johns.  &  H.  408;  Jordan  v.   Stevens,  36;   Keister  v.  Myers,   115  Ind.  312; 

61  Me.  78;  81  Am.  Dec.  556;  Freeman  Sands  v.  Sands,  112  111.  225;  Ramey 

V.  Curtis,    51  Me.   140;  81  Am.  Dec.  v.    Allison,    64   Tex.    697.      See   also 

564;  Spurr  v.  Benedict,  99  Mass.  463;  §  877.] 

Chestnut  Hill  etc.  Co.  v.  Chase,  14  Cases  of  surprise:  Evans  v.  Llew- 
Conn.  123;  Woodbury  etc.  Bank  v.  ellyn,  2  Brown  Ch.  150;  1  Cox,  333; 
Charter  Oak  Ins.  Co.,  31  Coun.  517;  Pusey  v.  Desbouvrie,  3  P.  Wms.  31'); 
Champlin  v.  Laytin,  18  Wend.  407,  Willan  v.  Willan,  16  Ves.  72,  81;  Or- 
422;  31  Am.  Dec.  382;  Rider  v.  Pow-  mond  v.  Hutchinson,  13  Ves.  47;  Mar- 
ell,  28  N.  Y.  310;  Green  v.  Morris  etc.  qnis  of  Townshend  v.  Stangroom,  6 
R.  R.  Co.,  12  N.  J.  Eq.  165;  Whelen'a  Ves.  328,  333,  338;  Clowes  v.  Hig^in- 
Appeal,  70  Pa.  St.  410,  425;  Light  v.  son,  1  Ves.  &  B.  524,  527;  Farewell  v. 


1175  MISTAKE.  §§  848,  849 

§  848.  Same.  Between  Parties  in  Relations  of  Trust. 
—  A  particular  application  of  the  foregoing  rule  requires 
a  special  mention.  Where  an  ignorance  or  misappre- 
hension of  the  law,  even  without  any  positive,  incorrect, 
or  misleading  words  or  incidental  acts,  occurs  in  a  trans- 
action concerning  the  trust  between  two  parties  holding 
close  relations  of  trust  and  confidence,  injuriously  affect- 
ing the  one  who  reposes  the  confidence,  equity  will,  in 
general,  relieve  the  one  w^ho  has  thus  been  injured.  The 
relations  of  trustee  and  cestui  que  trust,  guardian  and 
ward,  and  the  like,  are  examples.  The  relief  is  here 
based  upon  the  close  confidence  reposed, —  upon  the  duty 
of  the  trustee  to  act  in  the  most  perfect  good  faith,  to 
consult  the  interests  of  the  beneficiary,  not  to  mislead 
him,  and  not  even  to  sufi'er  him  to  be  misled,  when  such 
a  result  can  be  prevented  by  reasonable  diligence  and 
prudence.^ 

§  849.  Relief  where  a  Party  is  Mistaken  as  to  his  Own 
Existing  Legal  Rights,  Interests,  or  Relations.  —  Is  it  pos- 
sible to  formulate  any  general  rule  which  shall  be  a  crite- 
rion for  all  cases  of  relief  from  mistakes  of  law  pure  and 
simple,  and  without  other  incidental  circumstances,  which 
shall  be  sustained  by  judicial  authority,  and  which  shall 
furnish  a  principle  as  guide  for  future  decisions?  In  my 
opinion,  it  is  possible.  It  has  been  shown  that  where  the 
general  law  of  the  land  —  the  common  jus  —  is  involved,  a 
pure  and  simple  mistake  in  any  kind  of  transaction  can- 
not be  relieved.  Also,  where  a  person  correctly  appre- 
hends his  own  legal  rights,  interests,  and  relations,  a 
simple  mistake  as  to  the  legal  effect  of  a  transaction  into 

Coker,  2  Mer.  353;  Cochrane  v.  Willis,         '  LangstaflFe   v.    Fenwick,    10    Ves. 

L.  R.   1  Ch.  58;  Tyson  v.  Tyson,  31  405;    and   see   Cooke   v.    Nathan,    16 

Md.    134;  Jones   v.    Munroe,   32   Ga.  Barb.    342;   Dill   v.  Shahan,    25   Ala. 

181;  Harney  v.  Charles,  45  Mo.  157;  694;  60  Am.  Dec.    540;  Moreland   v. 

Carley  v.  Lewis,  24  Ind.  23.     Some  of  Atchison,     19    Tex.     303;     Ex    parte 

these  cases,  which  are  commonly  re-  James,  L.  R.  9  Ch.  609,  614;  Davis  v. 

ferred   to   the   effect  of   surprise,  are  Morier,  2  Coll.  C.  C.  303;  [Tompkins 

much   more   naturally   and    correctly  v.  Hollister,  60  Mich.  470;    Voltz  v. 

explained,  in  my  opinion,  by  the  doc-  Voltz,  75  Ala.   555;]  and   cases  cited 

trine  stated  in  §  849  of  the  text.  under  last  paragraph 


§  849  EQUITY    JURISPRUDENCE.  1176 

which  he  enters,  in  the  absence  of  other  determining  in- 
cidents, is  not  ground  for  relief.  There  is,  as  shown  in 
a  former  paragraph  (§  841),  a  third  condition.  A  person 
may  be  ignorant  or  mistaken  as  to  his  own  antecedent 
existing  legal  rights,  interests,  duties,  liabilities,  or  other 
relations,  while  he  accurately  understands  the  legal  scope 
of  a  transaction  into  which  he  enters,  and  its  legal  effect 
upon  his  rights  and  liabilities.  It  will  be  found  that  the 
great  majority,  if  not  indeed  all,  of  the  well-considered 
decisions  in  which  relief  has  been  extended  to  mistakes 
pure  and  simple  fall  within  this  class;  and  also,  that 
whenever  cases  of  this  kind  have  arisen,  relief  has  almost 
always  been  granted,  although  not  always  on  this  ground. 
Courts  have  felt  the  imperative  demands  of  justice,  and 
have  aided  the  mistaken  parties,  although  they  have  often 
assigned  as  the  reason  for  doing  so  some  inequitable 
conduct  of  the  other  party  which  they  have  inferred  or 
assumed.  The  real  reason  for  this  judicial  tendency  is 
obvious,  although  it  has  not  always  been  assigned.  A 
private  legal  right,  title,  estate,  interest,  duty,  or  liability 
is  always  a  very  complex  conception.  It  necessarily  de- 
pends so  much  upon  conditions  of  fact,  that  it  is  difficult, 
if  not  impossible,  to  form  a  distinct  notion  of  a  private 
legal  right,  interest,  or  liability,  separated  from  the  facts 
in  which  it  is  involved  and  upon  which  it  depends.  Mis- 
takes, therefore,  of  a  person  with  respect  to  his  own  pri- 
vate legal  rights  and  liabilities  may  be  properly  regarded, 
—  as  in  great  measure  they  really  are,  —  and  may  be  dealt 
with  as  mistakes  of  fact.  Courts  have  constantly  felt  and 
acted  upon  this  view,  though  not  always  avowedly.  Lord 
Westbury  openly  declares  that  such  misconceptions  are 
truly  mistakes  of  fact.  Some  very  instructive  remarks  of 
Sir  George  Jessel,  which  I  have  placed  in  the  foot-note, 
will,  with  a  slight  modification  of  his  language,  apply  to 
all  instances  involving  this  kind  of  error  or  ignorance.' 

■  Eaglesfield  V.  Marquis  of  London-  representation  of  the  law  affecting  a  per- 
derry,  L.  R.  4  Ch.  Div.  693,  702,  703.  son's  private  rights,  but  his  language, 
The  mastez*  of  rolls  is  speaking  of  a  mis-     with  slight  change,  will  apply  to  al 


1177 


MISTAKE. 


§  849 


A  general  rule  permitting  the  jurisdiction  of  equity  to 
relieve  from  mistakes  of  the  law  pure  and  simple,  in  all 
cases  belonging  to  this  species,  and  confining  its  operation 
to  them,  would  at  once  reduce  to  clearness,  order,  and 
certainty  a  subject  which  has  hitherto  been  confessedly 
uncertain  and  confused.  It  would  work  justice,  for  these 
kinds  of  errors  stand  upon  a  different  footing  from  all 
others,  and  justice  and  good  conscience  demand  their  re- 
lief; it  would  conform  to  sound  principle,  for  these  mis- 
takes are  in  part  essentially  errors  of  fact;  and  finally, 
it  would  explain  and  harmonize  many  decisions  of  the 
ablest  courts  which  have  hitlierto  seemed  almost  inex- 
plicable except  by  violent  and  unnatural  assumptions.     I 


cases  of  ignorance  or  error  concerning 
one's  own  private  legal  interests.  In 
my  opinion,  it  suggests  the  true  prin- 
ciple upon  which  to  rest  the  action  of 
the  courts  in  all  such  instances.  "It 
was  put  to  me  that  this  was  a  misrep- 
resentation of  law,  and  not  of  fact. 
....  Was  it  a  misrepresentation  of 
law?  A  misrepresentation  of  law  is 
this:  when  you  state  the  facts,  and 
state  a  conclusion  of  law,  so  as  to  dis- 
tinguish between  facts  and  law.  The 
man  who  knows  the  facts  is  taken  to 
know  the  law;  but  when  you  state 
that  as  a  fact  which  no  doubt  involves, 
as  most  facts  do,  a  conclusion  of  law, 
that  is  still  a  statement  of  fact,  and 
not  a  statement  of  law.  Suppose  a 
man  is  asked  by  a  tradesman  whether 
he  can  give  credit  to  a  lady,  and  the 
answer  is,  'You  may;  she  is  a  single 
woman  of  large  fortune.'  It  turns 
out  that  the  man  who  gave  that  an- 
swer knew  that  the  lady  had  gone 
through  the  ceremony  of  marriage 
with  a  man  who  was  believed  to  be  a 
married  man,  and  that  she  had  been 
advised  that  the  marriage  ceremony 
was  null  and  void,  though  it  had  not 
been  declared  so  by  any  court,  and  it 
afterwards  turned  out  they  were  all 
mistaken,  — that  the  first  marriage  of 
the  man  was  void,  so  that  the  lady 
was  married.  He  does  not  tell  the 
tradesman  all  these  facts,  but  states 
that  she  is  single.  That  ia  a  state- 
ment of  fact.  If  he  had  told  him  the 
whole  story,  and  all  the  facts,  and 
eaid,   *  Now,  you  see  the  lady  is  single,' 


that  would  have  been  a  misrepresenta- 
tion of  law.  But  the  single  fact  he 
states  —  that  the  lady  is  unmarried  — 
is  a  statement  of  fact,  neither  more  nor 
less;  and  it  is  not  the  less  a  statement 
of  fact  that  in  order  to  arrive  at  it 
you  must  know  more  or  less  of  the 
law.  There  is  not  a  single  fact  con- 
nected with  personal  status  that  does 
not,  more  or  less,  involve  a  question 
of  law.  If  you  state  that  a  man  is 
the  eldest  son  of  amarriage,  you  state 
a  question  of  law,  because  you  must 
know  that  there  has  been  a  valid  mar- 
riage, and  that  that  man  was  the  first- 
born son  after  the  marriage,  or,  in 
some  countries,  before.  Therefore,  to 
say  it  is  not  a  representation  of  fact 
seems  to  arise  from  a  confusion  of 
ideas.  It  is  not  the  less  a  fact  because 
that  fact  involves  some  knowledge  or 
relation  of  law.  There  is  hardly  any 
fact  which  does  not  involve  it.  If 
you  say  that  a  man  is  in  possession  of 
an  estate  of  ten  thousand  pounds  a 
year,  the  notion  of  possession  is  a  legal 
notion,  and  involves  knowledge  of  law; 
nor  can  any  other  fact  in  connection 
with  property  be  stated  which  does 
not  involve  such  knowledge  of  law. 
To  state  that  a  man  is  entitled  to  ten 
thousand  pounds  consols  involves  all 
sorts  of  law. "  The  decision  of  the  mas- 
ter of  rolls  in  this  case  was  reversed  by 
the  court  of  appeal,  but  only  upon  a  dif- 
ferent view  of  the  evidence  from  that 
which  he  took,  and  without  in  the 
least  affecting  tlie  correctness  of  the 
observations  which  I  have  quoted. 


849 


EQUITY    JURISPRUDENCE, 


1178 


therefore  venture  to  formulate  the  following  general  rule 
as  being  eminently  just  and  based  on  principle,  and  fur- 
nishing a  simple  criterion  defining  the  extent  of  the  juris- 
diction. The  number  of  decisions  which  support  it,  and 
which  it  explains,  is  very  great.  Wherever  a  person  is 
ignorant  or  mistaken  with  respect  to  his  own  antecedent 
and  existing  private  legal  rights,  interests,  estates,  duties^ 
liabilities,  or  other  relation,  either  of  property  or  contract 
or  personal  status,  and  enters  into  some  transaction  the 
legal  scope  and  operation  of  which  he  correctly  appre- 
hends and  understands,  for  the  purpose  of  affecting  such 
assumed  rights,  interests,  or  relations,  or  of  carrying  out 
such  assumed  duties  or  liabilities,  equity  will  grant  its 
relief,  defensive  or  affirmative,  treating  the  mistake  as 
analogous  to,  if  not  identical  with,  a  mistake  of  fact.*     It 


^  It  is  not  claimed  that  all  j^ these 
cases  were  avowedly  decided  upon  the 
above  rule,  although  many  of  them 
seem  to  distinctly  recognize  it.  In  all 
of  them  the  error  was  of  the  kind  de- 
scribed in  the  text,  and  the  rule  will 
furnish  a  simple  reason  why  relief  was 
granted,  which  the  judges  sometimes 
failed  to  do:  Cooper  v.  Phibbs,  L.  R. 

2  H.  L.  149  (A,  being  ignorant  that 
certain  property  belonged  to  himself, 
and  supposing  that  it  belonged  to  B, 
agreed  to  take  a  lease  of  it  from  B  at 
a  certain  rent.  There  was  no  fraud, 
no  unfair  conduct,  all  the  parties 
equally  knew  the  facts.  The  house 
of  lords  set  aside  the  agreement  on  ac- 
count of  the  mistake.  A  majority  of 
the  judges  called  it  a  mistake  of  fact. 
Lord  Westbury  boldly  acknowledged 
it  to  be  what  is  ordinarily  called  a 
mistake  of  law,  but  held  that  it  was 
really  a  mistake  of  fact,  and  to  be  dealt 
with  as  such.  The  mistake  was  clearly 
one  to  which  the  term  "mistake  of 
law  "  has  ordinarily  been  applied;  but 
it  as  clearly  possessed  the  elements  of 
a  mistake  of  fact.  The  decision  is  a 
direct  authority  in  support  of  the  text); 
Bingham  v.  Bingham,  1  Ves.  Sr.  126; 
Landsdowne  v.  Landsdowne,  2  Jacob 
&  W.  205;  Mos.  364;  Cocking  v.  Pratt, 
1  Ves.   Sr.  400;  Pusey  v.  Desbouvrie, 

3  P.  Wms.  315,  320;  Cann  v.  Cann,  1 
P.  Wms.  723,  727;  Marquis  of  Towns- 
hend  v.  Stangroom,  6  Ves.  328,  332; 


Broughton  v.  Hutt,  3  De  Gex  &  J, 
501,  504  (the  heir  of  a  stockholder  in 
a  company,  the  shares  in  which  were 
personal  estate,  supposing  himself  lia- 
ble in  respect  of  his  ancestor's  shares, 
gave  a  deed  of  indemnity  to  the  com- 
pany. This  deed  was  ordered  to  be 
canceled  on  the  ground  of  the  mistake, 
which  was  treated  as  one  of  fact  as 
well  as  law);  In  re  Saxon  L.  Ins.  Co.,  1 
De  Gex,  J.  &  S.  29;  2  Johns.  &H.  408; 
McCarthy  v.  Decaix,  2  Russ.  &  M. 
614;  Clifton  v.  Cockburn,  3  Mylne  & 
K.  76,  99;  Coward  v.  Hughes,  1  Kay 
&  J.  443;  Sturge  v.  Sturge,  12  Beav. 
229;  Davis  v.  Morier,  2  Coll.  C.  C.  303; 
Denys  v.  Shuckburgh,  4  Younge  &  C. 
42;  Reynell  v.  Sprye,  8  Hare,  222,  255; 
Ramsden  v.  Hylton,  2  Ves.  Sr.  304; 
Gee  V.  Spencer,  1  Vern.  32;  Mildmay 
v.  Hungerford,  2  Vern.  243;  Naylor  v. 
Winch,  1  Sim.  &  St.  655;  Farewell  v. 
Coker,  cited  2  Mer.  353.  In  Reynell 
v.  Sprye,  8  Hare,  222,  Wigram,  V.  C, 
laid  down  the  rule  in  complete  har- 
mony with  the  positions  maintained 
in  the  text:  "I  will  not  attempt  to  de- 
fine the  cases  in  which  relief  is  givea 
on  the  ground  of  ignorance  or  mistake. 
They  may,  however,  safely  be  distin- 
guished from  cases  in  which,  doubts 
having  arisen  as  to  the  rights  of  par- 
ties, an  arrangement  is  made  for  com- 
promising those  doubts.  But  if  parties 
are  ignorant  of  facts  on  which  their 
rights  depend,  or  erroneously  assume 


1179  MISTAKE.  §  850 

should  be  carefully  observed  that  this  rule  has  no  appli- 
cation to  cases  of  compromise,  where  doubts  have  arisen 
as  to  the  rights  of  parties,  and  they  have  intentionally 
entered  into  an  arrangement  for  the  purpose  of  compro- 
mising and  settling  those  doubts.  Such  compromises, 
whether  involving  mistakes  of  law  or  of  fact,  are  governed 
by  special  considerations. 

§  850.  Compromises  and  Voluntary  Settlements  Made 
upon  a  Mistake  as  to  Legal  Rights.  —  Compromises,  where 
doubts  with  respect  to  individual  rights,  especially  among 
members  of  the  same  family,  have  arisen,  and  where  all 
the  parties,  instead  of  ascertaining  and  enforcing  their 
mutual  rights  and  obligations  which  are  yet  undetermined 
and  uncertain,  intentionally  put  an  end  to  all  controversy 
by  a  voluntary  transaction  in  the  way  of  a  compromise, 
are  highly  favored  by  courts  of  equity.  They  will  not  be 
disturbed  for  any  ordinary  mistake,  either  of  law  or  of 
fact,  in  the  absence  of  conduct  otherwise  inequitable, 
since  their  very  object  is  to  settle  all  sucli  possible  errors 

that  they  know  those  rights,  and  deal  had  existed.  It  will  be  noticed  that 
with  their  property  accordingly,  not  there  was  no  ignorance  nor  error  as  to 
upon  the  principle  of  compromising  the  external  facts.  The  mistake  was 
doubts,  this  court  will  relieve  against  solely  as  to  the  legal  interest,  the  right 
such  transactions  ";  citing  Stockley  v.  of  property  held  by  A,  and  to  be  af- 
Stockley,  1  Ves.  &  B.  23;  Harvey  v.  fected  by  the  conveyance.  This  mis- 
Cooke,  4  Russ.  34.  Blakeman  v.  take  was  clearly  one  to  which  the 
Blakeman,  .S9  Conn.  320,  is  directly  term  "mistake  of  law"  is  ordinarily 
in  point,  and  is  a  striking  illustration,  applied,  and  yet  the  court  correctly 
A  right  of  way  had  become  extin-  held  it  to  be  essentially  a  mistake  of 
guished  by  the  purchase  of  the  servi-  fact,  and  dealt  with  it  as  such.  There 
ent  estate  by  A,  the  owner  of  the  could  be  no  more  admirable  an  illus- 
dominant  estate.  A  afterwar<ls  con-  tration  of  the  remarks  of  Sir  G-.  Jessel, 
veyed  the  dominant  estate  to  B  by  a  quoted  in  a  preceding  note.  See  also 
deed  which  granted  the  land  "with  Whelen's  Appeal,  70  Pa.  St.  410; 
its  privileges  aud  appurtenances,"  but  Hearst  v.  Pujol,  44  Cal.  230;  Morgan 
did  not  in  express  terms  mention  the  v.  Dod,  3  Col.  551;  [Daniell  v.  Sin- 
right  of  way.  A  and  B  were  both  ig-  clair,  6  App.  Cas.  (Priv,  Coun.)  181; 
norant  of  the  legal  rule  under  which  Geib  v.  Reynolds,  35  Minn.  331 ;  Ger- 
the  right  of  way  had  become  extin-  dine  v.  Menage,  41  Minn.  417;  Baldock 
guished,  and  supposed  it  still  existed;  v.  Johnson,  14  Or.  542;  Blair  v.  Chi- 
and  the  price  paid  bj'  B  was  sufficient  cago  etc.  R.  R.  Co.,  89  Mo.  383.] 
to  cover  the  right  of  way.  Held,  that  ZoUman  v.  Moore,  21  Gratt.  313,  is 
a  court  of  equity  would  relieve  B  by  directly  conflicting.  If  the  position  of 
correcting  the  mistake.  The  court  the  text  is  correct,  it  cannot  be  sus- 
expressly  held  that  there  was  no  mis-  tained;  and  on  any  view  it  seems  op- 
take  as  to  the  legal  scope  and  effect  of  posed  to  the  weight  of  authority, 
the  deed,  since  its  terms  were  suffi-  English  and  American, 
cient  to  have  conveyed  the  way  if  it 


§  850  EQUITY  JURISPRUDENCE.  1180 

without  a  judicial  controversy.  There  are,  indeed,  dicta 
to  the  effect  that  a  party  will  be  relieved  from  a  compro- 
mise in  which  he  has  surrendered  property  or  other  rights 
unquestionably  his  own,  through  a  misconception  of  a 
clear  legal  rule,  or  an  erroneous  supposition  that  a  legal 
duty  rested  upon  him,  whereas  plainly  no  such  duty  ex- 
isted; but  the  decisions  show  that  these  dicta  must  be 
confined  to  circumstances  which  render  the  compromise 
itself  a  virtual  surprise,  or  to  cases  in  which  it  was  in- 
duced by  positive  inequitable  conduct  of  the  other  par- 
ties.^ Voluntary  settlements  are  so  favored  that  if  a 
doubt  or  dispute  exists  between  parties  with  respect  to 
their  rights,  and  all  have  the  same  knowledge,  or  means 
of  obtaining  knowledge,  concerning  the  circumstances 
involving  these  rights,  and  there  is  no  fraud,  misrepre- 
sentation, concealment,  or  other  misleading  incident,  a 
compromise  into  which  they  thus  voluntarily  enter  must 
stand  and  be  enforced,  although  the  final  issue  may  be 
different  from  that  which  was  anticipated,  and  although 
the  disposition  made  by  the  parties  in  their  agreement 
may  not  be  that  which  the  court  would  have  decreed  had 
the  controversy  been  brought  before  it  for  decision,''     Of 

»  Naylor  v.  Winch,  1  Sim.  &  St.  555,  Ball  &  B.  176,  179;  Neale  v.  Neale,  1 

564;  Bingham  v.  Bingham,  1  Ves.  Sr,  Keen.  672;  Greenwood  v.  Greenwood, 

126;  and  see  Willan  v.  Willan,  16  Ves.  2  De  Gex,  J.  &  S.  28,  42,  per  Turner, 

72;  Gross V.  Leber,  47  Pa.  St.  520;  Light  L.  J.;  Harvey  v.  Cooke,  4  Russ.  34; 

V.  Light,  21  Pa.  St.  407,  412;  Cabot  v.  Attwood  v.  ,  5  Russ.  149;  Cliftou 

Haskins,  3  Pick.  83;  Larkins  v.  Bid-  v,  Cockburn,  3  Mylne  &  K.  76;  Good 

die,  21  Ala.  252,  256.  v.  Herr,  7  Watts  &   S.  253;   Stub  v. 

^  Stapilton  v.  Stapilton,  1  Atk.  2;  2  Leis,  7   Watts,    43;  Shartel's  Appeal, 

Lead.  Cas.  Eq.,  and  notes,   1675,  4th  64  Pa.  St.  25;  Wistar's  Appeal,  80  Pa. 

Am.  ed.;  Naylor  v.  Winch,   1  Sim.  &  St.  484;  Brandon  v.  Medley,  1   Jones 

Sc.  555;  Ex  parte  Lucy,  4  De  Gex,  M.  Eq.  313;  Bell  v.  Lawrence,  51  Ala.  160; 

&  G.   356;  Brooke  v.  Lord  Mostyn,  2  [Smith  v.  Tanner,  32  S.C.  2.59;  Gilliam 

De  Gex,  J.  &  S.  373;  Bullock  v.  Downes,  v.  Alford,  69  Tex.  267;  Wells  v,  Neff, 

9  H.  L.  Cas.  1;  Stewart  v.  Stewart,  6  14   Or.    66;   Gormly   v.    Gormly,   130 

Clark  &  F.  911,  969;  Trigge  v.  Laval-  Pa.  St.  467;  Hall  v.  "Wheeler,  37  Minn, 

lee,    15  Moore   P.    C.    C.   270;  Parker  522.]      The   requirement  of  complete 

V.  Palmer,  1  Cas.  Ch.    42;  Baxendale  frankness   and  full  disclosure  applies 

V.   Scale,   19  Beav.  601;  Pickering  v.  with  especial  force  when  the  parties 

Pickering,  2  Beav.  31,  56;  Lawton  v.  stand  towards  each  other  in  any  prior 

Campion,  18  Beav.  87;  Heap  v.  Tonge,  existing  relation  of   trust   and   confi- 

9  Hare,  90;  Reynell  v.  Sprye,  8  Hare,  dence:  See  Pusey  v.  Desbouvrie,  3  P. 

222,  254;  Gordon  v.  Gordon,  3  Swanst.  Wms.  315;  Sturge  v.  Sturge,  12  Beav. 

400,  463;  Westby  v.   Westby,  2  Dru.  229. 
&  War.   502;  Leonard  v.    Leonard,  2 


1181  MISTAKE.  §  851 

course,  there  must  not  only  be  no  representation,  imposi- 
tion, or  concealment;  there  must  also  be  a  full  disclosure 
of  all  material  facts  within  the  knowledge  of  the  parties, 
whether  demanded  or  not  by  the  others.  In  the  words 
of  a  distinguished  judge:  **  There  must  not  only  be  good 
faith  and  honest  intention,  but  full  disclosure;  and  with- 
out full  disclosure,  honest  intention  is  not  sufficient."  If 
these  requisites  of  good  faith  exist,  it  is  not  necessary 
that  the  dispute  should  be  concerning  a  question  really 
doubtful,  if  the  parties  bona  fide  consider  it  so;  it  is  enough 
that  there  is  a  question  between  them  to  be  settled  by 
their  compromise.^  The  foregoing  rules  apply  to  all  cases 
of  compromise,  whether  the  doubtful  questions  to  be  set- 
tled relate  to  matters  of  law  or  of  fact.' 

§  851.  Payments  of  Money  under  a  Mistake  of  Law. — 
The  general  rule  stated  in  the  paragraph  before  the  last, 
concerning  mistakes  as  to  one's  own  private  legal  rights 
and  duties,  is  also  subject  to  another  important  limita- 
tion. It  is  settled  at  law,  and  the  rule  has  been  followed 
in  equity,  that  money  paid  under  a  mistake  of  law  with 
respect  to  the  liability  to  make  payment,  but  with  full 
knowledge,  or  with  means  of  obtaining  knowledge,  of  all 
the  circumstances,  cannot  be  recovered  back.^     There  is 

*  Ex  parte  Lncy,  4  De  Gex,  M.  &G.  166;  10  Am.  Dec.  316;  Livermore  v. 

356;  Neale  v.  Neale,  1  Keen,  672.  Peru,  55  Me.  469;  [Gilliam  v.  Alford, 

i"  Neale  V.  Neale,  1  Keen,  672;  West-  ,69  Tex.  267;  Beard  v.  Beard,  25  W. 

by  V.  Westby,  2  Dru.  &  War.  502;  and  Va.  486;  52  Am.  Rep.  219;  Shriver  v. 

Bee  post,  §  855,  and  cases  there  cited.  Garrison,  30  W.  Va.  456;  Erkens  v. 

» Bilbie    v.    Lumley,    2    East,    469;  Nicolin,  39  Minn.  461.      In  Connec- 

Rogers  v.  Ingham,  L.  R.  3  Ch.  Div.  ticut  the  rule  seems  to  be  otherwise, 

351,  356,   357;  Bate  v.  Hooper,  5  De  both  at  law  and  in  equity;  the  doctrine 

Gex,  M.  &  G.  338;  Stafiford  v.  Stafford,  stated  in  §  849  applies:  Manstield  v. 

1  De  Gex  &  J.  193,  197;  Great  West-  Lynch,  59  Conn.  320;  citing  Northrop 

em  R'y  v.  Cripps,  5  Hare,  91;  Drewry  v.  Graves,  19  Conn.  548;  50  Am.  Dec. 

V.  Barnes.  3   Russ.    94;   Goodman  v.  264.]     If   the  doctrine  formulated  in 

Sayers,  2  Jacob  &  W.  249,  263;  Currie  §  849  be  correct,  then   it  seems  that 

V.  Goold,  2  Madd.   163;  Railroad  Co.  this  particular  rule  forbidding  the  re- 

V.  Soutter,  13  Wall.  517,  524;  Bank  of  covery  back  of   money  paid  under  a 

United  States  v.  Daniel,   12  Pet.  32;  mistake  of  law  is  based  upon   an   er- 

EUiott  V.  Swartout,  10  Pet.  137;  Ha-  roneous   conception   of    the   principle 

ven  V.  Foster,  9  Pick.   112;    19  Am.  which  should  govern  such  cases,  and 

Dec.  353;  Clarke  v.  Dutcher,  9  Cow.  the  opinions  of  those  jurists  which  up. 

674;   Ege   v.  Koontz,  3    Pa.  St.   109;  hold  the  right  of  recovory,  quoted  oti^, 

Shotwell  V.  Murray,  1  Johns.  Ch..512,  in  the  note  under  §  841,  appear  to  be 

616;  Storra  v.   Barker,  6   Johns.   Ch.  correct  in  principle.     This  rule  itself 


§§  852,  853  EQUITY    JURISPRUDENCE.  1182 

an  exception,  as  in  the  case  of  compromises,  when  the 
erroneous  payment  is  induced  or  accompanied  by  a  vio- 
lation of  confidence  reposed,  lack  of  full  disclosure,  mis- 
representation as  to  liability,  or  other  similar  inequitable 
conduct.^ 

§  852.  Second.  Mistakes  of  Facts.  —  The  general  doc- 
trine is  firmly  settled  as  one  of  the  elementary  principles 
of  the  equitable  jurisdiction,  that  a  court  of  equity  will 
grant  its  affirmative  or  defensive  relief,  as  may  be  re- 
quired by  the  circumstances,  from  the  consequences  of 
any  mistake  of  fact  which  is  a  material  element  of  the 
transaction,  and  which  is  not  the  result  of  the  mistaken 
party's  own  violation  of  some  legal  duty,  provided  that 
no  adequate  remedy  can  be  had  at  law.  It  has  been  said, 
"No  person  can  be  presumed  to  be  acquainted  with  all 
matters  of  fact  connected  with  a  transaction  in  which  he 
engages."  This  general  doctrine  is  applied  in  a  great 
variety  of  forms  and  under  a  great  variety  of  circum- 
stances. It  presents  but  few  theoretical  difficulties;  its 
practical  difficulties  arise  from  its  application  to  particu- 
lar instances  of  relief,  and  this  application  must  be 
largely  controlled  by  the  circumstances  of  each  case. 

§  853.  How  Mistakes  of  Fact  may  Occur.  —  All  mis- 
takes of  fact  in  agreements  executed  or  executory,  express 
or  implied,  must  be  concerning  either  the  subject-matter 
or  the  terms.  In  the  first  case,  the  terms  are  stated  accord- 
ing to  the  intent  of  both  the  parties,  but  there  is  an  error 
of  one  or  both  in  respect  of  the  thing  to  which  these  terms 
apply,  —  its  identity,  situation,  boundaries,  title,  amount, 
value,  and  the  like.  Such  a  mistake  may  relate  to  any 
kind  of  subject-matter,  and  may  occur  in  a  verbal  as  well 
as  in  a  written  agreement.  In  the  second  case,  the  mis- 
is  an  illnstration  of  the  disinclination  303;  Ex  parte  James,  L.  R.  9  Ch.  609; 
of  equity  courts  to  depart  from  a  doc-  Rogers  v.  Ingham,  L.  R.  3  Ch.  Div. 
trine  settled  at  law,  when  the  rights  351,  356;  Pusey  v.  Desbouvrie,  3  P. 
and  the  remedies  are  the  same  in  both  Wms.  315;  [Ex  parte  Simmonds,  L.  R. 
jurisdictions.  16  Q.  B.  D.  308  (payment  to  an  officer 

1  Bingham  v.  Bingham,  1  Ves.  Sr.  of  the  court);  In  re  Opera,  Limited 
126;  Davis  v.  Morier,  2   Coll,  C.  C.     (1891),  2  Ch.  154  (same).] 


1183  MISTAKE.  §  854 

take  may  arise  after  the  parties  have  verbally  concluded 
their  agreement,  and  may  occur  in  reducing  that  agree- 
ment to  writing,  by  erroneously  adding,  omitting,  or  al- 
tering some  term;  or  it  may  arise  in  the  very  process  of 
making  the  agreement,  during  the  negotiation  itself,  one 
or  both  the  parties  misconceiving,  misunderstanding,  or 
even  being  entirely  ignorant  of  some  term  or  provision; 
so  that,  although  they  appear  to  have  made  an  agreement, 
yet  in  fact  their  minds  never  met  upon  the  same  matters. 
"While  this  latter  species  of  error  is  not  infrequent,  it  gen- 
erally consists  in  a  mistake  or  ignorance  as  to  the  legal 
effect  of  the  provision,  rather  than  as  to  the  language  in 
which  the  provision  is  expressed.  The  same  description 
will  plainly  apply  to  all  forms  of  mistakes  of  fact  in  tran- 
sactions which  are  not  agreements. 

§  854.  In  What  Mistakes  of  Fact  may  Consist.  —  It 
would  be  impossible,  within  any  reasonable  limits,  to 
enumerate  the  various  forms  in  which  mistakes  of  fact 
may  appear;  and  such  an  enumeration  is  not  at  all  neces- 
sary; some  important  illustrations  will  be  given  in  sub- 
sequent chapters  which  treat  of  reformation  and  cancel- 
lation. A  general  description  of  all  the  possible  phases 
will  be  sufficient.  It  will  be  remembered  that  the  essen- 
tial element  of  mistake  was  defined  to  be  a  mental  condi- 
tion or  conception  or  conviction  of  the  understanding. 
This  mental  condition  may  be  either  a  passive  state  or  an 
active  conviction.  When  merely  passive,  it  may  consist 
of  an  unconsciousness,  an  ignorance,  or  a  forge tfulness; 
when  active,  it  must  be  a  belief.  In  the  first  of  these  two 
conditions,  the  unconsciousness,  ignorance,  or  forgetful- 
ness  may  be  either  of  a  fact  which  is  present  and  now 
existing,  or  of  a  fact  which  is  past  and  has  existed;  they 
must  always  concern  a  fact  material  to  the  transaction. 
In  the  second  condition,  the  belief  may  be  eitlier  that  a 
certain  matter  or  thing  exists  at  the  present  time,  which 
really  does  not  exist;  or  that  a  certain  matter  or  thing 
existed  at  some  past  time,  which  did  not  really  exist.    All 


§854 


EQUITY   JURISPRUDENCE. 


1184 


possible  forms  of  mistakes  of  fact  are  embraced  within 
this  description;  and  all  particular  errors  which  fall 
under  any  of  these  conditions  are  mistakes  of  fact  which 
furnish  an  occasion  for  equitable  relief.'  The  law  of  a 
foreign  country  or  of  another  state  is  always  regarded  as 
a  "fact,"  within  the  meaning  of  the  term  as  used  in  the 
foregoing  description;  an  error  or  ignorance  concerning 
such  law  is  therefore  a  mistake  of  fact.^  It  necessarily 
follows  from  this  description  that  where  an  act  is  done 
intentionally  and  with  knowledge,  the  doing  the  act  can- 
not be  treated  as  a  mistake.  Thus  if  parties  knowingly 
and  intentionally  add  to  or  omit  from  their  written 
agreement  a  certain  provision,  such  adding  to  or  omis- 
sion cannot  constitute  a  mistake,  so  as  to  be  a  ground  for 
relief.' 


•  See  ante,  cases  under  §  839. 

•  McCormick  v.  Garnett,  5  De  Gex, 
M.  &  G.  278;  Leslie  v.  Baillie,  2 
Younge  &  C.  91;  Haven  v.  Foster,  9 
Pick.  Ill,  112;  19  Am.  Dec.  353; 
Bank  of  Chillicothe  v.  Dodge,  8  Barb. 
233;  Merchants'  Bank  v.  Spalding,  12 
Barb.  302;  Patterson  v.  Bloomer,  35 
Conn.  57;  95  Am.  Dec.  218. 

•  The  exact  import  of  this  rule  should 
not  be  misapprehended.  The  parties 
may  be  in  error  as  to  the  legal  effect  of 
the  addition  or  omission;  this  would 
be  a  mistake  of  law  which,  as  has 
been  shown,  would  not  be  relieved. 
They  might  also  be  mistaken  as  to  the 
subject-matter  of  the  provision  added 
or  omitted,  or  possibly  as  to  its  lan- 
guage, and  such  an  error  might  be  a 
mistake  of  fact.  The  rule  of  the  text 
simply  declares  that  when  an  act  is 
done  intentionally  and  knowingly,  the 
very  doing  itself  csmnot  be  treated  as  a 
mistake  entitled  to  relief;  the  elements 
of  knowledge  and  intention  contradict 
the  essential  conception  of  mistake: 
See  Marquis  of  Townshend  v.  Stan- 
groom,  6  Ves.  328,  332;  Lord  Iruham 
v.  Child,  1  Brown  Ch.  92;  Lord  Port- 
more  v.  Morris,  2  Brown  Ch.  219; 
Hare  v.  Shearwood,  3  Brown  Ch.  168; 
Cripps  v.  Jee,  4  Brown  Ch.  472;  Pit- 
cairn  V.  Ogbourne,  2  Ves.  Sr.  375; 
Betts  V.  Gunn,  31  Ala.  219. 

Where  a  verbal  stipulation  is  made 
at  the  same  time  as  the  written  con- 


tract, and  is  omitted  intentionally  on 
the  faith  of  an  assurance  that  it  shall 
be  as  binding  as  though  incorporated 
into  the  writing,  the  rule  as  generally 
settled  does  not  permit  such  provision 
to  be  proved  and  enforced.  It  is  said 
that,  there  being  no  fraud  or  mistake, 
to  allow  the  verbal  term  to  be  proved 
by  parol  evidence,  and  the  written 
agreement  to  be  thereby  varied,  would 
be  a  violation  of  the  statute  of  frauds, 
and  would  introduce  all  the  evils  which 
the  statute  was  designed  to  prevent. 
The  relief  given  in  cases  of  fraud  and 
mistake  stands  upon  different  grounds; 
although  appearing  to  conflict  with  the 
statute,  it  is  really  carrying  out  the  ulti- 
mate purposes  of  the  legislature  by  pre- 
venting injustice.  No  such  grounds, 
it  is  said,  exist  where  parties  have  in- 
tentionally omitted  provisions  from 
their  written  agreements:  See  cases 
cited  above;  also  Stevens  v.  Cooper,  1 
Johns.  Ch.  425;  7  Am.  Dec.  499; 
Dwight  V.  Pomeroy,  17  Mass.  303; 
9  Am.  Dec.  148;  Towner  v.  Lucas,  13 
Gratt.  705;  Broughton  v.  Coffer,  18 
Gratt.  184;  Knight  v.  Bunn,  7  Ired. 
Eq.  77;  Westbrookv.  Harbeson,  2  Mc- 
Cord  Eq.  112;  Ware  v.  Cowles,  24  Ala. 
446;  60  Am.  Dec.  482.  There  are 
cases,  however,  which  seem  to  reject 
this  conclusion,  and  allow  the  verbal 
stipulation  to  be  proved  and  enforced, 
and  the  written  agreement  to  be  re- 
formed, on  the  ground  that  the  refusal 


1185  MISTAKE,  §  855 

§  855.  Compromises  and  Speculative  Contracts.  — 
When  parties  have  entered  into  a  contract  or  arrangement 
based  upon  uncertain  or  contingent  events,  purposely  as 
a  compromise  of  doubtfal  claims  arising  from  them,  and 
where  parties  have  knowingly  entered  into  a  speculative 
contract  or  transaction,  —  one  in  which  they  intentionally 
speculated  as  to  the  result,  —  and  there  is  in  either  case  an 
absence  of  bad  faith,  violation  of  confidence,  misrepresen- 
tation, concealment,  and  other  inequitable  conduct  men- 
tioned in  a  former  paragraph,  if  the  facts  upon  which 
such  agreement  or  transaction  was  founded,  or  the  event 
of  the  agreement  itself,  turn  out  very  different  from  what 
was  expected  or  anticipated,  this  error,  miscalculation,  or 
disappointment,  although  relating  to  matters  of  fact,  and 
not  of  law,  is  not  such  a  mistake,  within  the  meaning  of 
the  equitable  doctrine,  as  entitles  the  disappointed  party 
to  any  relief  either  by  way  of  canceling  the  contract  and 
rescinding  the  transaction,  or  of  defense  to  a  suit  brought 
for  its  enforcement.  In  such  classes  of  agreements  and 
transactions,  the  parties  are  supposed  to  calculate  the 
chances,  and  they  certainly  assume  the  risks,  where  there 
is  no  element  of  bad  faith,  breach  of  confidence,  misrep- 
resentation, culpable  concealment,  or  other  like  conduct 
amounting  to  actual  or  constructive  fraud.^ 

to  abide  by  the  whole  agreement,  and  351  (a  very  important  case);  and  see 

the  attempt   to  enforce  that   portion  Quinn  v.  Roath,  37  Conn.  16;  Murray 

only  which   is   written,    constitute   a  v.  Dake,  46  Cal.  644. 
fraud  which  equity  ought  to  prohibit:         '  Stapilton  v.   Stapilton,   1  Atk.  2; 

See   Murray   v.    Dake,    46   Cal.    644;  2  Lead.  Cas.  Eq.,  4th  Am.  ed.,  1676, 

Taylor  V.  Gilman,  25  Vt.  411;  Coger'a  and  notes;  Jefiferys  v.  Fairs,  L.  R.  4 

Ex'ra  V.  McGee,  2  Bibb,  321;  5  Am.  Ch.  D.  448;   Pickering  v.  Pickering, 

Dec.   610;   Re^rich   v.   Swinehart,    11  2  Beav.  31,  56;  Lawton  v.  Champion, 

Pa.  St.  233;  51   Am.   Dec.   540;  Ren-  18  Beav.   87;  Baxendale  v.  Scale,    19 

shaw  V.  Gans,  7  Pa.  St.  119;  Clark  v.  Beav.  601;  Haywood  v.  Cope,  25  Beav. 

Partridge,  2  Pa.  St.  13;  4  Pa.  St.  166;  140;  Colby  v.  Gadsden,  34  Beav.  416; 

Oliver  v.  Oliver,  4  Rawle,  141;  26  Am.  Jennings  v.  Broughton,   17  Beav.  234; 

Dec.    123;    Miller   v.    Henderson,    10  Mellers   v.    Duke   of   Devonshire,    16- 

Serg.  &  R.  290;  Campbell  v.  MeClen-  Beav.    252;    Stanton    v.    Tatteraall,    1 

achan,  6   Serg.    &  R.   171.     Whether  Smale  &  G.  529;   Ridgway  v.  Sneyd^ 

affirmative  relief  be  permitted  or  not,  Kay,  627;   Parker  v.    Palmer,   1   Caa. 

the  omitted  verbal  portion  of  the  en-  Ch.  42;  Anonymous,  cited  in  Cooth  v. 

tire  agreement  may  be  set  up  by  way  Jackson,  6  Ves.  24;  Ex  parte  Peaks,  1 

of  defense  in  equity,  when  an  attempt  Madd.    346,  355;  Cann  v.  Cann,  1  P. 

is  made  to  enforce  the  written   part  Wms.  722,  727;  Stockley  v.  Stockley,  1 

alone:  Jervis  v.  Berridge,  L.  R.  8  Ch.  Ves.  &  B.  23.  29,  31;  Naylor  v.  Winch. 
2Eq.  JUK.  —  75 


§  856  EQUITY    JURISPRUDENCE.  1186 

§  856.  Requisites  to  Relief — Mistake  must  be  Material 
and  Free  from  Culpable  Negligence.  —  There  are  two  requi- 
sites essential  to  the  exercise  of  the  equitable  jurisdiction 
in  giving  any  relief  defensive  or  affirmative.  The  fact  con- 
cerning which  the  mistake  is  made  must  be  material  to  the 
transaction,  affecting  its  substance,  and  not  merely  its  inci- 
dents; and  the  mistake  itself  must  be  so  important  that  it 
determines  the  conduct  of  the  mistaken  party  or  parties. 
If  a  mistake  is  made  by  one  or  both  parties  in  reference  to 
some  fact  which,  though  connected  with  the  transaction, 
is  merely  incidental,  and  not  a  part  of  the  very  subject- 
matter,  or  essential  to  any  of  its  terms,  or  if  the  complain- 
ing party  fails  to  show  that  his  conduct  was  in  reality 
determined  by  it,  in  either  case  the  mistake  will  not  be 
ground  for  any  relief  affirmative  or  defensive.*  As  a  sec- 
ond requisite,  it  has  sometimes  been  said  in  very  general 
terms  that  a  mistake  resulting  from  the  complaining 
party's  own  negligence  will  never  be  relieved.  This 
proposition  is  not  sustained  by  the  authorities.  It  would 
be  more  accurate  to  say  that  where  the  mistake  is  wholly 

1  Sim.  &  St.  555;  Goodman  v.  Sayers,  reasonable    diligence    have    obtained 

2  Jacob  &  W.  249,  263;  Dunnage  v.  knowledge  of  the  facts,  equity  will 
White,  1  Swanst.  1.37,  151,  152;  Gor-  not  relieve;  also  when  means  of  in- 
don  V.  Gordon,  3  Swanst.  400,  470;  formation  are  equally  open  to  both 
Harvey  v.  Cooke,  4  Russ.  34;  Leonard  parties,  and  no  confidence  is  reposed, 
V.  Leonard,  2  Ball  &  B.  171,  179,  180;  and  there  is  no  violation  of  a  duty  to 
Stewart  v.  Stewart,  6  Clark  &  F.  911,  disclose,  equity  will  not  relieve:  See 
969;  Shotwell  v.  Murray,  1  Johns.  Ch.  Pickering  v.  Pickering,  2  Beav.  31, 
512,  516;  Good  v.  Herr,  7  Watts  &  S.  56,  per  Lord  Langdale;  and  Clapham 
253;  Brandon  v.  Medley,  1  Jones  Eq.  v.  Shillito,  7  Beav.  146,  149,  150. 
313;  Durham  v.  Wadlington,  2  Strob.  '  Stone  v.  Godfrey,  5  De  Gex, 
Eq.  25S;  V/illiams  v.  Sneed,  3  Coldw.  M.  &  G.  76,  90,  per  Turner,  L.  J.; 
533;  Stover  v.  Mitchell,  45  111.  213;  Okill  v.  Whittaker,  1  De  Gex  &  S.  83; 
Bell  V.  Lawrence,  51  Ala.  160;  and  2  Phill.  Ch.  338;  Trigge  v.  Lavallee,  15 
see  ante,  §  850,  and  cases  cited;  [Colton  Moore  P.  C.  C.  270,  276;  Carpmael  v. 
V.  Stanford,  82  Cal.  389;  16  Am.  St.  Powis,  10  Beav,  36,  39;  Penny  v.  Mar- 
Rep.  137;  Cooper  v.  Austin,  58  Tex.  tin,  4  Johns.  Ch.  566;  Segur  v.  Tingley, 
494.  As  to  the  requisite  of  good  faith,  11  Conn.  134;  Weaver  v.  Carter,  10 
see  Anthony  v.  Boyd,  15  R.  I.  495;  Leigh,  37;  Trigg  v.  Read,  5  Humph. 
McHarry  v.  Irvin,  85  Ky.  322.]  It  is  529;  42  Am.  Dec.  447;  McFerran  v. 
to  this  kind  of  agreements  and  tran-  Taylor,  3  Cranch,  270;  Henderson  v. 
sactions  that  the  rules  properly  apply  Dickey,  35  Mo.  120;  Paulison  v.  Van 
which  have  sometimes  been  incorrectly  Iderstine,  28  N.  J.  Eq.  306;  Damb- 
laid  down  as  requisite  to  relief  in  all  maun  v.  Schulting,  75  N.  Y.  55,  63; 
species  of  mistakes  (see  1  Story  Eq.  Stettheimer  v.  KiUip,  75  N.  Y.  282; 
Jur.,  sees.  146-149;  Siiell's  Equity,  p.  [Daggett  v.  Ayer,  65  N.  H.  82.] 

376),  viz.,  that  if  the  party  could  by 


1187 


MISTAKE. 


§  856 


caused  by  the  want  of  that  care  and  diligence  in  the 
transaction  which  should  be  used  by  every  person  of 
reasonable  prudence,  and  the  absence  of  which  would  be 
a  violation  of  legal  duty,  a  court  of  equity  will  not  inter- 
pose its  relief;  but  even  with  this  more  guarded  mode  of 
statement,  each  instance  of  negligence  must  depend  to  a 
great  extent  upon  its  own  circumstances.*  It  is  not  every 
negligence  that  will  stay  the  hand  of  the  court.  The  con- 
clusion from  the  best  authorities  seems  to  be,  that  the 
neglect  must  amount  to  the  violation  of  a  positive  legal 
duty.  The  highest  possible  care  is  not  demanded.  Even 
a  clearly  established  negligence  may  not  of  itself  be  a 
sufficient  ground  for  refusing  relief,  if  it  appears  that  the 
other  party  has  not  been  prejudiced  thereby.'    In  addi- 


'  Duke  of  Beaufort  v.  Neeld,  12 
Clark  &  F.  248,  286;  Leuty  v.  Hillas, 
2  De  Gex  &  J.  110;  Wild  v.  Hillas,  28 
L.  J.  Ch.  170;  Besley  v.  Besley,  L.  R. 
9  Ch.  Div.  103;  West.  R.  R.  v.  Bab- 
cock,  6  Met.  346;  Diman  v.  Providence 
R.  R.,  5R.  I.  130;  Voorhis  v.  Murphy. 
26  N.  J.  Eq.  434;  Dillett  v.  Kemble, 
25  N.  J.  Eq.  66;  Haggerty  v.  McCanna, 
25  N.  J.  Eq.  48;  Wood  v.  Patterson, 
4  Md.  Ch.  335;  Capehart  v.  Mhoon,  5 
Jones  Eq.  178;  Lewis  v.  Lewis,  5  Or. 
169;  Ferson  v.  Sanger,  1  Wood,  ft  M. 
138;  and  see  cases  ante,  under  §  839; 
[also  Powell  v.  Heisler,  16  Or.  412; 
Durkee  v.  Durkee,  59  Vt.  70;  Pearce 
V.  Suggs,  85  Tenn.  724;  Champion  v. 
Woods,  79Cal.  17;  12  Am.  St.  Rep.  126.] 
As  examples:  Under  the  original  form 
of  the  two  jurisdictions,  a  party  who 
had  a  good  defense  or  cause  of  action 
at  law,  and  through  negligence  failed 
to  set  it  up  or  enforce  it,  could  not 
obtain  relief  in  equity:  Stephenson 
V.  W^ilson,  2  Vern.  325;  Ware  v.  Hor- 
wood,  14  Ves.  29,  31;  Drewry  v. 
Barnes,  3  Russ.  94;  Bateman  v.  Willoe, 
1  .Schoales  &  L.  201.  [See  §  1361,  note.] 
The  purchaser  of  an  estate,  who  had 
been  compelled  to  give  it  up  from  a 
defect  in  the  title  which  his  attorney 
had  carelessly  overlooked,  could  not 
recover  back  the  purchase  price  which 
he  had  paid:  Urmston  v.  Pate,  3  Ves, 
2.'^5,  note;  and  see  Cator  v.  Lord  Pem- 
broke, 1  Brown  Ch.  301;  2  Brown.  Ch. 
282;   Thomas   v.   Powell,  2   Cox,  394. 


When  a  person  neglects  to  perform 
some  legal  obligation,  and  thereby  in- 
curs a  forfeiture,  equity  will  not  re- 
lieve therefrom:  Gregory  v.  Wilson, 
9  Hare,  683,  689;  and  see  a7ite,  §  452. 
And  if  a  person  executes  an  instrument 
carelessly,  without  even  reading  it, 
equity  may  refuse  to  relieve  him  from 
the  consequences  of  errors  in  its  con- 
tents: Glenn  v.  Statler,  42  Iowa,  107, 
110;  and  see  Butman  v.  Hussey,  30  Me. 
263;  Juzan  v.  Toulmin,  9  Ala.  662;  44 
Am.  Dec.  448;  Hill  v.  Bush,  19  Ark. 522; 
[Thompson  v.  Ela,  58  N.  H.  490;  Ken- 
nerty  v.  Phosphate  Co.,  21  S.  C.  226; 
53  Am.  Rep.  669;  Roundy  v.  Kent,  75 
Iowa,  662;  Metropolitan  Loan  Ass'n  v. 
Esche,  75  Cal.  513.  But  failure  to 
read  an  instrument  before  executing  it 
is  not  always  such  negligence  as  will 
bar  relief:  Albany  City  Savings  Inst, 
v.  Burdick,  87  N.  Y.  39;  Andrews  v. 
Gillespie,  47  K  Y.  487.  Thus  in 
Palmer  v.  Hartford  Ins.  Co.,  54  Conn. 
488,  an  insurance  policy  was  reformed 
at  the  suit  of  the  insured,  although  he 
had  not  read  the  stipulation  of  the 
policy,  in  order  to  ascertain  whether 
they  corresponded  with  the  terms  of 
the  agreement  which  he  had  already 
made.  Illiteracy  may  excuse  careless- 
ness in  executing  an  instrument:  Kin- 
ney V.  Eiisminger,  87  Ala.  340.] 

^  U.  S.  Bank  v.  Bank  of  Georgia,  10 
Wheat.  333,  343;  Mayer  v.  Mayor  etc., 
63  N.  Y.  455;  Snyder  v.  Ives,  42  Iowa, 
157,    162;  and  see  cases  at  the  coin- 


§  857  EQUITY    JURISPRUDENCE.  118S 

tion  to  the  two  foregoing  requisites,  it  has  been  said  that 
equity  would  never  give  any  relief  from  a  mistake,  if  the 
party  could  by  reasonable  diligence  have  ascertained  the 
real  facts;  nor  where  the  means  of  information  are  open 
to  both  parties  and  no  confidence  is  reposed;  nor  unless 
the  other  party  was  under  some  obligation  to  disclose  the 
facts  known  to  himself,  and  concealed  them.^  A  moment's 
reflection  will  clearly  show  that  these  rules  cannot  possi- 
bly apply  to  all  instances  of  mistake,  and  furnish  the  pre- 
requisites for  all  species  of  relief.  Their  operation  is, 
indeed,  quite  narrow;  it  is  confined  to  the  single  relief  of 
cancellation,  and  even  then  it  is  restricted  to  certain  spe- 
cial kinds  of  agreements.^ 

§  857.  III.  How  Mistake  may  be  Shown — When  by 
Parol  Evidence.  —  The  next  important  matter  to  be  con- 
sidered is  the  mode  of  showing  any  mistake  which  may 
furnish  an  occasion  for  the  exercise  of  equitable  juris- 
diction and  the  granting  of  equitable  relief;  and  practi- 
cally this  is  reduced  to  the  question,  When  is  extrinsic 
parol  evidence  admissible  to  establish  a  mistake  in  written 
instruments,  and  obtain  the  appropriate  remedy?  When- 
ever any  suit  or  defense  arises  from  a  mistake  in  some 

mencement  of  last  note.     In  this  con-  general  terms,  without  limitation,  as 

nection,  there  are  dicta,  followed  by  though  tliey  belonged  to  every  kind  of 

some  of  the  text-writers,  that  a  mis-  mistake  and  form  of  relief:   Sees.  146- 

take  concerning  matters  as  to  which  148.  Mr.  Snell  adopts  them  in  the  same 

the  party  had  "means  of  knowledge,"  unreserved  manner:  P.  376.    The  utter 

or  ' '  might  have  ascertained  the  truth, "  impossibility  of  applying  such  requisites 

etc.,  will  not  be  relieved  from:     See  in  all  instances  of  a  common  mistake  by 

Mutual  Life   Ins.   Co.  v.    Wager,    27  both  the  parties,  and  in  granting  the 

Barb.  354;  Clarke  v.  Dutcher,  9  Cow.  most  important  remedy  of  reformation, 

674.     Tliese  dicta  cannot  be  accepted  is  evident;    there   is   a   contradiction 

as  correct.     They  are  inconsistent  with  in  terms  between  these  requirements 

decisions,    and    have    been   expressly  and  the  very  conception  of  a  common 

overruled:     See    Kelly    v.     Solari,    9  mistake.     Even  where  only  one  party 

Mees.  &  W.  54;  Townsend  v.  Crowdy,  is  mistaken,  and  alleges  the  error  as 

8  Com.  B.,  N.  S.,  477;   Bell  v.  Gar-  ground  of  defense  or  of  rescission,  to 

diner,  4  Man.  &  G.  11;  Dails  v.  Lloyd,  make  these  requisites  ordinarily  appli- 

12  Q.  B.  531;  Allen  v.  Mayor  etc.,  4  E.  cable  would  contradict   the  decisions 

D.  Smith,  404.     These  are  decisions  at  concerning  negligence  cited  in  the  last 

law,  but  the  same  would  a  fortiori  be  note,  and  would  curtail  the  relief  far 

true  in  equity.     [See  also   Kinney  v.  within  the  well-established  limits. 

Ensminger,  87  Ala.  340;  Bush  v.  Bush,  ^  See  note  under  the  preceding  par- 

33  Kan.  556.]  agraph  (§  855),  and  cases  at  the  end  of 

1  In  Story's    Equity   Jurisprudence  the  last  note  but  one. 
these  rules  are   laid    down   in  most 


1189  MISTAKE.  §  858 

transaction,  not  in  the  body  of  a  written  instrument,  and 
not  controlled  by  the  statute  of  frauds  nor  by  the  settled 
rules  concerning  written  evidence,  —  as,  for  example,  a 
suit  to  recover  back  paid  money  through  mistake,  —  since 
the  entire  transaction  may  be  parol,  there  can  be  no  doubt 
that  the  mistake  may  be  proved  by  parol  evidence.  The 
whole  right  of  action  or  of  defense  in  such  case  may  de- 
pend upon  verbal  proofs.  It  is  only  in  cases  of  mistakes 
in  writings  that  any  difficulty  is  possible.  The  following 
comprise  all  the  modes  in  which  the  question  can  be  pre- 
sented, and  furnish  a  natural  order  of  discussion:  1.  In 
suits  expressly  brought  to  reform  or  to  cancel  written  in- 
struments on  account  of  mistake;  2.  Where  the  mistake 
is  set  up  as  a  defense  in  suits  brought  to  specifically  en- 
force written  instruments;  3.  When  the  plaintiff  alleges 
mistake  in  a  written  instrument,  and  seeks  to  hare  it 
enforced  as  corrected.  There  will  be  added,  —  4.  An  exam- 
ination of  the  question,  how  far  the  admission  of  parol 
evidence  is  limited  in  general  by  the  statute  of  frauds. 

§  858.  Parol  Evidence  in  Cases  of  Mistake,  Fraud,  or 
Surprise. —  It  is  an  elementary  doctrine  that  parol  evi- 
dence is  not,  in  general,  admissible  between  the  parties 
to  vary  a  written  instrument,  w^hether  the  same  has  been 
voluntarily  adopted,  or  made  in  pursuance  of  a  legal  neces- 
sity.' It  is  equally  well  settled  that  mistake,  fraud,  sur- 
prise, and  accident  furnish  exceptions  to  this  otherwise 
universal  doctrine.  Parol  evidence  may,  in  proper  modes 
and  within  proper  limits,  be  admitted  to  vary  written  in- 
struments, upon  the  ground  of  mistake,  fraud,  surprise, 
and  accident.  This  exception  rests  upon  the  highest 
motives  of  policy  and  expediency;  for  otherwise  an  in- 
jured party  would  generally  be  without  remedy.  Even 
the  statute  of  frauds  cannot,  by  shutting  out  parol  evi- 
dence, be  converted  into  an  instrument  of  fraud  or 
wrong.* 

'  Croome  v.  Lediard,  2  Mylne  &K.     Cormick  v.  Grogan,  L.  R.  4  H.  L.  82, 

251.  97,  quoted  ante,  in    §  431;  Clarke  v. 

^  See,  per  Lord  Westbury,   in    Mc-     Grant,  14  Ves.  519;  Marquis  of  Towns- 


§  859  EQUITY    JURISPRUDENCE.  1190 

§  859.  Parol  Evidence  in  Suits  for  a  Reformation  or 
Cancellation.  —  The  foregoing  exception  embraces  all 
suits  brought  expressly  upon  the  mistake  for  the  purpose 
of  obtaining  affirmative  relief  from  its  consequences.  It 
is  therefore  settled  that  in  the  suits,  whenever  permitted, 
to  reform  a  written  instrument  on  the  ground  of  a  mu- 
tual mistake,  parol  evidence  is  always  admissible  to  estab- 
lish the  fact  of  the  mistake,  and  in  what  it  consisted;  and 
to  show  how  the  writing  should  be  corrected  in  order  to 
conform  to  the  agreement  which  the  parties  actually  made. 
Although  in  such  cases  there  is  often  some  ancillary  writ- 
ing to  aid  the  court,  such  as  a  rough  draught  of  the  agree- 
ment, written  instructions,  and  the  like,  yet,  in  the  absence 
of  these  helps,  the  court  may  grant  relief  upon  the  strength 
of  the  verbal  evidence  alone.  The  same  is  true  in  suits 
brought  to  rescind  and  cancel  a  written  agreement  on  the 
ground  of  a  mistake  by  one  of  the  parties,  whereby  their 
minds  were  prevented  from  meeting  upon  the  same  mat- 

hend  v.  Stangroom,  6  Ves.  328,  333,  Blanchard  v.   Moore,   4  J.  J.  Marsh, 

per  Lord   Eldon;  Clinan  v.    Cooke,  1  471;  Chambers  v.  Li vermore,  15  Mich. 

tschoales  &  L.  22,  39,  per  Lord  Redes-  381;  Van  Ness  v.  City  of  Washington, 

dale;  Murray  v.  Parker,  19  Beav.  305,  4   Pet.   232;  [Smith   v.  Butler,  11  Or. 

308.     As  to  the  effect  of  surprise,  see  46;  Walden  v.  Skinner,  101  U.  S.  577; 

Willan  V.  Willan,  16  Ves.  72;  19  Ves.  Harding  v.  Long,  103  N.  C.  1;  14  Am. 

590;  2  Dow.  274;  Twining  v.  Morrice,  St.  Rep.  775.] 

2  Brown  Ch.  326;  Mason  v.  Armitage,  In  the  California  Code  of  Civil  Pro- 
13  Ves.  25.  The  following  American  cedure  the  general  doctrine  and  the 
cases  illustrate  the  exception  by  which  exceptions  are  formulated  as  follows: 
parol  evidence  maybe  admitted  to  vary  "Sec.  1856.  When  the  terms  of  an 
written  instruments  on  the  ground  of  agreement  have  been  reduced  to  writ- 
mistake,  in  different  forms  and  modes  ing  by  the  parties,  it  is  to  be  consid- 
of  proceeding:  Peterson  v.  Grover,  ered  as  containing  all  those  terms,  and 
20  Me.  363;  Bradbury  v.  White,  4  therefore  there  can  be  between  the 
Greenl.  391;  Rogers  v.  Saunders,  16  parties  and  their  representatives,  or 
Me.  92;  33  Am.  Dec.  635;  Goodell  v.  successors  in  interest,  no  evidence  of 
Field,  15  Vt.  448;  Lawrence  v.  Staigg,  the  terms  of  the  agreement,  other  than 
8  R.  L  256;  Quinn  v.  Roath,  37  Conn,  the  contents  of  the  writing,  except  in 
16;  Canterbury  Aq.  Co.  v.  Ensworth,  tlie  following  cases:  1.  Where  a  mis- 
22  Conn.  60S;  Patterson  v.  Bloomer,  take  or  imperfection  of  the  writing  is 
35  Conn.  57;  95  Am.  Dec.  218;  Mar-  put  in  issue  by  the  pleadings;  2. 
graff  V.  Muir,  57  N.  Y.  155;  Best  v.  Where  the  valiclity  of  the  agreement 
Stow,  2  Sand.  Ch.  298;  White  v.  Wil-  is  the  fact  in  dispute.  But  this  sec- 
liams,  48  Barb.  222;  Morganthau  v.  tion  does  not  exclude  other  evidence 
White,  1  Sweeny,  395;  Ryno  v.  of  the  circumstances  under  which  the 
Darby,  20  N.  J.  Eq.  231;  Conover  v.  agreement  was  made,  or  to  ....  ex- 
Wardell,  20  N.  J.  Eq.  266;  Chamness  plain  an  extrinsic  ambiguity,  or  to  es- 
V.  Crutchfield,  2  Ired.  Eq.  148;  Har-  tablish  illegality  or  fraud.  The  term 
rison  v.  Howard,  1  Ired.  Eq.  407;  '  agreement '  includes  deeds  and  wills, 
Perry   v.    Pearson,    1     Humph.     431;  as  well  as  contracts  between  parties." 


1191 


MISTAKB. 


§  859 


ter,  and  no  agreement  was  really  made;  and  a  fortiori 
when  the  ground  of  the  relief  is  fraud.  Parol  evidence 
must  be  admitted  in  these  classes  of  cases,  in  order  to  a 
due  administration  of  justice.  If  the  general  doctrine  of 
the  law  or  the  statute  of  frauds  was  regarded  as  closing 
the  door  against  such  evidence,  the  injured  party  would 
be  without  any  certain  remedy,  and  fraud  and  injustice 
would  be  successful.'  The  authorities  all  require  that 
the  parol  evidence  of  the  mistake  and  of  the  alleged  mod- 
ification must  be  most  clear  and  convincing,  —  in  the  lan- 
guage of  some  judges,  "the  strongest  possible,"  —  or  else 
the  mistake  must  be  admitted  by  the  opposite  party;  the 
resulting  proof  must  be  established  beyond  a  reasonable 
doubt.  Courts  of  equity  do  not  grant  the  high  remedy  of 
reformation  upon  a  probability,  nor  even  upon  a  mere  pre- 
ponderance of  evidence,  but  only  upon  a  certainty  of  the 
error.' 


•  Lady  Shelbnrnev.  Lord  Inchiquin, 
1  Brown  Ch.  338,  per  Lord  Thurlow; 
Calverly  v.  Williams,  1  Ves.  210; 
Willaa  v.-  Willan,  16  Ves.  72;  Davia 
V.  Symonds,  1  Cox.  402;  Druifif  v. 
Parker,  L.  R.  5  Eq.  131,  137;  Fowler 
V.  Fowler,  4  De  Gex  &  J.  250,  273; 
Garrard  v.  Frankel,  30  Beav.  445,  451; 
Barrow  v.  Barrow,  18  Beav.  529; 
Malmesbiiry  v.  Malmesbury,  31  Beav. 
407;  Murray  v.  Parker,  19  Beav.  305, 
308;  Scholefield  v.  Lockwood,  32  Beav. 
436;  Ashurst  v.  Mill,  7  Hare,  502; 
Bentley  v.  Mackay,  31  L.  J.  Ch.  697; 
Lackersteen  V.  Lackersteen,  6  Jur. ,  N. 
S.,  1111;  Tomlison  v.  Leigh,  11  Jur., 
N.  S.,962;Beaumoiitv.  Brainley,  Turn. 
&  R.  41;  Mortimer  v.  Shortall,  2  Dru. 
&  War.  363;  Alexander  v.  Crosbie, 
Lloyd  &  G.  145;  Peterson  v.  Grover, 
20  Me.  363;  Bellows  v.  Stone,  14  N.  H. 
175;Langdon  v.  Keith,9Vt.  299;  Cham- 
berlain  v.  Thompson,  10  Conn.  243;  26 
Am.  Dec.  390;  Wooden  v.  Haviland,  18 
Conn.  101;  Many  v.  Beekman  Iron  Co., 
9  Paige,  188;  Firmstone  v.  De  Camp, 
17  N.  J.  Eq.  317;  WaJJron  v.  Let- 
son,  15  N.  J.  Eq.  120.  Blair  v.  Mc- 
Donnell, 5  N.  J.  Eq.  327;  Gump's  Ap- 
peal, 65  Pa.  St.  476;  Chew  v.  Gillespie, 
56  Pa.  St.  308;  Lanehner  v.  Rex,  20 
Pa.  St.  4G4;  Gower  v.  Sterner,  2  Whart. 


75;  Baynard  v.  Norris,  5  Gill,  468;  46 
Am.  Dec.  647;  Newcomer  v.  Kline,  11 
Gill  &  J.  457;  37  Am.  Dec.  74;  Irick 
V.  Fulton,  3  Gratt.  193;  Keyton  v. 
Brawford,  5  Gratt.  39;  Larkins  v.  Bid- 
die,  21  Ala.  252;  Hale  v.  Stone,  14 
Ala.  803;  Lauderdale  v.  Hallock,  7 
Smedes  &  M.  622;  Wurzburger  v. 
Meric,  20  La.  Ann.  415;  Mattingly  v. 
Speak,  4  Bush,  316;  Graves  v.  Mat- 
tingly, 6  Bush,  361;  McCann  v.  Letch- 
er, 8  B.  Moil.  320;  McCloskey  v.  Mc- 
Cormick,  44  111.  336;  Mills  v.  Lock- 
wood,  42  111.  Ill;  Cleary  v.  Babcock, 
41  111.  271;  Shively  v.  Welsh,  2  Or. 
288;  Bradford  V.  Union  Bank,  13  How. 
67,  66;  and  see  cases  in  next  note. 

« Henkle  v.  Royal  Exch.  Co.,  1 
Ves.  Sr.  317;  Pitcairn  v.  Ogbourue,  2 
Ves.  Sr.  375,  379;  Willan  v.  Willan, 
16  Ves.  72;  Marquis  of  Townshend  v. 
Stangroom,  6  Ves.  328,  333;  Fowler  v. 
Fowler,  4  De  Gex  &  J.  250,  265; 
Walker  v.  Armstrong,  8  De  Gex,  M. 
&  G.  531;  Bold  v.  Hutchinson,  5  De 
Gex,  M.  &  G.  558;  Bentloy  v.  Mackay, 
4  De  Gex,  F.  &  J.  279;  31  L.  J.  Ch. 
709;  Harris  v.  Pepperoll,  L.  R.  5  Eq. 
1;  Earl  of  liradford  v.  Earl  of  Ronmey, 
.30  Beav.  431;  Garrard  v.  Frankel,  30 
Bfav.  445;  Eaton  v.  Bennett,  34  Beav. 
196;  Lloyd  v.  Cocker,   19  Beav.   140; 


§  860 


EQUITY    JURISPRUDENCE. 


1192 


§  8G0.  Parol  Evidence  in  Defense  in  Suits  for  a  Spe- 
cific Performance,  —  The  second  class  of  cases  embraces 
those  in  which  parol  evidence  of  mistake  is  offered  de- 
fensively. The  equitable  remedy  of  the  specific  enforce- 
ment of  contracts,  even  when  they  are  valid  and  binding 
at  law,  is  not  a  matter  of  course;  it  is  so  completely  gov- 
erned by  equitable  considerations  that  it  is  sometimes, 
though  improperly,  called  discretionary;  it  is  never 
granted  unless  it  is  entirely  in  accordance  with  equity 
and  good  conscience.  It  is  therefore  a  well-settled  rule, 
that  in  suits  for  the  specific  enforcement  of  agreements, 
even  when  written,  the  defendant  may  by  means  of  parol 
evidence  show  that,  through  the  mistake  of  both  or  either 
of  the  parties,  the  writing  does  not  express  the  real 
agreement,  or  that  the  agreement  itself  was  entered  into 


Rooke  V.  Lord  Kensinzton,  2  Kay  &  J. 
753;  Sells  v.  Sells,  1  Dru.  &  Sm.  42; 
Mortimer  v.  Shortall,  2  Dru.  &  War. 
363,  372,  374;  Beaumont  v.  Bramley, 
Turn.  &  R.  41,  50;  Marquis  of  Bread- 
albane  v.  Marquis  of  Chandos,  2  Mylne 
&  C.  711,  740;  United  States  v.  Mun- 
roe,  5  Mason,  572;  Andrews  v.  Essex 
Ins.  Co.,  3  Mason,  6;  Tucker  v.  Mad- 
den, 44  Me.  206;  Farley  v.  Bryant.  32 
Me.  474;  Brown  v.  Lamphear,  35  Vt. 
252;  Lyman  v.  Little,  15  Vt.  576; 
Preston  v.  Whitcomb,  17  Vt.  183; 
Stockbridge  Iron  Co.  v.  Hudson  R, 
Iron  Co.,  102  Mass.  45;  Sawyer  v. 
Hovey,  3  Allen,  331 ;  81  Am.  Dec.  659; 
Andrew  v.  Spurr,  8  Allen,  412;  Can- 
edy  V.  Marcy,  13  Gray,  373;  Kevins 
V.  Dunlar),  33  N.  Y.  676;  Mead  v. 
Westchester  Ins.  Co.,  64  N.  Y.  453; 
White  V.Williams,  48  Barb.  222;  Smith 
V.  Mackin,  4  Lans.  41;  Lyman  v.  U. 
S.  Ins.  Co.,  2  Johns.  Ch.  630;  17  Johns. 
373;  Conover  v.  Wardell,  22  N.  J.  Eq. 
492;  Burgin  v.  Giberson,  26  N.  J.  Eq. 
72;  Green  v.  Morris,  12  N.  J.  Eq.  165, 
170;  Durant  v.  Bacot,  13  N.  J.  Eq.  201; 
15  N.  J.  Eq.  411;  Hall  v.  Clagett,  2 
Md.  Ch.  151;  Philpott  v.  Elliott,  4 
Md.  Ch.  273;  Showman  v.  Miller,  6 
Md.  479;  Brantley  v.  West,  27  Ala. 
542;  Mosby  v.  Wall,  23  Miss.  81;  55 
Am.  Dec.  71;  Tesson  v.  Atlantic  Ins. 
Co.,  40  Mo.  S3,  36;  93  Am.  Dec.  293; 
Beebe  v.  Young,   14  Mich.  136;  Shay 


V.  Pettes,  35  HI.  360;  Edmonds's  Ap- 
peal, 59  Pa.  St.  220;  Potter  v.  Potter, 
27  Ohio  St.  84;  Heavenridge  v.  Mon- 
dy,  49  Ind.  434;  Miner  v.  Hess,  47 
111.  170;  Newton  v.  HoUey,  6  Wis. 
564;  State  v.  Frank,  51  Mo.  98;  Lea- 
trade  v.  Earth,  19  Cal.  660,  675;  Hath- 
away  v.  Brady,  23  Cal.  122;  Shively  v. 
Welch,  2  Or.  288;  [Hupsch  v.  Reash, 
45  N.  J.  Eq.  657;  Harding  v.  Long, 
103  N.  C.  1;  14  Am.  St.  Rep.  775; 
Marsh  v.  Marsh,  74  Ala.  418;  Max- 
well Land  Grant  Case,  121  U.  S.  325; 
122  U.  S.  365;  Griswold  v.  Hazard, 
27  Fed.  Rep.  135;  Andrews  v.  An- 
drews, 81  Me.  337;  Jarrell  v.  Jarrell, 
27  W.  Va.  743;  Jackson  v.  Magbee, 
21  Fla.  622;  Moore  v.  Giesecke,  76 
Tex.  543;  First  Presbyterian  Church  v. 
Logan,  77  Iowa,  328;  Bod  well  v. 
Heaton,  40  Kan.  36;  Hutchinson  v. 
Ainsworth,  73  Cal.  458;  2  Am.  St. 
Rep.  823.]  In  Stockbridge  etc.  Co.  v. 
Hudson  R.  Iron  Co.,  102  Mass.  45, 
Chapman,  J.,  said:  "  The  ordinary  rule 
of  evidence  in  civil  actions,  that  the 
fact  must  be  proved  by  a  preponder- 
ance of  evidence,  does  not  applj'  to 
such  a  case  as  this.  The  proof  that 
both  parties  intended  to  have  the  pre- 
cise agreement  set  forth  inserted  in 
the  deed,  and  omitted  to  do  so  by  mis- 
take, must  be  made  beyond  a  reasona- 
ble doubt." 


1193  MISTAKE.  §  860 

through  a  mistake  as  to  its  subject-matter  or  as  to  it» 
terms.  In  short,  a  court  of  equity  will  not  grant  its 
affirmative  remedy  to  compel  the  defendant  to  perform 
a  contract  which  he  did  not  intend  to  make,  or  which  he 
would  not  have  entered  into  had  its  true  effect  been  un- 
derstood. What  is  thus  true  of  mistake  is  equally  true 
of  a  defense  based  upon  fraud  or  surprise.^  Wherever 
the  defendant's  mistake  was,  either  intentionally  or  not, 
induced,  or  made  probable  or  even  possible,  by  the  acts 
or  omissions  of  the  plaintiff,  then,  on  the  plainest  prin- 
ciples of  justice,  such  error  prevents  a  specific  enforce- 
ment of  the  agreement.'^  Such  co-operation  by  the 
plaintiff,  however,  is  not  at  all  essential.  A  mistake 
which  is  entirely  the  defendant's  own,  or  that  of  his 
agent,  and  for  which  the  plaintiff  is  not  directly  or  indi- 
rectly  responsible,  may  be  proved  in  defense,  and  may 
defeat  a  specific  performance.  This  is  indeed  the  very 
essence  of  the  equitable  theory  concerning  the  nature 
and  effect  of  mistake.'     A  mistake  thus  set  up  by  the 

'  Joynes  y.    Statham,  3   Atk.  388;  Ves.  34;  and  see  Doggett  v.  Emerson, 

Garrard   v.  Grinling,  2   Swanst.  244;  3   Story,    700;    Rider    v.    Powell,    28 

Lord  Gordon  v.  Marquis  of  Hertford,  N.  Y.  310;  Matthews  v.  Terwilliger, 

2  Madd.  106;  Clarke  v.  Grant,  14  Ves.  3  Barb.  50;  [Campbell  v.  Durham,  86 

519;  Winch  v.  Winchester,  1   Ves.  &  Ala.  299.] 

B.  375;  Manser  v.  Back,  6  Hare,  443;  *  Ball  v.  Storie,  1  Sim.  &  St.  210; 
Woodv.  Scarth,  2  Kay  &  J.  33;  Alvan-  Malins  v.  Freeman,  2  Keen,  25;  Man- 
ley  v.  Kinnaird,  2  Macn.  &  G.  1;  Wat-  ser  v.  Back,  6  Hare,  443;  Leslie  v, 
son  V.  Marston,  4  De  Gex,  M.  &  G.  230;  Tompson,  9  Hare,  268;  Alvanley  v. 
Falcke  V.  Gray,  4  Drew.  651 ;  Barnard  Kinnaird,  2  Macn.  &  G.  1,  7;  Hels- 
V.  Cave,  26  Beav.  253;  Webster  v.  ham  v.  Langley,  1  Young  &  C.  175; 
Cecil,  30  Bear.  62;  Bradbury  v.  White,  Neap  v.  Abbott,  Coop.  C.  P.  333; 
4  Grecnl.  391;  Quinn  v.  Roath,  37  Howell  v.  George,  1  Madd.  1;  Wood 
Conn.  16;  Best  v.  Stow,  2  Sand.  Ch.  v.  Scarth,  2  Kay  &  J.  33;  Baxendale 
298;  Coles  v.  Bowne,  10  Paige,  526;  v.  Scale,  19  Beav.  601;  Webster  v. 
Elv  V.  Perrine,  2  N.  J.  Eq.  396;  Ryno  Cecil,  30  Beav.  62;  Western  R.  R. 
V.  Darby,  20  N.  J.  Eq.  231;  Towner  v.  Co.  v.  Babcock.  6  Met.  346;  Park  v. 
Lucas,  13  Gratt.  705,  714;  Chambers  Johnson,  4  Allen,  259;  Post  v.  Leet, 
V.  Livermore,  15  Mich.  381;  Cathcart  8  Paige,  337;  [Buckley  v.  Patterson, 
V.  Robinson,  5  Pet.  263;  [Mansfield  v.  39  Minn.  250.]  See,  however,  Morti- 
Sherman,  81  Me.  365;  Fort  Smith  v.  mer  v.  Pritchard,  1  Bail.  Eq.  505. 
Brogan,  49  Ark.  306.     See  also  §  868.]         In  applying  these  rules  of  the  text, 

*  Denny  v.  Hancock,    L.  R.  6  Ch.  it   may   be    laid   down    as   a  general 

1;    Bascomb    v.    Beckwith,    L.    R.    8  proposition  that  wherever,  in  the  de- 

Eq.    100;   Swaisland   v.    Dearsley,   29  scription  of   the  subject-matter  or  in 

Beav.  430;  Webster  v.  Cecil,  30  Beav.  the  terms  and  stipulations,  a  written 

62;  Mason  v.   Armitage,   13  Ves.  25;  agreement  is  ambiguous,  so  that  the 

Clowes  V.  Higginson,  1  Ves.  &  B.  524;  defen<lant  may  reasonal)ly  have  i)een 

15   Ves.    616;   Pym   v.    Blackburn,  3  mistaken  as  to  the  subject-matter  or 


860 


EQUITY    JURISPRUDENCE. 


1194 


defendant  is  not  merely  a  ground  of  defense,  of  dismiss, 
ing  the  suit.  If  the  plaintiff  alleges  a  written  agreement, 
and  demands  its  specific  performance,  and  the  defendant 
sets  up  in  his  answer  a  verbal  provision  or  stipulation, 
or  variation  omitted  by  mistake,  surprise,  or  fraud,  and 
submits  to  an  enforcement  of  the  contract  as  thus  varied, 
and  clearly  proves  by  his  parol  evidence  that  the  written 
contract  modified  or  varied  in  the  manner  alleged  by 
him  constitutes  the  original  and  true  agreement  made 
by  the  parties,  the  court  may  not  only  reject  the  plain- 
tiff's version,  but  may  adopt  that  of  the  defendant,  and 
may  decree  a  specific  performance  of  the  agreement  with 
the  parol  variation  upon  the  mere  allegations  of  his 
answer,  without  requiring  a  cross-bill.  The  court  will 
either  decree  a  specific  execution  of  the  contract  thus 
varied  by  the  defendant,  or  else,  if  the  plaintiff  refuses 


terms,  or  is  susceptible  of  different 
constructions,  so  that  upon  one  con- 
struction it  would  have  an  effect  which 
the  defendant  may  be  reasonably  sup- 
posed not  to  have  contemplated  or  in- 
tended, or  so  that  the  defendant  may 
have  reasonably  put  a  different  con- 
struction upon  it  from  that  which  was 
understood  by  the  plaintiff,  in  either 
of  these  cases  a  specific  performance 
will  be  denied  at  the  instance  of  the 
defendant,  on  the  ground  that  it  is 
inequitable  to  enforce  the  apparent 
agreement,  when  he  has  shown  that 
there  was  no  real  meeting  of  minds,  no 
common  assent  upon  the  same  matters: 
Calverly  v.  Williams,  1  Ves.  210;  Jen- 
kinaon  v.  Pepys,  cited  15  Ves.  521;  1 
Ves.  &  B.  528;  Clowes  v.  Higginson, 

1  Ves.  &  B.  524;  Harnett  v.  Yielding, 

2  Schoales  &  L.  549;  Watson  v.  Mars- 
ton,  4  De  Gex,  M.  &  G.  230;  Parker 
V.  Taswell,  2  De  Gex  &  J.  559;  Cal- 
laghan  v.  Callaghan,  8  Clark  &  F.  374; 
Wycombe  R'y  v.  Donnington  Hospi- 
tal, L.  R.  1  Ch.  2G8;  Neap  v.  Abbott, 
Coop.  C.  P.  333;  Wood  v.  Scarth,  2 
Kay  &  J.  33;  Baxendale  v.  Scale,  19 
Beav.  601;  Swaisland  v.  Dearsley,  29 
Beav.  430;  Webster  v.  Cecil,  30  Beav. 
62;  Hood  v.  Oglander,  34  Beav.  513; 
Manser   v    Back,    6   Hare,  443.     An 


attempt  has  been  made  in  a  few  cases 
to  limit  the  operation  of  this  doctrine. 
Thus  in  Clowes  v.  Higginson,  1  Ves. 
&  B.  524,  Sir  Thomas  Plumer  was  of 
opinion  that  the  admission  of  defend- 
ant's parol  evidence  of  mistake,  sur- 
prise, or  fraud  should  be  restricted  to 
matters  collateral  to  and  independent 
of  the  written  contract  itself.  He 
disputed  the  doctrine  which  permits 
the  defendant  to  contradict  the  terms 
themselves  of  a  written  contract  for 
the  purpose  of  defeating  a  specific 
performance,  but  conceded  that  parol 
evidence  was  admissible  to  show  mis- 
take, fraud,  or  surprise,  in  something 
collateral  to  the  contract.  See  also 
Price  V.  Ley,  4  Giff.  235;  32  L.  J.  Ch., 
N.  S.,  530.  Notwithstanding  this  at- 
tempt to  limit  the  doctrine,  it  is  very 
clear  that  parol  evidence  of  mistake, 
surprise,  or  fraud  is  admissible  in  tie- 
fen.se  as  well  where  it  contradicts  the 
very  terms  themselves  of  the  written 
agreement,  as  where  it  contradicts  or 
modifies  something  collateral  to  the 
contract:  Ramsbottom  v.  Gosdon,  1 
Ves.  &  B.  165;  Winch  v.  Winchester, 
1  Ves.  &  B.  375;  Marquis  of  Towns- 
hend  r.  Stangroom,  6  Ves.  328;  and 
see  cases  cited  in  former  part  of  this 
note. 


1195  MISTAKE.  §  8G1 

to  accept  such  relief,  will  dismiss  the  suit.^  "Under  the 
old  chancery  practice,  the  action  of  the  court  in  such 
cases  seemed  to  have  been  discretionary.  Under  the  re- 
formed procedure,  which  permits  affirmative  relief,  either 
legal  or  equitable,  to  be  obtained  by  defendants  through 
a  counterclaim,  such  a  decree,  under  proper  pleadings, 
is  doubtless  a  matter  of  course  and  of  right.  Even 
where  there  has  been  no  mistake,  surprise,  or  fraud,  if  in 
such  a  suit  the  defendant  alleges  and  proves  an  additional 
parol  provision  or  stipulation  agreed  upon  by  the  parties, 
the  court  will  decree  a  specific  performance  of  the  writ- 
ten contract  with  this  verbal  provision  incorporated  into 
it,  or  else  will  dismiss  the  suit  entirely.^  It  is  not  every 
mistake  which  will  defeat  the  enforcement  of  an  agree- 
ment. The  error  must  be  material,  and  must  possess  all 
of  the  elements  heretofore  described  as  requisite  to  the 
existence  of  the  equitable  jurisdiction.' 

§  861.  Parol  Evidence  of  Mistake  on  the  Plaintiff's 
Part  in  Suits  for  a  Specific  Performance  —  English  Rule. 
—  We  come,  in  the  third  place,  to  the  question  as  to  parol 
evidence  of  mistake  on  the  part  of  the  plaintiff  in  suits 

*  Ramsbottom  v.  Gosdon,  1  Ves.  &  381;  Murphy  v.  Roonev,  45  Cal.  78; 

B.  165;  Winch  v.  Winchester,  1  Ves.  [Redfield  v.  Gleason,  61  Vt.  220;  15 

&  B.  375;  Joynes  v.  Statham,  3   Atk.  Am.  St.  Rep.  889.] 
388;  Fife   v.    Clayton,    13   Ves.    546;         '^  Martin  v.  Pycroft,  2  De  Gex,  M. 

Clarke  v.  Grant,  14  Ves.  519;  Gwynn  &  G.   785    (a   very    instructive    case); 

V.  Lethbridge,  14  Ves.  585;  Martin  v.  Leslie  v.  Tompson,  9  Hare,  268;  Bar- 

Pycroft,  2  De  Gex,  M.  &  G.  785;  Lon-  nard  v.  Cave,   26  Beav.  253;  and   see 

don  etc.   R'y  v.   Winter,  Craig  &  P.  Croome  v.  Ledianl,  2  Mylne  &  K.  251, 

57;  Price  v.  Ley,  4  GifF.  235;  Manser  in  which  the  subject  of  parol  variation 

V.  Back,  6  Hare,  443;  Wood  v.  Scarth,  is   fully  discussed.      The  rule  of   the 

2  Kay  &  J.  33;    Barnard  v.  Cave,  26  text   will   not   be    applied  where  the 

Beav.  253;  Webster  v.  Cecil,  30  Beav.  contract  has   been  to  a  great  extent 

62;  Vouillon  v.  States,  2  Jur.,  N.  S.,  performed,  and  the  parties  cannot  be 

845;    Bradford    v.    Union    Bank,    13  restored    to    their    original    position: 

How.  57;  Quinn  v.  Roath,  37  Conn.  Vouillon  v.  States,  2  Jur.,  N.  S. ,  845. 
16;   Patterson    v.   Bloomer,   35    Conn,  '  Thus   an    inadvertent  omission  to 

67;  95  Am.  Dec.  218;  Wells  v.  Cruger,  propose  an  intended  provision  or  stip- 

5  Paige,  164;  Best  v.  Stow,  2  J^and.  Ch.  ulation  as  a  part  of  the  agreement  is 

298;    Ferussac  v.   Thorn,    I    Barb.  42;  not:  Parker  v.  Taswell,   2  De  Oex  & 

Bradbury    v.    White,   4   Grcenl.    .S91;  J.  559.     But  see  Broughton  v.  Hutt,  3' 

Ryno   V.    Darby,    29   N.    J.    Eq.   231;  DeGex&J.  501.     Nor  is  a  mistake  as 

McComas   v.    Easley,    21    Gratt.    23;  to  the  purpose  for  which  the  property 

Arnold   v.    Arnold,    2   Dev.   Eq.  467;  referreil   to  in   the   contract   is  to  be 

Huntington  v.  Rogers,  9  Ohio  St.5Il,  used:  Mildmay  v,  Hungerford,  2  Vera. 

616;  Chambers  v.  Livuruiore,  15  Mich.  243. 


§  861  EQUITY    JURISPRUDENCE.  1196 

brought  upon  written  agreements  seeking  to  obtain  their 
specific  enforcement.  It  has  been  shown  that  parol  evi- 
dence of  the  mistake  may  be  used  by  the  plaintiff  in  suits 
brought  directly  upon  it  and  seeking  the  remedy  of  a 
reformation  or  a  cancellation,  in  order  to  be  relieved  from 
its  consequences;  and  also  that  in  suits  on  a  written  con- 
tract the  defendant  may  resort  to  parol  evidence  of  a 
mistake  by  way  of  defense,  and  even  that  the  court  may 
decree  a  performance  of  the  contract  as  thus  varied  by 
means  of  his  evidence.  The  question  now  presented  is, 
whether,  in  suits  of  the  same  nature  for  the  enforcement 
of  a  written  agreement,  the  plaintiflf,  in  addition  to  his 
averment  of  the  written  contract,  may  allege  a  mistake, 
surprise,  or  fraud,  and  may  by  means  of  parol  evidence 
establish  the  verbal  modification  in  the  terms  of  the  con- 
tract which  would  result  from  such  error  or  fraud,  and 
may  obtain  in  the  same  suit  a  specific  performance  of  the 
agreement  so  modified  or  varied.  The  rule  is  well  estab- 
lished in  England  that  this  cannot  be  done,  unless  there 
has  been  a   part   performance  of  the   parol   variation.' 

'  The  leading  case  is  Woollam  v.  198;  Clarke  v.  Grant,  14  Ves.  519, 
Hearn,  7  Ves.  211;  2  Lead.  Cas.  Eq.,  524,  per  Sir  William  Grant;  Clifford 
4th  Am.  ed.,  920,  and  notes;  Earl  v.  Turrell,  1  Younge  &  C.  Ch.  138, 
Darnley  v.  London  etc.  R'y.  L.  R.  2  per  Knight  Bruce,  V.  C.  As  to  en- 
H.  L.  43;  Wilson  v.  Wilson,  5  H.  L.  forcing  the  performance  of  a  written 
Cas.  40,  65,  per  Lord  St.  Leonards;  contract  with  a  parol  modification  at 
Rich  V.  Jackson,  4  Brown  Ch.  514;  6  the  instance  of  and  proved  by  the  de- 
Ves.  334,  note;  Higginsonv.  Clowes,  15  fendant,  see  Martin  v.  Pycroft,  2  De 
Ves.  516,  523;  Winch  v.  Winchester,  Gex,  M.  &  G.  785;  Robinson  v.  Page, 
1  Ves.  &  B.  375,  378;  Manser  v.  Back,  3  Russ.  114,  and  cases  in  note  under 
6  Hare,  443,  447;  Squire  v.  Campbell,  the  last  paragraph.  This  English  doc- 
1  Mylne  &  C.  459,  480;  London  etc.  trine,  although  established  by  such  an 
R'y  V.  Winter,  Craig  &  P.  57,  61;  array  of  authority,  is  open  to  the  fol- 
Emmet  v.  Dewhurst,  3  Macn.  &  G.  lowing  observations:  1.  When  the  al- 
587;  Attorney-General  v.  Sitwell,  1  leged  mistake,  and  a  fortiori  the 
Younge  &  C.  559;  Clinan  v.  Cooke,  fraud,  is  committed  by  the  plaintifiF 
1  Schoales  &  L.  22,  38,  39;  Davies  v,  himself,  it  would  be  manifestly  unjust 
Fitton,  2  Dru.  &  War.  225,  233.  There  that  he  should  be  allowed  to  correct 
are  dicta  suggesting  a  contrary  view  his  own  error,  or  obviate  the  effects  of 
by  Lord  Hardwicke,  in  Walker  v.  his  own  deceit,  and  obtain  the  aflSrm- 
Walker,  2  Atk.  98,  100;  6  Ves.  335,  ative  remedy  of  a  specific  execution 
note;  and  in  Joynes  v.  Statham,  3  Atk.  of  the  contract  as  thus  amended.  In 
388;  by  Lord  Thurlow,  in  Pember  v.  its  application  tocsuch  a  case,  the  doc- 
Mathers,  1  Brown  Ch.  52;  and  by  trine  rests  upon  the  sure  foundations 
Lord  Eldon,  in  Marquis  of  Townshend  of  equity,  and  prevails  in  the  United 
V.  Stangroom,  6  Ves.  328,  339;  and  see  States  as  well  as  in  England.  2.  But 
also   Harrison   v.    Gardner,   2   Madd.  when  the  mistake  la  common,  or  the 


1197  MISTAKE.  §  862 

The  reason  originally  assigned  for  this  rule  was,  that  the 
admission  of  parol  evidence  as  the  foundation  for  final 
relief  in  such  suits  would  he  a  violation  of  the  statute  of 
frauds.  If  this  reasoning  has  any  force,  it  is  difficult  to 
see  why  it  does  not  equally  forbid  the  enforcement  of 
written  contracts  as  modified  by  parol  evidence  at  the 
instance  of  defendants,  or  why  it  does  not  in  fact  strike 
at  the  very  foundation  of  the  doctrine  of  reforming  writ- 
ten agreements  by  means  of  parol  evidence. 

§  862.  Same.  American  Rule — Evidence  Admissible. — 
The  American  courts  have  pursued  a  more  simple  and 
enlightened  course  of  adjudication.  The  doctrine  is  well 
settled  in  the  United  States  that  where  the  mistake  or 
fraud  in  a  written  contract  is  such  as  admits  the  equitable 
remedy  of  reformation,  parol  evidence  may  be  resorted  to 
by  the  plaintiff  in  suits  brought  for  a  specific  performance. 
The  plaintiff  in  such  a  suit  may  allege,  and  by  parol  evi- 
dence prove,  the  mistake  or  fraud,  and  the  modification 
in  the  written  agreement  made  necessary  thereby,  and 
may  obtain  a  decree  for  the  specific  enforcement  of  the 
agreement  thus  varied  and  corrected.^     As. in  suits  for  a 

fraud  is  committed  by  the  other  party,  by  a  mistake  have  relief  as  well  where 
80  that  the  contract  is  one  which  may  he  is  plaintiif  as  where  he  is  defend- 
be  reformed,  there  is  certainly  no  ant?  It  cannot  make  any  diflerence 
greater  injustice  in  permitting  such  in  the  reasonableness  and  justice  of 
correction,  as  a  preliminary  to  an  en-  the  remedy,  whether  the  mistake  were 
forcement,  to  be  made  on  the  demand  to  the  prejudice  of  the  one  party  or 
of  the  plaintiff,  and  as  the  result  of  the  other.  If  the  court  be  a  compe- 
parol  evidence  introduced  by  him,  tent  jurisdiction  to  correct  such  mis- 
than  in  allowing  it  to  be  made  on  the  takes,  —  and  that  is  a  point  understood 
allegations,  parol  proofs,  and  conten-  and  settled,  — the  agreement,  ■when 
tion  of  the  defendant.  And  when  we  corrected  and  made  to  speak  the  real 
consider  that  the  plaintiff  is  able,  by  sense  of  the  parties,  ought  to  be  en- 
means  of  parol  evidence,  to  obtain  a  forced,  as  well  as  any  otiier  agreement 
reformation  of  the  written  contract,  perfect  in  the  first  instance.  It  ought 
and  that  he  can  in  a  second  suit  com-  to  have  the  same  efficacy  and  be  en- 
pel  the  specific  performance  of  the  titled  to  the  same  protection,  when 
agreement  as  thus  corrected,  the  doc-  made  accurate  under  a  decree  of  the 
trine  of  the  text  seems  to  rest  upon  court,  as  when  made  accurate  by  the 
no  more  solid  foundation  than  mere  act  of  the  parties."  The  doctrine  is 
verbal  logic.  either  directly  decided  or  recognized 
'  The  leading  case  is  Keisselbrack  by  the  following  cases:  Bellows  v. 
V.  Livingston,  4  Johns.  Ch.  144,  148.  Stone,  14  N.  H.  175;  Smith  v.  Greeley, 
Chancellor  Kent  placed  the  decision  14  N.  H.  378;  Tilton  v.  Tilton.  9N.  H. 
broadly  and  squarely  upon  this  doc-  385;  Craig  v.  Kittredge,  2.3  N.  H.  231; 
trine,  and  said, concerning  it, as  follows:  Beardsley  v.  Knight,  10  Vt.  185;  33 
"  Why  should  not  the  party  aggrieved  Am.  Dec.  193;  Glass  v,  Hulbert,  102 


862 


EQUITY    JURISPRUDENCE. 


1198 


reformation  alone,  the  evidence  must  be  of  the  clearest 
and  most  convincing  nature;  the  burden  of  proof  is  on 
the  plaintiff,  and  he  must  prove  his  case  beyond  a  reason- 
able doubt.*  It  is  not  sufficient  merely  to  prove  a  mistake 
which  might  be  ground  for  a  rescission.  The  plaintiff 
must  establish  a  mistake  of  such  a  character  as  entitles 
him  to  a  reformation,  and  such  circumstances  as  render 
a  reformation  possible.''  In  those  states  which  have 
adopted  the  reformed  procedure  this  doctrine  is  clearly 
established  and  its  operation  enlarged.  In  one  civil  ac- 
tion the  plaintiff  may  not  only  unite  and  obtain  both 
the  remedy  of  reformation  and  the  equitable  remedy  of 
specific  performance,  but  also  the  remedy  of  reformation 
and  the  legal  remedy  of  a  pecuniary  judgment  for  debt 
or  damages  for  the  breach  of  the  contract  as  corrected, 
or  the  legal  remedy  of  a  recovery  of  specific  property.' 


Mass,  24,  41;  3  Am.  Rep.  418;  Metcalf 
V.  Putnam,  9  Allen,  97;  Quinn  v. 
Roath,  37  Conn.  16;  Wooden  v.  Havi- 
land,  18  Conn.  101;  Chamberlain  v. 
Thompson,  10  Conn.  243;  26  Am.  Dec. 
390;  Gillespie  v.  Moon,  2  Johns.  Ch. 
585;  7  Am.  Dec.  559;  Lyman  v.  Un. 
Ins.  Co.,  17  Johns.  373;  Rosevelt  v. 
Fulton,  2  Cow.  129;  Coles  v.  Bowne, 
10  Paige,  526,  535;  Gouverneur  v. 
Titus,  1  Edvv.  Ch.  477;  6  Paige,  347; 
Hyde  V.  Tanner,  1  Barb.  75;  Gooding 
V.  McAlister,  9  How.  Pr.  123;  Smith 
V.  Allen,  1  N.  J,  Eq.  43;  21  Am.  Dec. 
33;  Hendrickson  v.  Ivins,  1  N.  J.  Eq. 
562;  Christ  v.  Diffenbach,  1  Serg.  & 
R.  464;  7  Am.  Dec.  624;  Susquehanna 
Ins.  Co.  V.  Perrine,  7  Watts  &  S.  348; 
Govver  v.  Sterner,  2  Whart.  75;  Bow- 
man V.  Bittenbender,  4  Watts,  290; 
Clark  V.  Partridge,  2  Pa.  St.  13;  4  Pa. 
St.  166;  Wesley  v.  Thomas,  6  Har.  & 
J.  24;  Moale  v.  Buchanan,  11  Gill  & 
J.  314,  325;  Coutt  v.  Craig,  2  Hen.  & 
M.  618;  Newsom  v.  Bufferlow,  1  Dev. 
Eq.  383;  Brady  v.  Parker,  4  Ired.  Eq. 
430;  Clopton  v.  Martin,  11  Ala.  187; 
Harris  v.  Columbiana  Ins.  Co.,  18 
Ohio,  116;  51  Am.  Dec.  448;  Webster 
V.  Harris,  16  Ohio,  490;  Worley  v. 
Tuggle,  4  Bush,  168,  173;  Shelby  v. 
Smith,  2  A.  K.  Marsh.  504;  Bailey  v. 
Bailey,  8  Humph.  230;  Leitensdorfer 
V.  Delphy,  15  Mo.   160;  55  Am.  Dec. 


137;  Murphy  v.  Rooney,  45  Cal.  78; 
Murray  v.  Dake,  46  Cal.  644;  [Popp- 
lein  V.  Foley,  61  Md.  381.] 

>  Nevins  V.  Dunlap,  33  N.  Y.  676; 
Lj'man  v.  U.  Ins.  Co.,  2  Johns.  Ch. 
630;  17  Johns.  373;  Harris  v.  Reece, 
5  Gilm.  212;  Beard  v.  Linthicum,  1 
Md.  Ch.  345;  Brady  v.  Parker,  4  Ired. 
Eq.  430;  Harrison  v.  Howard,  1  Ired. 
Eq.  407;  Hunter  v.  Bilyeu,  30  111.  228. 
246;  Selby  v.  Geines,  12  111.  69;  Bailey 
V.  Bailey,  8  Humph.  2.30;  and  see  ante, 
§  859,  and  cases  in  note. 

■■'  Lyman  v.  U.  Ins.  Co.,  2  Johns. 
Ch.  630;  Keisselbrack  v,  Livingston.  4 
Johns.  Ch.  144;  Rider  v.  Powell,  28 
N.  Y.  310;  Mathews  v.  Terwilliger,  3 
Barb,  50;  -Hall  v.  Clagett,  2  Md.  Ch. 
151,  153;  Philpott  v.  Elliott,  4  Md. 
Ch.  273;  Durant  v.  Bacot,  15  N.  J.  Eq. 
411;  Beebe  v.  Young,  14  Mich.  136; 
Tesson  v.  Atlantic  M.  Ins.  Co.,  40  Mo. 
3.3,  36;  93  Am.  Dec.  293;  Fowler  v. 
Fowler,  4  De  Gex  &  J,  250,  265. 

'  Pomeroy  on  Remedies,  sees.  78-85. 
Reforming  and  a  pecuniary  judgment 
on  the  instrument  as  reformed:  Bid- 
well  V.  Astor  Ins.  Co.,  16  N.  Y.  263; 
Cone  V.  Niagara  Ins.  Co. ,  60  N.  Y.  619; 
3  Thomp.  &  C.  33;  N.  Y.  Ice  Co.  v. 
N.  W.  Ins.  Co.,  23  N.  Y.  357,  359; 
Welles  V.  Yates,  44  N.  Y.  525;  Cas- 
well V.  West,  3  Thomp.  &  C.  383. 
Reformation  and  other  specific  relief, 


1199  MISTAKE.  §  863 

Also,  the  defendant,  by  means  of  a  counterclaim,  may 
obtain  against  the  plaintiff  the  same  union  of  affirmative 
equitable  or  equitable  and  legal  reliefs.^ 

§  863.  Evidence  of  a  Parol  Variation  Which  has  been 
Part  Performed.  —  There  is  one  particular  case  with  re- 
spect to  which  the  English  and  American  courts  are 
agreed,  —  the  part  performance  by  the  plaintiff  of  the 
parol  provision  which  he  alleges  in  variation  of  the 
written  agreement.  It  is  the  settled  rule,  both  in  Eng- 
land and  in  this  country,  that,  in  suits  for  a  specific  per- 
formance, the  plaintiff  may  allege  and  prove  a  verbal 
addition  or  variation  of  the  written  contract,  and  that 
this  additional  verbal  stipulation  has  been  part  performed 
by  him,  and  may  then  obtain  a  decree  for  the  specific  en- 
forcement of  the  entire  agreement  as  thus  modified.' 
There  are  two  conditions  of  fact  to  which  this  rule  ap- 
plies: 1.  The  verbal  modification  may  be  contemporaneous 
with  and  a  part  of  the  original  agreement;'  2.  It  may  be 
a  subsequent  alteration  of  or  addition  to  the  original 
written  agreement.*  The  rule  applies  alike  to  each  of 
these  two  cases;  but  in  both  the  part  performance  must 
be  of  the  verbal  stipulation,  and  must  conform  to  all 

such  as  recovery  of  land:   Lattin   v.  *  Anonymous,  5  Vin.  Abr.  522,  pi. 

McCarty,   41   N.    Y.    107;  Phillips  v.  38;  Legal  v.  Miller,  2  Ves.  Sr.  299;  Pit- 

Gorham,  17  N.  Y.  270;  Laub  v.  Buck-  cairn  v.  Ogbourne,  2  Ves.  Sr.  375;  Price 

miller,    17  N.   Y.   620;  Henderson  v.  v.  Dyer,  17  Ves.  356;  Gilroy  v.  Alis, 

Dickey,  50  Mo.   161,  165;  and  see,  on  22   Iowa,   174;  and   cases  in  the  two 

this  subject  generally,  Gray  y.  Dough-  following  notes. 

erty,  25  Cal.  266;  Walker  v.  Sedgwick,  *  As  an  illustration:  The  real  agree- 

8  Cal.  39S;  Guernsey  v.  Am.  Ins.  Co.,  ment  was  for  the  sale  of  two  lots;  the 

17    Minn.    104,    108;   Montgomery  v.  writing  only  set  forth  a  contract  for 

McEwen,  7  Minn.  351.  the  sale  of  one;  the  plaintiff  proves  by 

'  Pomeroy  on  Remedies,  sees.  91-97;  parol  evidence  the  true  contract,  and 

Murphy  v.  Rooney,  45  Cal.  78;  Gue-  also  a  sufficient  part  performance  with 

dici  v.  Boots,  42  Cal.  452,  456;  Talbert  respect   to  the  second   lot;   a  specific 

V.  Singleton,  42  Cal.  .390;  Hoppough  performance  of  the  whole  is  granted: 

V.  Struble,  60  N.  Y.  430;  Haire  v.  Ba-  Moale  v.  Buchanan,  11  Gill  &  J.  314; 

ker,  5  N.  Y.  357;  Crary  v.  Goodman,  Parkhurst  v.  Cortlandt,  1  Johns.  Ch. 

12  N.  Y.  266,  268;  64  Am.  Dec.  506;  273;  14  Johns.   15;  and  see  Tilton  v. 

Bartlett  v.  Judd,  21  N.  Y.  200,  203;  Tilton,  9   N.    H.   385;   Glass  v.   Hul- 

78  Am.  Dec.  131;  Cavalli  v.  Allen,  57  bert,   102  Mass,  24,  43;   3  Am.   Rep. 

N.    Y.    508;  Petty  v.   Malier,    15   B.  418. 

Mon.  591,  604;  Ingles  v.  Patterson,  36  *  O'Connor  v,  Spaight,  1  Schoales  4; 

Wis.   373;   Ousou  v.  Cown,  22   Wis.  L.  .305;  Devling  v.  Little,  26  Pa.  St. 

329.  502. 


§§  SG4,  865  EQUITY    JURISPRUDENCE.  1200 

requisites  as  settled  with  respect  to  tlie  part  pe:formance 
of  any  verbal  agreement.' 

§  864.  Effect  of  the  Statute  of  Frauds  upon  the  Use  of 
Parol  Evidence.  —  I  shall  conclude  this  branch  of  the 
subject  with  an  examination,  in  more  general  terms,  of 
the  doctrine  concerning  the  admission  of  parol  evidence 
to  vary  the  terms  of  written  instruments  which  are  em- 
braced within  the  statute  of  frauds,  the  theory  upon 
which  the  doctrine  rests,  the  extent  to  which  such  evi- 
dence is  admissible,  and  the  limits  upon  the  doctrine 
which  have  been  asserted  by  some  decisions.  The  dis- 
cussion embraces  both  the  use  of  parol  evidence  in  suits 
brought  merely  for  the  reformation  of  such  written  in- 
struments, and  also  its  use  where  the  plaintiff  seeks,  in 
one  suit,  to  correct  a  written  instrument  by  means  of  a 
verbal  variation,  and  to  specifically  enforce  it  as  cor- 
rected; the  same  fundamental  principle  underlies  both 
of  these  classes.  A  distinct  conflict  of  opinion  exists 
among  the  American  decisions  with  respect  to  the  extent 
of  the  general  doctrine  and  the  limitations  upon  its  oper- 
ation; and  the  question  is  one  of  so  much  practical  im- 
portance that  it  demands  a  careful  examination.  I  shall 
state  the  two  opposing  positions,  and  the  grounds  on 
which  they  are  maintained,  as  clearly  and  accurately  as 
may  be  possible,  and  shall  endeavor  to  show  which  of 
the  two  accords  with  principle  and  is  sustained  by  au- 
thority. It  is,  of  course,  assumed  that  the  variation  in 
the  writing,  which  is  to  be  established  by  parol  evidence, 
arose  from  mistake,  surprise,  or  fraud. 

§  865.  Two  Classes  of  Cases  in  Which  the  Use  of  Parol 
Evidence  may  be  Affected  by  the  Statute.  —  In  contracts 
required  by  the  statute  of  frauds  to  be  in  writing,  all 
possible  errors  requiring  a  verbal  variation,  whether 
arising  from  mistake,  surprise,  or  fraud,  may  be  reduced 

*  Cases  in  the  two  preceding  notes;     Estate,  1  Watts  &  S.  383;  Broughton 
Glass  V.  Hulbert,  102  Mass.  24,  28;  3    v.  Cofifer,  18  Gratt.  184. 
Am.  Rep.  418,  per  Wells,  J.;  Allen's 


1201  MISTAKE.  §  865 

to  two  general  classes:  1.  By  means  of  the  error  the  con- 
tract may  include  within  its  terras  certain  subject-matters 
—  as,  for  example,  lands  —  which  were  not  intended  by  the 
parties  to  come  within  its  operation,  in  which  case  the 
parol  evidence  will  show  that  such  subject-matters  should 
be  omitted,  and  the  relief  demanded  will  be  a  correction 
which  shall  exclude  them,  and  confine  the  operation  of 
the  agreement  to  the  remaining  subject-matters  mentioned 
in  it,  and  to  which  alone  it  was  intended  by  the  parties 
to  apply;  2.  By  means  of  the  error  the  contract  may  omit 
certain  subject-matters  —  as  lands — which  were  intended 
by  the  parties  to  come  within  its  operation;  and  in  this 
case  the  parol  evidence  will  show  that  such  subject-matter 
should  be  included,  and  the  relief  demanded  will  be  a 
modification  of  the  writing,  so  that  it  shall  embrace  them, 
and  shall  thus  extend  its  operation  to  particular  subject- 
matters  not  mentioned  in  it,  but  to  which  it  was  originally 
intended  to  apply.  So  far  as  the  statute  of  frauds  can 
affect  the  parol  variation  of  written  instruments,  it  is  ob- 
vious that  these  two  classes  describe  all  possible  cases 
which  can  arise.  Now,  it  has  been  asserted  —  and  I  merely 
state  the  position  at  present  without  inquiring  into  its 
correctness — that  a  reformation  and  enforcement  based 
upon  parol  evidence  in  the  fiirst  of  these  classes  does  not 
conflict  with  the  statute  of  frauds,  since  the  relief  does 
not  maJce  a  parol  contract,  but  simply  narrows  a  written 
one.  already  made.  On  the  other  hand,  as  it  is  asserted, 
the  same  relief  in  the  second  class  does  directly  conflict 
with  the  statute,  since  it  is  a  virtual  making  of  a  parol 
contract  in  relation  to  land  or  other  subject-matter  speci- 
fied in  the  statute.  In  short,  it  is  argued,  the  remedy  in 
the  latter  instance  is  a  parol  extension  of  a  written  con- 
tract, so  that  it  shall  embrace  a  subject-matter  not  other- 
wise within  its  scope;  in  the  former  instance  it  is  the 
withdrawal,  by  parol  evidence,  of  a  portion  of  the  subject- 
matter  from  the  scope  of  a  written  contract  which  is  left 
in  full  force  as  to  the  remaining  portion  wliich  had  been 

2  Eq.  Jur.  — 76 


§  866  EQUITY   JURISPRUDENCE.  1202 

embraced  within  it  from  the  beginning;  one  is  an  affirm- 
ative process  of  making  a  contract;  the  other  is  merely 
a  negative  process  of  limiting  a  contract  already  made. 
The  conflict  of  decision  before  mentioned  turns  upon 
these  two  classes.  According  to  the  interpretation  of  the 
general  doctrine  maintained  by  one  group  of  decisions, 
the  admission  of  parol  evidence  is  confined  to  cases  fall- 
ing within  the  first  class;  according  to  the  other  view, 
the  evidence  is  admissible  alike  in  cases  belonging  to 
both  classes. 

§  866.  General  Doctrine  that  Parol  Evidence  of  Mis- 
take or  of  Fraud  is  Admissible  in  Both  Classes  of  Cases. — 
The  doctrine  in  all  its  breadth  and  force  is  maintained 
by  courts  and  jurists  of  the  highest  ability  and  authority, 
which  hold  that,  whether  the  contract  is  executory  or  exe- 
cuted, the  plaintiff  may  introduce  parol  evidence  to  show 
mistake  or  fraud  whereby  the  written  contract  fails  to 
express  the  actual  agreement,  and  to  prove  the  modifi- 
cations necessary  to  be  made,  whether  such  variation  con- 
sists in  limiting  the  scope  of  the  contract,  or  in  enlarging 
and  extending  it  so  as  to  embrace  land  or  other  subject- 
matter  which  had  been  omitted  through  the  fraud  or 
mistake,  and  that  he  may  then  obtain  a  specific  perform- 
ance of  the  contract  thus  varied,  and  such  relief  may  be 
granted  although  the  agreement  is  one  which  by  the 
statute  of  frauds  is  required  to  be  in  writing.*  This  view, 
in  my  opinion,  is  not  only  supported  by  the  overwhelm- 
ing preponderance  of  judicial  authority,  but  is  in  com- 
plete accordance  with  the  fundamental  principles  of 
equity  jurisprudence.  Indeed,  the  other  theory,  as  will 
more  fully  appear  in  the  sequel,  has  no  necessary  connec- 

'  Keisselbrack  v,  Livingston,  4  more,  2  Pa.  St.  122;  44  Am.  Dec.  181; 
Johns.  Ch.  144;  Gillespie  v.  Moon,  2  Gower  v.  Sterner,  2  Whart.  75;  Phil- 
Johns.  Ch.  585;  8  Am.  Dec.  559;  Phyfe  pott  v.  Elliott,  4  Md.  Ch.  273;  Tiltoa 
V.  Warden,  2  Edw.  Ch.  47;  Coles  v.  v.  Tilton,  9  N.  H.  385;  Murphy  v. 
Bown,  10  Paige,  526,  535;  Hendrick-  Rooney,  45  Cal.  78;  Quinn  v,  Roath, 
son  \r.  Ivins,  1  N.  J.  Eq.  562;  Work-  37  Conn.  16;  Monro  v.  Taylor,  3  Macn. 
man  v.  Guthrie,  29  Pa.  St.  495;  72  &  G.  713,  718;  Leuty  v.  Hillas,  2  Da 
Am.  Dec.  654;  Raffensberger  v.  Cal-  Gex  &  J.  ilO,  120;  Beardsley  v. 
lison,  28  Pa.  St.  246;  Tyson  v.  Pass-  Duutley,  69  N.  Y.  577. 


1203  MISTAKE.  §  866 

tion  with  specific  performance;  if  adopted  and  consist- 
ently carried  out,  it  would  necessarily  restrict  within 
narrow  bounds  the  most  salutary  equitable  remedy  of 
reformation.  The  same  broad  view  of  the  doctrine  is 
clearly  illustrated  in  the  treatment  of  executed  contracts 
or  conveyances  of  land.  It  is  settled  by  the  great  pre- 
ponderance of  authority  that  a  deed  of  land  may  be  thus 
corrected  by  enlarging  its  scope,  extending  its  operation 
to  other  subject-matter,  supplying  portions  of  land  which 
had  been  omitted,  making  the  estates  conveyed  more 
comprehensive,  as  changing  a  life  estate  into  a  fee, 
and  the  like,  and  by  enforcing  the  instrument  thus 
varied  against  the  grantor.  If  the  doctrine  can  be  thus 
applied  to  deeds  which  have  actually  conveyed  the  title, 
then  a  fortiori  may  it  be  applied  to  mere  executory  con- 
tracts which  do  not  disturb  the  legal  title.*  No  such  re- 
lief, however,  can  be  granted,  either  when  the  contract  is 
executory  or  executed,  and  no  parol  evidence  can  be  used 
to  modify  the  terms  of  a  written  instrument,  and  most 
emphatically  when  that  instrument  is  required  by  the 
statute  of  frauds  to  be  in  writing,  except  upon  the  occa- 
sion of  mistake,  surprise,  or  fraud;  one  or  the  other 
of  these  incidents  must  be  alleged  and  proved  before  a 
resort  can  be  had  to  parol  evidence  in  such  cases.  This 
is  certainly  the  general  rule,  and  the  exceptions  to  it  are 
more  apparent  than  real.' 

'  Monro  v.  Taylor,  3   Macn.  &  G.  Murray  v.  Dake,  46  Cal.  644;  [Hitchina 

718;  Leuty  v.  Hillaa,  2  De  Gex  &  J.  v.  Pettingill,  58  N.  H.  386;  Goodbarv. 

110,  120;  Craig  v.  Kittredge,  23  N.  H.  Duan,  61  Miss.  618;  Taylor  v.  Dever- 

231;  Smith  v.  Greeley,  14  N.  H.  378;  ell,  43  Kan.  469;  Mining  Co.  v.  Mia- 

Tilton  V.  Tiltou,  9  N.  H.   385;  Blod-  ing  Co.,  5  Utah,    624;    McDonald  v. 

gett  V.  Hobart,  18  Vt.  414;  Chamber-  Yungbluth,  46  Fed.  Rep.  836.] 

lain  V.  Thompson,   10  Conn.  243;   26  » Lee    v.    Kirby,    104    Mass.    420; 

Am.  Dec.  390;  Gouverneur  v.  Titus,  Blakeslee  v.  Biakeslee,  22  Pa.  St.  237. 

1  Edw.  Ch.  477;  6  Paige,  347;  Wiswall  The  rule  prevailing  in  several  states, 

V.  Hall,  3  Paige,  313;  De  Peyster  v.  which  allows  parol  evidence  to  show 

Hasbrouck,   11  N.  Y.  582;  Hendrick-  that  a  deed   absolute   on   its   face   is 

son  V.  Ivins,  1  N.  J.  Eq.  562;  Tyson  really  a  mortgage    even    when    there 

V.  Passmore,  2  Pa.  St.   122;   44  Am.  was  no  mistake  or  fraud  in  its  execu- 

Dec.   181;  Flagler  v.  Pleiss,  3  Rawle,  tion,  might  be  regarded  as  an  excep- 

345;  Moale  v.  Buchanan,  11  Gill  &  J.  tion,  but   is    not   so   treated    by    the 

314;  Worley  v.  Tug<j,ie,  4  Bush,   168,  courts  which  have    adopted   it;    it  is 

182;   Provost   v.    Rebman,    21    Iowa,  rested  by  them  upon  entirely  different 

419;  Wright  v.  McCormick,  22  Iowa,  principles. 
645;   Hunter  v.  Bilyeu,   30  111.   228; 


867 


EQUITY    JURISPRUDENCE. 


1204 


§  867.  Glass  v.  Eulbert—  Examination  of  Proposed 
Limitations  on  This  General  Doctrine. — The  courts  of 
some  states  have  confined  the  operation  of  the  general 
doctrine  to  the  first  of  the  two  classes  described  in  a  pre- 
ceding paragraph.  They  have  refused  to  apply  the  doc- 
trine of  a  parol  variation  on  behalf  of  the  plaintiff  to 
written  instruments  within  the  statute  of  frauds,  w^hen  the 
modification  would  enlarge  the  scope  of  the  instrument 
so  that  it  should  include  subject-matter  not  embraced 
within  it  as  it  stands,  or  would  increase  the  estate,  or  would 
otherwise  cause  it  to  operate  upon  interests  which  were 
not  originally  contained  within  its  terms.*    The  grounds 

afforded  to  a  plaintiff  seeking  a  modi- 
fication of  the  contract,  as  well  as  to 
a  defendant  resisting  its  enforcement. 
That  proposition  must  be  considered 
as  fully  established.  It  ia  quite  an- 
other proposition  to  enlarge  the  sub- 
ject-matter of  the  contract,  or  to  add 
a  new  term  to  the  writing,  by  parol 
evidence,  and  enforce  it.  No  such 
proposition  was  presented  by  the  case 
of  Gillespie  v.  Moon,  and  it  does  not 
sustain  the  right  to  such  relief  against 

the   statute   of    frauds When 

the  proposed  reformation  of  an  instrn- 
ment  involves  the  specific  enforcement 
of  an  oral  agreement  within  the  stat- 
ute of  frauds,  or  when  the  term  sought 
to  be  added  would  so  modify  the  in- 
strument as  to  make  it  operate  to  con- 
vey an  interest  or  secure  a  right  which 
can  only  be  conveyed  or  secured 
through  an  instrument  in  writing, 
and  for  which  no  writing  has  ever  ex- 
isted, the  statute  of  frauds  is  asnflS- 
cient  answer  to  such  a  proceeding, 
unless  the  plea  of  the  statute  can  be 
met  by  some  ground  of  estoppel  to  de- 
prive the  party  of  the  right  to  set  up 
that  defense:  Jordan  V.  Sawkins,  1  Ves. 
Jr.  402;O3l)ornv.  Phelps,  19  Conn.  63; 
48  Am.  Dec.  133;  Clinan  v.  Cooke,  1 
Schoales  &  L.  22.  The  fact  that  the 
omission  or  defect  in  the  writing, 
by  reason  of  which  it  failed  to  convey 
the  land,  or  express  the  obligation 
which  it  is  sought  to  make  it  convey  or 
express,  was  occasioned  by  mistake  or 
by  deceit  and  fraud,  will  not  alone 
constitute  such  an  estoppel.  There 
must  concur,  also,  some  change  in  the 
condition  or  position  of  the  party  seek- 


*  The  case  in  which  this  restrictive 
Tiew  is  set  forth  in  the  most  elaborate 
and  distinct  manner,  and  is  maintained 
with  the  greatest  display  of  reasoning, 
in  Glass  v,  Hulbert,  1 02  Ma8S.24;  3  Am, 
Rep.  418.  The  practical  importance 
of  the  question  justifies  a  careful  ex- 
amination of  this  noted  decision.  One 
of  two  adjoining  lots  belonging  to  the 
same  person  was  bought  in  reliance 
upon  the  vendor's  false  and  fraudulent 
representations  that  it  included  a  cer- 
tain sixteen  acres,  whereas  these  acres 
formed  a  part  of  the  other  lot.  On 
discovering  the  fraud,  the  purchaser 
brought  the  suit,  praying  that  the  ven- 
dor might  be  compelled  to  convey  the 
lot  really  intended.  This  remedy  the 
court  refused,  holding  that  the  vendee 
must  be  confined  to  a  rescission  and  a 
legal  action  for  damages.  The  follow- 
ing  extracts  from  the  opinion,  by 
Wells,  J.,  will  show  the  theory  main- 
tained by  the  Massachusetts  court. 
Mr.  Justice  Wells,  after  criticising  the 
opinion  of  Chancellor  Kent  in  the  lead- 
ing case  of  Gillespie  v.  Moon,  2  Johns. 
Ch.  585,  8  Am.  Dec.  559,  and  claim- 
ing that  much  of  what  the  chancellor 
there  said  concerning  the  extent  and 
operation  of  the  general  doctrine  was 
a  mere  dictum,  not  warranted  by  the 
facts  nor  necessary  to  the  decision, 
proceeds:  "  The  principle  wYuch  was 
maintained  by  Chancellor  Kent  in 
Gillespie  v.  Moon,  2  Johns.  Ch.  585, 
8  Am.  Dec.  559,  was,  that  relief  in 
equity  against  the  operation  of  a  writ- 
ten instrument,  on  the  ground  that  by 
fraud  or  mistake  it  did  not  express  the 
true  contract  of  the  parties,  might  be 


120^ 


MISTAKE. 


§  8G7 


upon  wliicli  this  conclusion  is  based  are  briefly  as  follows: 
The  statute  of  frauds  peremptorily  requires  that  every 


ing  relief,  by  reason  of  being  induced 
to  enter  upon  the  execution  of  the 
agreement,  or  to  do  acts  upon  the  faith 
ot  it  as  if  it  were  executed,  with  the 
knowleilge  and  acquiescence  of  the 
other  party  either  express  or  implied, 
for  wiiich  he  would  be  left  without 
redress  if  the  agreement  were  to  be 

defeated The    principle    on 

which  courts  of  equity  rectify  an  in- 
strument so  as  to  enlarge  its  operation, 
or  to  convey  or  enforce  rights  not 
found  in  the  writing  itself,  and  make 
it  conform  to  the  af^reemeut  as  proved 
by  parol  evidence,  on  the  ground  of  an 
omission  by  mutual  mistake  in  the  re- 
daction of  the  agreement  to  writing, 
is,  as  we  understand  it,  that  in  equrty 
the  previous  oral  agreement  is  held  to 
subsist  as  a  binding  contract,  notwith- 
Bcanding  the  attempt  to  put  it  in  writ- 
ing; and  upon  clear  proof  of  its  terms 
the  court  compel  the  incorporation  of 
tiie  omitted  clause,  or  tlie  modification 
of  that  which  is  inserted,  so  that  the 
whole  agreement  as  actually  intended 
to  be  made  shall  be  truly  expressed  and 
executed:  Hunt  v.  Rousmaniere,  1 
Feb.  1;  Oliver  v.  Mut.  etc.  Ins.  Co.,  2 
Curt.  277.  But  when  the  omitted 
term  or  obligation  is  within  the 
statute  of  frauds,  there  is  no  valid 
(Kjreement  which  the  court  is  anthorizcd 
to  enforce  outside  of  the  writing.  In 
such  case  relief  may  be  had  against 
the  enforcement  of  the  contract  as 
written  or  the  assertion  of  rights  ac- 
quired under  it  contrary  to  the  terms 
and  intent  of  the  real  agreement  of  the 
parties.  Such  relief  may  be  given  as 
well  upon  the  suit  of  a  plaintiff  seek- 
ing to  have  a  written  contract  or  some 
of  its  terms  set  aside,  annulled,  or  re- 
stricted, as  to  a  defendant  resisting 
its  specific  performance:  Gillespie  v. 
Moon,  2  Johns.  Ch,  585;  8  Am.  Dec. 
559;  Iveisselbrack  v.  Livingston,  4 
Johns.  Ch.  148.  Relief  in  this  form, 
although  procured  by  parol  evidence 
of  an  agreement  dififering  from  the 
written  contract,  with  proof  that  the 
difference  was  the  result  of  accident  or 
mistake,  does  not  conflict  with  the 
provisions  of  the  statute  of  frauds. 
That  statute  forbids  the  enforcement 
of  certain  kinds  of  agreement  without 
writing,    but  it  does   not  forbid  the 


defeat  or  restriction  of  written  con* 
tracts,  nor  the  use  of  parol  evidence 
for  the  purpose  of  establishing  the 
equitable  grounds  therefor.  The  parol 
evidence  is  introduced,  not  to  establish 
an  oral  agreement  independently  of 
the  writing,  but  to  show  that  the 
written  instrument  contains  something 
contrary  to  or  in  excess  of  the  real 
agreement  of  the  parties,  or  does  not 
properly  express  that  agreement: 
Higginson  v.  Clowes,  15  Ves.  516;  1 
Ves.  &  B.  524;  Squier  v.  Campbell,  1 
Mylne  &  C.  459,  480.  But  rectifica- 
tion by  making  the  contract  include 
obligations  or  subject-matter  to  which 
its  written  terms  will  not  apply  is  a 
direct  enforcement  of  the  oral  agree- 
ment, as  much  in  conflict  with  the 
statute  of  frauds  as  if  there  were  no 
writing  at  all.  Such  rectification,  when 
the  enlarged  operation  includes  that 
which  is  within  the  statute  of  frauds, 
must  be  accomplished,  if  at  all,  under 
the  other  head  of  equity  jurisdiction, 
namely,  fraud."  I  remark,  in  this 
connection,  that  it  is  difficult  to  un- 
derstand what  the  learned  judge  means 
by  this  last  statement.  The  ground 
on  which  the  plaintiff  in  the  suit 
sought  relief  was  fraud,  —  direct  fraud- 
ulent misrepresentations  by  the  de- 
fendant, and  not  mere  mistake,  —  and 
the  relief  was  denied  because,  as  the 
court  said,  the  granting  it  would 
violate  the  statute  of  frauds.  How, 
then,  could  the  relief  be  sought,  con- 
sistently with  this  view,  under  the 
jurisdiction  over  fraud  ?  It  is  possible 
that  he  refers  to  the  remedy  of  reacis' 
eion  based  upon  fraud;  but  the  use  of 
the  word  "  rectification  "  seems  to  be 
opposed  to  this  explanation.  The 
same  view  of  the  doctrine  was  main- 
tained in  Elder  v.  Elder,  10  Me.  80, 
25  Am.  Dec.  205,  per  Weston,  J.,  al- 
though it  does  not  appear  that  any 
fraud  was  alleged  as  in  the  Massachu- 
setts case.  See  also,  as  supporting  the 
same  theory  with  more  or  less  direct- 
ness, Osborn  v.  Phelps,  19  Conn.  63; 
48  Am.  Dec  133;  Miller  v.  Chetwood, 
2  N.  J.  Eq.  99;  Dennis  v.  Dennis,  4 
Rich.  Eq.  307;  Westbrook  v.  Harbe- 
son,  2  McCord  Eq.  112;  Climer  v. 
Hovey,  15  Mich.  18;  Whitteaker  v. 
Yanschoiack,  5  Or.  113;  Best  v.  Stow, 


§  867  EQUITY   JURISPRUDENCE.  1206 

contract  creating  or  transferring  or  otherwise  dealing 
with  an  interest  in  land  must  be  in  writing,  and  tliat 
while  the  limitation  or  restriction  of  a  written  agreement, 
so  that  it  shall  not  include  all  the  subject-matter  originally 
within  its  scope,  does  not  conflict  with  the  statute,  a  ref- 
ormation or  enforcement  based  upon  parol  evidence,  by 
which  the  contract  is  made  to  operate  upon  new  and  dis- 
tinct subject-matter,  estates,  or  interests,  is  a  direct  viola- 
tion of  the  legislative  mandate,  and  a  gross  usurpation 
of  power  by  the  courts,  and  cannot  therefore  be  per- 
mitted. With  regard  to  the  character  of  these  decisions 
as  correct  representations  of  the  equitable  doctrine,  and 
to  their  effect  as  binding  authoritj',  it  would  perhaps  be 
enough  to  say  that,  at  the  time  when  they  were  made,  the 
courts  of  Massachusetts  and  of  Maine,  able  and  learned 
as  they  were,  possessed  only  a  very  narrow  and  partial 
equitable  jurisdiction,  conferred  entirely  by  statutes,  and 
it  was  the  very  central  position  of  their  local  system,  re- 
peatedly affirmed  in  the  most  positive  manner,  that  they 
would  not  and  could  not  enlarge  their  statutory  jurisdic- 
tion by  implication.  This  fact  has  exerted  a  most  marked 
influence  upon  these  courts  in  their  manner  of  dealing 
with  general  topics  which  were  partly  embraced  within  the 
terms  of  the  local  statutes.^  Passing  by  this  fact,  how- 
ever, the  decisions  themselves  are,  in  my  opinion,  based 
upon  a  misconception  and  misinterpretation  of  the  true 
province  and  methods  of  equity  in  dealing  with  manda- 
tory statutes  of  form,  —  such  as  the  statute  of  frauds  or  of 
wills,  —  in  cases  of  fraud,  mistake,  accident,  and  surprise, 
so  as  to  prevent  the  enactments  themselves  from  being 
made  the  instruments  of  injustice.^  The  principles  which 
underlie  the  theory  advocated  by  the  Massachusetts  court, 
if  carried  out  to  their  legitimate  results,  would  work  a 

2  Sand.  Ch.   298;  [Davis  v.   Ely,  104        »  See  vol.  1,  §§  311-321,  322-337. 
N.  C.  16;  17  Am.  St.  Rep.  667.]    The         'See   the  language  of   Lord  West- 
American  editor  of  the  Leading  Cases  bury  in  McCorinick  v.  Grogau,  L.  R. 
in   Equity  seems   to   favor   the   same  4  H.  L.   82,  97,  quoted  ante,  voL  1, 
view  in  his  notes  to  WooUam  v.  Hearn,  §  431. 
vol.  2,  pp.  920,  944-1040,  4th  Am.  ed. 


1207 


MISTAKE. 


§SG7 


virtual  revolution  in  equity  jurisprudence,  T^ould  confine 
its  most  salutary  remedial  functions  ■within  very  narrow- 
limits,  and  would  overturn  doctrines  which  have  been 
regarded  as  settled  since  the  earliest  periods  of  the  juris- 
diction.^     They  w^ould    greatly    abridge   the   remedy   of 


*  In  the  first  place  the  authorities 
are  overvvhelmiugly  opposed  to  the 
fundamental  positions  maintained  by 
the  Massachusetts  and  Maine  courts, 
and  the  ratio  decidendi  in  these  nu- 
merous cases  is  conclusive.  Ihe  state- 
ment necessarily  implied  hy  Mr. 
Justice  Wells,  that  the  relief  of  ref- 
ormation is  confined  to  agreements  not 
vnthin  the  statute  of  frauds,  is  with- 
out any  foundation  of  fact.  The  cases 
are  many,  decided  by  the  ablest  courts, 
where  a  reformation  aud  enforcement 
have  been  granted  of  written  agree- 
ments within  the  statute  of  frauds, 
the  effect  of  which  was  to  enlarge  the 
scope  of  the  writing  and  make  it  in- 
clude and  operate  upon  lauds  not  em- 
braced within  its  original  form,  —  cases 
belonging  to  the  second  class  described 
in  a  foregoing  paragraph.  I  will  refer 
to  a  few  such  instances  by  way  of 
illustration.  In  Moale  v.  Buchanan, 
11  Gill  &  J.  314.  a  vendor  had  agreed 
to  sell  certain  lots;  he  gave  a  deed,  in 
pursuance  of  his  contract,  in  which  part 
of  the  lots  were  omitted  by  mistake. 
The  court  granted  a  rectification  and 
compelled  the  vendor  to  convey  the 
other  lots.  In  De  Peyster  v.  Has- 
brouck,  UN.  Y.  582,  defendant  gave 
a  mortgage  on  a  piece  of  land  which 
he  fraudulently  induced  the  plaintilf 
to  believe  was  a  lot  containing  a  tan- 
nery and  mill,  while  in  fact  these 
structures  stood  on  another  lot.  The 
court  granted  relief  by  extending  the 
lien  of  the  mortgage  so  that  it  should 
include  the  land  on  which  the  build- 
ings stood.  In  Wiswall  v.  Hall,  3 
Paige,  313,  a  grantee  intended  to  pur- 
chase and  supposed  he  was  obtaining 
'  certain  land  containing  a  wharf  and 
other  structures,  aud  the  grantor 
fraudulently  suffered  him  to  take  a 
deed  which  only  conveyed  an  adjacent 
and  worthless  lot.  The  court  granted 
a  reformation,  and  compelled  the 
grantor  to  convey  the  true  land.  In 
Gouverneur  v.  Titus,  6  Paige,  347,  1 
Edw.  Ch.  477,  a  deed  was  corrected 
which  by  mistake  conveyed  an  entirely 
different  piece  of  land  from  the  one 


intended  to  be  purchased.  In  Flagler 
V.  Pleiss,  3  Rawle,  345,  a  deed  was 
reformed  and  made  to  convey  laud 
which  had  been  left  otit  by  mistake. 
In  Hendrickson  v.  Ivins,  1  N.  J.  Eq. 
562,  a  bond  was  corrected  and  enforced 
against  a  surety,  although  the  surety's 
contract  was,  of  course,  requireil  to 
be  in  writing  by  the  statute.  In  Ty- 
son V.  Passmore,  2  Pa.  St.  122,  44  Am. 
Dec.  181,  under  the  peculiar  procediiie 
then  prevailing  in  Pennsylvania,  an 
agreement,  which  was  fraudulently 
represented  as  containing  an  entire 
tract  of  260  acres,  but  which  only  cov- 
ered a  third  of  that  amount,  was  virtu- 
alh'  reformed,  and  the  defendant  com- 
pelled to  convey  the  entire  tract.  The 
case,  though  in  form  an  action  of  eject-, 
ment,  was  decided  entirely  upon  equi- 
table principles.  See  also  Tilton  v. 
Tilton,  9  N.  H.  385;  Smith  v.  Greeley, 
14  N.  H.  378;  Blodgett  v,  Hobart,  18 
Vt.  414;  Beardsley  v.  Duntley,  69  N.  Y. 
577.  [In  McDonald  v.  Yungbluth,  46 
Fed.  Rep.  836,  and  Hitchins  v.  Pettiu- 
gill,  58  N.  H.  386,  the  doctrine  of  Glass 
V.  Hulbert,  is  expressly  disapproved.] 
Mr.  Justice  Wells  would  escape  from 
the  force  of  these  and  other  cased  of  the 
same  class,  by  claiming  that  they  were 
decided  upon  the  principle  of  equitable 
estoppel.  He  asserts  that  relief  of  the 
kind  under  consideration  can  only  ba 
given  when  the  defendant  has  by  his 
conduct  estopped  himself  from  setting 
up  and  relying  upon  the  mandates  of 
the  statute.  It  is  a  complete  answer 
to  this  ingenious  position,  that  these 
cases  were  not  in  fact  decided  upon, 
the  ground  of  equitable  estoppel.  J  a 
all  the  cases  of  this  class,  the  ratio  deci- 
dendi was  in  no  instance  an  equitable 
estoppel.  In  ascertaining  what  doc- 
trines and  rules  have  been  established 
by  adjudicated  cases,  we  must  alwaya 
inquire  what  was  the  actual  ground  of 
the  decision,  what  was  the  actual  ratio 
decidendi  adopted  by  the  courts;  it  is 
useless  to  speculate  as  to  other  and 
possible  grounds  upon  which  the  decis- 
ions might  have  been  re.sted.  But,  as 
I  shall  bhow  in  the  tic^uel,  even  if  this 


§  867 


EQUITY   JURISPRUDENCE. 


1208 


reformation;  they  would  prevent  the  court  from  establish- 
ing and  enforcing  parol  contracts  which  the  defendant's 


class  of  decisions  could  be  referred  to 
the  principle  of  equitable  estoppel, 
their  direct  antagonism  to  the  posi- 
tions of  the  Massachusetts  court  would 
not  thereby  be  lessened. 

I  will  now  examine  these  positions 
upon  principle.  The  sole  ground  of 
opposition  to  the  equitable  jurisdiction 
is  the  statute  of  Irauds.  If  there  is 
any  force  in  tlie  objection,  it  applies 
as  well  to  fraud  as  to  mistake.  In- 
deed the  Massachusetts  decision  ex- 
pressly takes  this  view,  and  denies  the 
power  of  granting  such  relief  in  cases 
of  fraud  as  well  as  in  those  of  mistake. 
The  Maine  court  does  not  avowedly 
push  its  reasoning  to  this  extreme.  In 
the  first  place,  I  shall  suggest  some  con- 
siderations neyatively.  A  fatal  objec- 
tion to  the  whole  theory  is,  that  it 
proves  too  much;  if  accepted  as  a  true 
principle  of  equity,  it  necessarily  de- 
stroys unojlatn  several  branches  of  the 
jurisdiction  which  are  among  its  most 
familiar  and  salutary  instances  of  re- 
lief. This  theory  is  not  in  its  essence 
directed  against  tlie  remedy  of  specific 
performance,  but  against  that  of  ref- 
ormation; the  act  which  these  courts 
find  to  be  so  impossible  is  the  construc- 
tion of  a  contract  by  parol  evidence,  not 
the  enforcement  of  a  contract  after  it 
is  constructed.  The  theory,  therefore, 
militates  against  the  remedy  of  refor- 
mation, as  such,  in  all  its  phases,  and  as 
distinct  from  the  subsequent  remedy 
of  enforcement.  It  also  seems,  not- 
witlistauding  the  ingenious  and  very 
refined  distinctions  drawn  by  the 
Massachusetts  court,  to  militate  no 
less  against  the  remedy  of  rescission. 
In  short,  if  this  theory  be  accepted,  it 
must  nullify  the  well-settled  doctrines 
which  permit  a  plaintiff  to  reform  a 
written  contract  which,  through  fraud 
or  mistake,  does  not  express  the  real 
intent  of  tlie  parties  as  shown  by  their 
prior  parol  agreement,  and  which  per- 
mit a  defendant  to  vary  an  agreement 
and  enforce  it  as  varied.  It  is  well 
settled  that  both  of  these  proceedings 
may  be  had;  and  neither  the  English 
nor  the  American  courts  have  sug- 
gested the  limitation  that  they  can 
only  be  resorted  to  where  the  written 
instrument  includes  too  much  and  the 
relief  consists  in  narrowing  its  opera- 


tion. But  each  of  these  proceedings 
is  in  appearance  a  violation  of  the  stat- 
ute of  frauds,  and  is  certainly  prohib- 
ited by  the  principles  of  the  theory 
which  I  am  examining.  Each  of  them 
is,  in  fact,  the  establishing  by  parol  a 
contract  which  the  statute  says  can 
only  be  established  by  writing.  Nor 
can  I  see  any  essential  distinction  be- 
tween the  remedy  of  reformation  in 
these  instances  and  that  of  rescissioyi, 
when  the  party,  in  order  to  lay  the 
foundation  for  the  rescission,  is  obliged 
to  show  by  parol  evidence  a  departure 
in  the  written  instrument  from  the  in- 
tent as  verbally  agreed.  The  party 
proves  by  parol  evidence  that  tliere 
was  a  verbal  contract  broader  than  the 
written  one,  and  because  the  written 
one  thus  varies  from  this  agreement,  it 
is  set  aside.  The  gist  of  the  proceeding 
lies,  not  in  the  nature  of  the  remedy, 
whether  it  be  rescission  or  reformation, 
but  in  the  establishment  by  means  of 
parol  evidence  of  a  contract  which 
embraces  more  than  the  written  in- 
strument does,  and  in  thus  doing  what 
it  is  said  the  statute  forbids.  Again, 
this  theory  is  in  direct  conflict  with 
the  well-settled  doctrine  that  if  one 
of  the  parties  to  a  contract  which  is 
required  by  the  statute  of  frauds  to  be 
in  writing,  by  his  own  fraudulent 
practices  prevents  it  from  being  re- 
duced to  writing  in  compliance  with 
the  statute,  equity  will  interfere  at 
the  suit  of  the  other  party,  and  will 
enforce  the  agreement,  although  ver- 
bal; See  Mestaer  v.  Gillespie,  11  Ves. 
627,  628,  per  Lord  Eldon;  Montacute 
V.  Maxwell,  1  P.  Wms.  618;  Haigh  v. 
Kaye,  L.  R.  7  Ch.  469;  Whitridge  v. 
Parkhurst,  20  Md.  62;  Jenkins  v.  El- 
dredge,  3  Story,  181;  Taylor  v.  Luther, 
2  Sum.  228;  Barnard  v.  Flinn,  8  Ind. 
204. 

Finally,  this  theory,  if  correct, 
would  at  once  overturn  the  whole  ju- 
risdiction of  establishing  and  enforcing 
a  parol  contract  which  has  been  partly 
performed.  The  Massachusetts  court 
accounts  for  the  numerous  cases  in 
which  written  instruments  within  the 
statute  of  frauds  have  been  reformed 
and  enforced  by  enlarging  their  opera- 
tion and  making  them  include  new 
subject-matter,  by  referring  them  all 


1209 


MISTAKE. 


§  867 


actual  fraud  had  prevented  from  being  put  into  writing; 
and  in  fact,  these  principles  cannot  be  reconciled  with 


to  the  doctrine  of  equitable  estoppel. 

Tills  exphuiiitiou,  while  coucediug 
that  such  cases  were  correctly  decid- 
ed, IS  insufficient,  and  fails  to  remove 
the  inconsistency  and  antagonism  be- 
tween those  decisions  and  the  theory 
maintained  by  the  court.  If  the  stat- 
ute of  frauds  is  so  peremptory  in  its 
mandates  that  it  forbids  the  proof  of  a 
contract  by  parol  when  it  ought  to  be 
in  writing,  upon  the  occasion  of  fraud 
or  mistake,  it  is  equally  peremptory 
in  forbidding  such  proof  upon  the  oc- 
casion of  an  equitable  estoppel.  It  is 
just  as  much  a  violation  of  the  statute 
to  permit  a  contract  to  be  established 
by  parol  evidence  on  the  plea  of  an 
estoppel  from  mere  conduct,  as  on  the 
plea  of  fraud  or  mistake.  If  the 
statute  may  be  avoided  on  the  one 
ground,  it  may  be  on  the  other;  and  it 
should  be  borne  in  mind  that  the  sole 
foundation  for  the  theory  is  the  invio- 
lability of  the  statute.  There  is  noth- 
ing in  an  equitable  estoppel  which 
gives  it  any  more  power  to  dispense 
with  the  statute  than  may  be  given  to 
fraud  or  mistake.  In  fact,  the  very 
foundation  of  the  doctrine  of  equitable 
estoppel  is  the  notion  that  it  would  be 
a  virtual  fraud  upon  one  party  if  the 
other  was  not  estopped;  and  some 
American  courts  have  gone  so  far  in 
this  direction  as  to  hold  that  actual 
fraud  is  an  indispensable  element  of 
every  equitable  estoppel.  It  tlius  ap- 
pears that  the  principles  involved  in 
this  theory,  if  adopted,  would  under- 
mine all  these  various  instances  of 
equitable  jurisdiction,  and  the  objec- 
tions urged  by  the  courts  in  support 
of  the  theory  prove  too  much. 

To  the  foregoing  negative  observa- 
tions I  shall  now  add  an  affirmative 
criticism  of  theory.  Notwithstand- 
ing the  great  learning  and  eminent 
ability  of  the  courts  which  have  an- 
nounced it,  the  theor}'  involves,  as  it 
seems  to  me,  a  misconception  of  the 
fundamental  principles  of  equity  juris- 
prudence, —  a  failure  to  grasp  those  es- 
sential principles  in  their  true  nature, 
operation,  and  effects.  As  occasions 
for  the  exercise  of  equitable  jurisdic- 
tion and  for  tlie  granting  of  equitable 
relief,  fraud  and  mistake  stand  upon 
exactly  the  same  footing;  their  effects 


upon  the  rights  of  the  injured  party 
are  the  same;  the  necessity  which  they 
create  for  relief  is  the  same.  It  is 
true  that  there  is  an  element  of  moral 
wrong  in  fraud,  which  is  not  present 
in  mistake  where  it  at  drat  occurs, 
and  a  judge  feels  inclined  to  punish 
the  wrong-doer.  But  it  is  a  principle 
which  is  fundamental  and  should  never 
be  forgotten,  that  equity  relieves 
against  fraud  on  account  of  its  effects 
upon  the  rights  of  the  injured  party, 
and  not  on  account  of  the  moral  de- 
linquency of  the  wrong-doer.  Now, 
the  effects  of  a  pure  mistake  upon  the 
rights  of  the  suffering  party  are  the 
same  as  injuries,  and  calling  as  loudly 
for  relief  as  those  of  fraud.  Further- 
more, although  in  the  original  mistake 
there  is  no  element  of  immorality, 
yet  afterwards,  when  the  mistake  is 
discovered,  and  the  party  benefited 
insists  upon  retaining  its  advantages, 
and  refuses  to  voluntarily  correct  the 
error,  but  plants  himself  upon  the  strict 
legal  rights  which  the  erroneous  writ- 
ing gives  him,  there  is  but  a  very 
shadowy  distinction  between  the  im- 
moral character  of  his  conduct  and 
that  of  the  person -who  intentionally, 
by  misrepresentations  and  conceal- 
ments, induces  another  to  enter  into  an 
agreement.  And  for  this  reason  we 
find  judges  constantly  describing  the 
conduct  of  persons  in  such  a  situation, 
who  insist  upon  holding  the  advan- 
tages accidentally  obtained  by  mistake, 
as  fraudulent,  and  the  persons  them- 
selves as  guilty,  from  a  moral  point 
of  view,  of  virtual,  if  not  actual,  fraud. 
Whatever  power,  therefore,  courts  of 
equity  possess  to  prevent  and  remove 
the  consequences  of  fraud,  they  also 
possess  in  dealing  with  the  effects  of 
mistake.  What,  then,  is  the  true  prin- 
ciple upon  which  equity  grants  its 
reliefs  on  the  occasion  of  fraud  or  mis- 
take in  written  instruments,  espe- 
cially when  these  remedies  seem  to 
militate  against  the  provisions  of  the 
statute  of  frauds  ?  There  are  many 
settled  doctrines  of  equity  which 
maintain,  protect,  and  enforce  rights 
both  of  property  and  of  remedy  in 
seeming  antagonism  to  the  statutes  of 
frauds,  of  wills,  of  recor.liiig,  and  the 
like.     It  has  been  shown  in  the  first 


§867 


EQUITY    JURISPRUDENCE. 


i2ia 


the  doctrines  upon  which  the  jurisdiction  of  equity  to 
enforce  parol  contracts  in  cases  of  part  performance  is 


volume  that  in  all  such  instances 
equity  does  not  overrule  the  statute, 
nor  deny  nor  disturb  the  legal  title 
protected  by  the  statute;  it  fastens  a 
personal  obligation  upon  the  conscience 
of  the  party,  and  compels  him  to  hold 
and  use  his  legal  title  for  the  benefit 
of  the  other  person  who  is  recognized 
by  the  court  as  possessing  the  bene- 
ficial right:  See  vol.  1,  §§  430,  431, 
and  the  language  of  Lord  Westbury 
there  quoted. 

The  principle  is  unalterably  fixed  in 
the  foundations  of  the  jurisprudence 
that  equity  will  not  suffer  a  statute 
passed  for  the  purpose  of  preventing 
fraud  to  be  used  as  an  instrument  for 
accomplishing  fraud;  the  statute  will 
be  uplifted,  when  necessary  to  prevent 
such  a  result.  One  or  two  examples 
will  serve  to  illustrate  this  grand  prin- 
ciple. In  the  case  of  enforcing  a  ver- 
bal contract  on  the  ground  of  part 
performance,  the  relief  is  wholly  based 
upon  the  notion  that  for  the  defend- 
ant —  the  vendor  —  to  insist  upon  the 
statute  and  to  set  it  up  as  a  bar 
would  be  a  fraud  upon  the  plaintiff. 
Although  the  fraud  is  merely  con- 
structive, yet,  because  the  mere  act  of 
setting  up  the  statute  as  a  peremptory 
defense  would  be  a  virtual  fraud,  a 
court  of  equity  treats  the  statute  as 
uplifted;  it  fastens  a  personal  obliga- 
tion upon  the  conscience  of  the  defend- 
ant, and  compels  him  to  hold  his  legal 
title  in  trust  for  the  plaintiff,  and  to 
perform  the  obligation  by  a  convey- 
ance. It  is  the  same  when  parties 
have  entered  into  a  verbal  agreement 
which  the  statute  of  frauds  requires 
to  be  in  writing  in  order  to  be  binding, 
and  one  of  them  by  his  fraudulent  con- 
duct prevents  it  from  being  executed 
in  a  written  form.  Here,  according  to 
the  terms  of  the  statute,  there  is  no 
contract;  and,  according  to  the  theory 
under  review,  there  being  no  contract, 
it  should  be  impossible  for  a  court  of 
equity  to  construct  one  by  parol  proof 
ot  what  the  parties  had  agreed  upon, 
and  to  enforce  it  when  established. 
But  a  court  of  equity  is  not  in  the  least 
hindered  by  these  considerations,  nor 
prevented  from  granting  its  relief. 
The  fraud  being  shown  and  the  con- 
tract proved  by  parol  evidence,  the 


court  is  not  embarrassed  by  the  stat- 
ute. It  fastens  upon  the  wrong-doer  a 
personal  ol)ligation  to  do  exactly  what 
he  had  verbally  agreed  to  do,  and  if 
necessar3%  treats  him  as  holding  the 
legal  title  to  the  subject-matter  in 
trust  for  the  plaintiff,  and  compels 
him  to  consummate  his  own  duty  and 
the  other's  right  by  a  conveyance,  and 
thus  the  statute  is  uplifted.  The  same 
principle  applies  to  facts  and  circum- 
stances like  those  involved  in  the  case  of 
Glass  V.  Hulbert.  When  A  and  B  have 
made  a  verbal  agreement  by  which  A 
is  to  convey  certain  lots  of  land,  and 
in  putting  this  agreement  into  a  writ- 
ten form,  through  mistake  or  the  fraud 
of  A,  the  writing  includes  only  a  por- 
tion of  the  lots,  or  different  land  from 
that  intended  by  the  parties,  a  court 
of  equity  is  not  any  more  obstructed 
by  the  statute  in  granting  relief  than 
in  the  instances  before  mentioned. 
The  real  agreement  and  intention 
being  showzi  by  parol  evidence,  the 
court  fastens  a  personal  obligation 
upon  A;  it  treats  him  as  holding  the 
legal  title  of  the  lots  really  intended 
in  trust  for  the  vendee;  and  it  works 
out  and  executes  this  trust  by  com- 
pelling a  conveyance.  It  follows  from 
the  foregoing  analysis  of  the  principle, 
as  well  as  from  the  general  current  of 
authorities,  that,  in  granting  the  equi- 
table relief  of  reformation  and  enforce- 
ment in  such  cases  of  mistake  or  fraud, 
it  makes  no  possible  difference  whether 
the  failure  of  the  written  instrument 
to  express  the  real  agreement  and  in- 
tent of  the  parties  consists  in  its  in- 
cluding too  much  or  too  little;  it  is 
immaterial  whether  the  verbal  con- 
tract to  be  proved  by  parol  is  broader 
than  the  written  instrument,  covering 
more  or  different  subject-matter,  or  is 
narrower,  embracing  only  a  part  of 
the  subject-matter  or  terms  which  are 
found  in  the  writing;  whether  the  ref- 
ormation shall  enlarge  the  scope  of 
the  written  contract  by  adding  other 
terms  or  subject-matter,  or  shall  re- 
strict it  by  subtracting  from  its  terms 
or  subject-matter.  In  either  of  these 
instances  the  statute  of  frauds  opposes 
no  obstacle  to  relief,  since  in  pursu- 
ance of  the  very  principle  upon  which 
equity  intervenes  ajid  grants  any  re- 


1211  MISTAKB.  §  SQS 

vested.  The  statute  of  frauds  is  no  real  obstacle  in  the 
way  of  administering  equitable  remedies  so  as  to  promote 
justice  and  prevent  wrong.  Equity  does  not  deny  nor 
overrule  the  statute;  but  it  declares  that  fraud  or  mistake 
creates  obligations,  and  confers  remedial  rights  which  are 
not  within  the  statutory  prohibition;  in  respect  of  them, 
the  statute  is  uplifted.  A  more  detailed  examination  of 
the  theory  advocated  by  these  decisions,  which  its  im- 
portance seemed  to  require,  I  have  placed  in  the  foot- 
note. 

§  868.  IV.  Instances  of  Equitable  Jurisdiction  Occa- 
sioned by  Mistake  — By  Way  of  Defense.—  I  shall,  in  con- 
cluding this  section,  enumerate  the  various  modes  in 
which  the  equitable  jurisdiction  may  be  exercised,  and 
the  various  forms  of  remedy  which  may  be  granted,  on 
the  occasion  of  mistake.  These  modes  and  forms  will  be 
enumerated;  the  full  discussion  of  the  doctrines  and  rules 
which  govern  the  remedies  themselves,  and  regulate  the 
exercise  of  the  jurisdiction  in  awarding  them,  will  be 
given  in  the  subsequent  chapters  which  treat  of  remedies. 
The  jurisdiction  may  be  exercised  either-  defensively  or 
affirmatively.  In  equitable  suits  to  compel  the  specific 
performance  of  contracts,  or  to  enforce  the  obligation 
arising  out  of  contract,  or  to  enforce  an  obligation  aris- 
ing out  of  any  other  transaction,  the  defense  of  mistake 
is  available  to  defeat  or  modify  the  relief.  Of  course,  the 
mistake  alleged  and  proved  by  the  defendant  must  in  all 
respects  conform  to  the  rules  heretofore  stated  concerning 
the  requisites  of  mistake  in  equity;  it  must  be  material, 
and  must  have  determined  the  action  of  the  party  in 
entering  into  the  contract  or  transaction.  It  may  be  com- 
mon to  both  parties;  it  may  be  induced  or  procured  by 

lief,  the  statute  is  regarded  as  uplifted,  course  of  decision  in  the  English  and 

80  that  it  may  not  become  the  instru-  American  courts  can  deny;  and  in  my 

ment  of  perpetuating  the  very  fraud  opinion,    notwithstanding    occasional 

which  it  was  designed  by  the  legisla-  doubts  and  even  protests  from  indi- 

ture  to  prevent.     That  this  principle  vidual  judges,  they  have  not  thereby 

has  been  established  on  the  grounds  exceeded    their    proper    powers    and 

and  to  the  extent  which  I  have  de-  functions, 
acribed,  no  one  ac(^uaiuted  with  the 


§  S69  EQUITY   JURISPRUDENCE.  1212 

the  conduct  of  the  plaintiff;  or  it  may  be  an  error  of  the 
defendant  alone,  wholly  due  to  himself.  In  either  case  it 
will  be  a  defense.  The  effect  of  mistake  as  a  defense  in 
equitable  actions  has  already  been  considered  in  the  for- 
mer paragraphs  which  treat  of  the  admission  of  parol 
evidence,  and  the  decisions  there  cited  will  furnish  ex- 
amples and  illustrations.^  In  states  which  have  adopted 
the  reformed  procedure,  the  equitable  jurisdiction  may 
also  be  invoked,  if  necessary,  by  defendants  in  legal  ac- 
tions. This  may  be  done  by  means  of  equitable  defenses 
which  simply  defeat  the  plaintiff's  legal  cause  of  action, 
or  by  means  of  equitable  counterclaims  or  cross-com- 
plaints, which  demand  for  the  defendant  some  affirma- 
tive relief,  as  reformation  or  cancellation.^ 

§  869.  By  Way  of  Affirmative  Relief — Recovery  of 
Money  Paid  by  Mistake.  —  The  jurisdiction  to  confer 
affirmative  relief  will  only  be  exercised  in  cases  where  an 
adequate  remedy  cannot  be  obtained  at  law.  Whenever 
money  has  been  paid,  or  chattels  have  been  delivered, 
through  mistake,  the  legal  remedy  by  action  will  ordina- 
rily be  adequate  and  certain;  in  fact,  the  action  to  recover 
back  money  paid  by  mistake  is  a  very  familiar  one  at 
law.  Whenever  land  has  been  conveyed,  or  contracted  to 
be  conveyed,  through  mistake,  the  adequate  remedy  of  the 
grantor  or  vendor  would  generally  require  the  equitable 
relief  of  a  cancellation.  Although  an  action  at  law  will 
ordinarily  lie  to  recover  back  money  paid  through  mis- 
take, still,  if  the  circumstances  are  special,  and  such  that 

'  See  ante,  §  860;  see  also  Allen  v.  376;  Price  v.  Macaulay,  2  De  Gex,  M. 

Richardson,  L.   R.   13  Ch.   Div.   524;  &  G.  339;  Swaisland  v,  Dearsley,  29 

Jones  V.  Clififord,  L.  R.  3  Ch.  Div.  779;  Beav.  430;    Alvanley  v.    Kinnaird,   2 

McKenzie  v.  Hesketh,  L.  R.  7  Ch.  Div.  Macn.  &  G.  1,  7;  Helsham  v.  Langley, 

675;  Denny  v.  Hancock,  L.  R.  6  Ch.  1  Younge  &  C.  175;  Howell  v.  George, 

1;  Davis  v.  Shepherd,  L.  R.  1  Ch.  410;  1   Madd.   1;   Mason  v.    Armitage,   13 

Wycombe  R'y  v.  Donnington  Hospi-  Ves.  25;  Do2gett  v.  Emerson,  3  Story, 

tal,  L.  R.  1  Ch.  268;  Hooper  v.  Smart,  700;  West.  R.  R.  v.  Babcock,  6  Met. 

L.  R.  18  Eq.  683;  Baskcomb  v.  Beck-  346;  Post  v.  Leet,  8  Paige,  337;  Mor- 

with,  L.  R.  8  Eq.  100;  Whittemore  v.  timer  v.  Pritchard,  1  Bail.  Eq.  505. 
Whittemore,  L.  R.  8  Eq.  603;  Moxey         '•'  See    ante,    %   862;    see    Arthur   v. 

v.   Bigwood,   4  De  Gex,  F.  &  J.  351;  Homestead  F.  Ins.  Co.,  78  N.  Y.  462; 

Parker  v.  Taswell,  2  De  Gex  &  J.  559;  34  Am.  Rep.  550. 
Webb  V.  Kirby,  7  De  Gex,  M.  &  G. 


1213  MISTAKE.  §  870 

an  action  at  law  will  either  not  lie  at  all,  or  will  furnish 
an  inadequate  relief,  a  court  of  equity  has  undoubted  ju- 
risdiction, and  will  entertain  a  suit  for  the  recovery  of  the 
money,  if  in  good  conscience  it  ought  to  he  repaid.^ 

§  870.  Affirmative  Relief  —  Reformation  and  Cancella- 
tion.—  The  most  important  affirmative  remedies  conferred 
by  an  exercise  of  the  equitable  jurisdiction  on  the  occa- 
sion of  mistake  are  cancellation  and  reformation.  Can- 
cellation is  appropriate  when  there  is  an  apparently  valid 
written  agreement  or  transaction  embodied  in  writing, 
while  in  fact,  by  reason  of  a  mistake  of  both  or  one  of  the 
parties,  either  no  agreement  at  all  has  really  been  made, 
since  the  minds  of  both  parties  have  failed  to  meet  upon 
the  same  matters,  or  else  the  agreement  or  transaction  is 
dififerent,  with  respect  to  its  subject-matter  or  terms,  from 
that  which  was  intended.^  Reformation  is  appropriate, 
when  an  agreement  has  been  made,  or  a  transaction  has 
been  entered  into  or  determined  upon,  as  intended  by  all 
the  parties  interested,  but  in  reducing  such  agreement  or 
transaction  to  writing,  either  through  the  mistake  com- 
mon to  both  parties,  or  through  the  mistake  of  the  plain- 
tifif  accompanied  by  the  fraudulent  knowledge  and  pro- 
curement of  the  defendant,  the  written  instrument  fails  to 
express  the  real  agreement  or  transaction.  In  such  a  case 
the  instrument  may  be  corrected  so  that  it  shall  truly 
represent  the  agreement  or  transaction  actually  made  or 
determined  upon  according  to  the  real  purpose  and  inten- 

1  Davis  V.  Morier,  2  Coll.  C.  C.  303;  Clark,  10  Iowa,  423;  Jackson  v.  An- 

Ex  parte  James,  L.R.  9Ch.  609;  Rogers  drews,  59  N.  Y.  244;  Nevins  v.  Dun- 

V.  Ingham,  L.  R.  3  Ch.  Div.  351,  356;  lap,   33  N.  Y.  676;  Story  v.  Conger, 

Bingham  v.  Bingham,  1  Ves.  Sr.  126.  36  N.  Y.  673;  93  Am.  Dec.  546;  Welles 

As  to  mistake  in  settling  accounts  and  v.    Yates,    44    N.    Y.   525;    Diman  v. 

relief  from,    see  Gething  v.  Keighley,  Providence  R.  R.,  5  R.  I.   130,    135; 

L.  R.  C  Ch.  Div.  547.  Sawyer   v,    Hovey,    3   Allen,  331;  81 

*  Illustrations:     Childers     v.    Chil-  Am.  Dec.  659;  Woodbury  etc.  Bank  v. 

ders,  1  De  Gex  &  J.  482;  Cooper  v.  Joel,  Ins.  Co.,  31  Conn.  517;  Tesson  v.  At- 

1   De   Gex,   F.  &  J.    240;  Bentley   v.  lantic  Ins.  Co.,  40  Mo.  33;  93  Am.  Dec. 

Mackay,    4    De   Gex,    F.    &   J.     279;  293;  [Page  v.  Hi^gins,   150  Mass.  27; 

Henkle  v.  Royal  Ex.  Ins.  Co.,  1  Ves.  De  Voin  v.  De  Voiu,  76  Wis.  6S.     See 

Sr.    317;    Marquis    of    Townshend   v.  also  §  1377.] 
Stangroom,    6   Ves.   328;    Holmes  •  v. 


§  871  EQUITY    JURISPRUDENCE.  1214 

tion  of  the  parties.*  The  rules  which  govern  these  rem- 
edies and  determine  when  they  may  be  conferred,  together 
with  the  various  kinds  and  classes  of  instances  in  which 
they  have  been  granted,  will  be  found  in  subsequent 
chapters. 

§  871.  Conditions  of  Fact  Which  are  Occasions  for 
Affirmative  Relief.  —  The  conditions  of  fact  which  furnish 
occasions  for  the  exercise  of  the  jurisdiction  to  grant  af- 
firmative relief,  either  of  reformation,  of  cancellation,  or  of 
pecuniary  recovery,  are  many  and  various.  The  follow- 
ing are  some  of  the  most  important.  The  relief  which 
equity  gives  in  aid  of  a  defective  execution  of  powers 
may  be  occasioned  by  mistake  as  well  as  by  accident.' 
Judgments  at  law  recovered  through  mistake  may  be  a 
ground  for  the  interposition  of  equity  in  enjoining  or 
setting  aside  the  judgment,  to  the  same  extent  and  under 
the  same  limits  as  those  recovered  by  accident.'  Mar- 
riage settlements  may  be  corrected  when,  through  mistake, 
they  do  not  represent  the  original  agreement  between  the 
parties,  either  with  respect  to  their  subject-matter  or  their 
terms,  and  especially  where  the  formal  instrument  does 
not  correspond  with  the  preliminary  writings.*     Family 

*  Illustrations:     Baker   v,   Paine,   1  v,   Ryder,    63   Wis.    106;  Trusdell  v. 

Ves.  Sr.  456;  White  v.  White,  L.  R.  Lehman,  47  N.  J.  Eq.  218;  North  etc. 

15  Eq.  247;  Bloomer  v.  Spittle,  L.  R.  R'y  Co.  v.   Swank,  105  Pa.  St.   555; 

13  Eq.  427;  Mackenzie  v.  Coulsou,  L.  Phoenix  Ins.   Co.   v.  Ryland,  69    Md. 

R.  8  Eq.   368;    Fowler  v.   Fowler,    4  437;  Adams  v.  Wheeler,  122  Ind.  251; 

De  Gex  &  J.  250;  Rider  v.  Powell,  28  Fritzler   v.    Robinson,  70   Iowa,  500; 

N.  Y.  310;  De  Peyster  v.  Hasbrouck,  James   v.    Cutler,  54  Wis.  172.     See 

11  N.  Y.  582;  Ford  v.  Joyce,  78  N.  Y.  also  §  1376.] 

618;  Moran  v.  McLarty,  75  N.  Y.  25;  ^  See  ante,  §§   589.    590,    834,  835, 

Cone  V.   Niagara  Ins.  Co.,  60  N.  Y.  where  this  particular  instance  of  the 

619;  Comer  v.  Himes,  49  Ind.  482,  489;  jurisdiction  is  explained. 

Heavenridge  v.  Mondy,  49  Ind.  434;  «  See  ante,  §  836;  Lalso§§  1364,  1376, 

Winnipiseogee  etc.  Co.  v.  Perley,  46  1377.] 

N.    H.  83;    Wooden  v.   Haviland,   18  *  Higginson  v,  Kelly,   1  Ball  &   B, 

Conn.   101;  Langdon  v.  Keith,  9  Vt.  252;    Wright  v.  Goff,    22    Beav.  207; 

299;  Firinstone  v.  De  Camp,  17  N.  J.  Breadalbane  v.  Chandos,  2  Mylne  & 

Eq.  317;  Weston  v.  Wilson,  31  N.  J.  C.  711;  Bold  v.  Hutchinson,  5  De  Gex, 

Eq.  51;  Sanders  v.  Wagner,  32  N.  J.  M.  &  G.  558,  566;  Hanley  v,  Pearson, 

Eq.  506;  Gump's   Appeal,    65  Pa.  St.  L.  R.    13  Ch.  Div.  545;   In  re  Daniel's 

476;  Chew  v.  Gillespie,  56  Pa.  St.  308;  Settlement,  L.  R.  1    Ch.  Div.  .375;  In 

Dulany  v.  Rogers,  50  Md.  524;  Brad-  re  Bird's  Trusts,  L.  R.  3  Ch.  Div.  214 

ford  V.  Union   Bank,  13  How.  55,  57,  Smith   v.  Iliffe,    L.    R.    20   Eq.    666 

66;  [Kinney  v.  Ensminger,  87  Ala.  340;  Cogan  v.  Duffield,   L.   R.  20  Eq.  789 

Page  V.  Higgiiis,  150  Mass.  27;  Silbar  la  re  De  la  Touche'a  Settlement,  L, 


1215 


MISTAKE. 


§871 


compromises  and  settlements  may  certainly  be  set  aside 
or  corrected,  but  the  jurisdiction  is  exercised  with  great 
caution,  and  never  unless  the  mistake  is  palpable  so  as  to 
indicate  a  surprise,  or  unless  there  are  incidents  of  in- 
equitable conduct  by  some  of  the  parties.*  Equity  has  a 
very  narrow  jurisdiction  to  correct  mistakes  in  wills,  but 
only  when  the  error  appears  upon  the  face  of  the  will  it- 
self, so  that  both  the  mistake  and  the  correction  can  be 
ascertained  and  supplied  by  the  context,  from  a  plain  in- 
terpretation of  the  terms  of  the  instrument  as  it  stands. 
A  resort  to  extrinsic  evidence  is  never  permitted,  either 
to  show  a  mistake  or  to  ascertain  the  correction.  Mis- 
takes which  can  be  thus  corrected  may  be  in  the  names 
of  legatees  or  devisees,  in  the  description  of  property,  or 
in  other  terms.''     The  jurisdiction  to  grant  the  relief  of 

Mo.  518;  66  Am.  Dec.  630;  Trexler  ▼. 
Miller,  6  Ired.  Eq.  248;  Johnson  v. 
Hubbell,  10  N.  J.  Eq.  332;  66  Am. 
Dec.  773;  Yates  v.  Cole,  1  Jones  Eq. 
110;  59  Am.  Dec.  602;  McAlister  v. 
Butterfield,  31  Ind.  25;  Erwin  v. 
Hamner,  27  Ala.  296:  Machem  v. 
Machem,  28  Ala.  374;  Alter's  Appeal, 
67  Pa.  St.  341;  5  Am.  Rep.  433;  Nutt 
V.  Nutt,  1  Freem.  (Miss.)  128;  and  see 
Kerr  on  Fraud  and  Mistake,  448-453. 
[See  also  Salt  v.  Pym,  28  Ch.  Div. 
153.]  The  rules  upon  this  subject 
belong  to  the  general  doctrine  coq- 
cerning  the  interpretation  of  wills, 
and  will  be  found  in  works  which  treat 
of  wills.  The  subject  of  correcting 
mistakes  in  wills,  mentioned  in  the 
text,  needs  a  little  fuller  explanation. 
There  is  no  jurisdiction  of  equity  to 
entertain  suits  for  the  reformation 
of  wills  analogous  to  that  for  the 
reformation  of  conveyances,  agree- 
ments, and  the  like.  The  power  to 
correct  mistakes  in  wills  is  simply  a 
part  of  the  more  general  function  of 
construction  and  interpretation,  and 
may  be  exercised,  if  at  all,  in  admin- 
istration suits,  or  in  any  other  suits 
wherein  the  rights  of  parties  under 
the  will  are  adjudicated.  In  many  of 
the  states  it  would  be  exercised  by 
courts  having  a  probate  jurisdiction  ia 
the  proceedings  for  the  final  settle- 
ment and  distribution  of  the  estate. 
However   exercised,  the   power   only 


R.  10  Eq.  599;  Elwes  v.  Elwes,  3  De 
Gex,  F.  &  J.  667.  As  to  setting  aside 
a  marriage  settlement,  see  Evans  v. 
Carrington,  2  De  Gex,  F.  &  J.  4S1; 
Merryweather  v.  Jones,  4  Giff.  509; 
Hartopp  v.  Hartopp,  21  Beav,  259. 

1  See  ante,  §§  850,  855.  _ 

*  When  evidence  of  circumstances 
is  admitted  to  explain  an  ambiguity 
this  is  not  for  the  purpose  of  correct- 
ing a  mistake.  The  following  cases 
illustrate  the  extent  and  limits  of  this 
jurisdiction:  In  re  Aird's  Estate,  L.  R. 
12  Ch.  Div.  291;  Whitfield  v.  Lang- 
dale,  L.  R.  1  Ch.  Div.  61;  Barber  v. 
Wood,  L.  R.  4  Ch.  Div.  885;  Newman 
V.  Piercey,  L.  R.  4  Ch.  Div.  41 ;  Wilson 
V.  Morley,  L.  R.  5  Ch.  Div.  776; 
Travers  v.  Blundell,  L.  R.  6  Ch.  Div. 
436;  Homer  v.  Homer,  L.  R.  8  Ch. 
Div.  758;  Garland  v.  Beverley,  L.  R. 
9  Ch.  Div.  213;  In  re  Nunn's  Trusts, 
L.  R.  19  Eq.  331;  Farrer  v.  St.  Cath- 
arine's College,  L.  R.  16  Eq.  19; 
Hardwick  v.  Hardwick,  L.  R.  16  Eq. 
188:  McKechnie  v.  Vauehan,  L.  R. 
15  Eq.  289;  In  re  Ingle's  Trusts,  L.  R. 
11  Eq.  578;  Hall  v.  Lietch,  L.  R.  9 
Eq.  376;  Box  v.  Barrett,  L.  R.  3  Eq. 
244;  Hart  v.  Tulk,  2  De  Gex,  M.  &  G. 
300;  Campbell  v.  Bouskell,  27  Beav. 
325;  Taylor  v.  Richardson,  2  Drew. 
16;  Snvder  v.  Warl)asse,  11  N.  .J.  Eq. 
463;  Wood  v.  Wliite,  32  Me.  340;  52 
Am.  Dec.  654;  Jackson  v.  Payne,.  2 
Met.  (Ky.)  567;  Goode  v.  Goode,  22 


§871 


EQUITY   JURISPRUDENCE. 


1216 


reformation  may  be   exercised  with    respect   to  written 


exists  withia  very  narrow  limite.  The 
only  possible  modes  of  correcting  mis- 
takes in  wills  are  by  transposing,  re- 
jecting, or  supplying  words  or  clauses; 
and  the  fundamental  principle  is 
settled,  that  both  the  error,  and  the 
correction  of  it,  must  appear  iv'ith  cer- 
taiiity  on  the  face  of  the  will  itself,  and 
extrinsic  evidence  can  never  be  re- 
sorted to  for  that  purpose.  Courts 
find  little  difficulty  in  transposing  the 
order  of  words  or  dispositions  so  that 
all  shall  be  reconciled,  and  an  effect 
be  given  to  each  and  to  the  whole. 
This  is  not  an  infrequent  step  in  the 
process  of  interpretation.  Rejecting 
a  word  or  clause  is  also  not  an  extreme 
measure  where  the  context  clearly  re- 
quires it.  To  supply  a  word  or  clause 
demands  a  very  strong  and  unusual 
case,  where  it  must  certainly  appear 
that  something  has  been  omitted  by 
inadvertency.  Even  then  the  alter- 
native, that  the  whole  disposition 
should  be  rejected  as  unmeaning, 
might  be  adopted.  If  a  clause  is  to  be 
rejected,  the  necessity  for  it  must 
arise  from  the  face  of  the  will  itself. 
If  a  word  or  clause  is  to  be  supplied, 
the  necessity  for  such  a  supply,  and 
also  the  very  word  or  clause  itself  to  he 
sxippUrd,  must  appear  from  the  face  of 
the  will.  The  case  of  Du  Bois  v.  Ray, 
35  N.  Y.  162,  which  contains  a  full 
citation  of  authorities,  furnishes  an 
excellent  example.  Children  which 
a  named  person  "may  leave"  was 
read  as  though  changed  to  "may 
have."  The  case  of  patent  ambigu- 
ities, which  admit  extrinsic  evidence 
in  order  to  identify  the  person  or  thing 
intended,  is  not  an  exception  to  the 
foregoing  conclusions,  since  patent 
ambiguities  are  in  no  true  sense  of  the 
term  mistakes.  I  add  a  few  illustra- 
tions of  such  correction  of  errors, 
taken  from  the  decisions. 

Cases  of  Snpphjinf]  Words.  —  Where, 
from  the  will  generally,  it  is  clear  that 
certain  words  are  omitted  from  part 
of  it,  and  also  what  these  words  are, 
the  omission  may  be  supplied.  Thus 
where  there  was  a  gift  to  A  and  B, 
and  "if  either  died  before  twenty-one, 
and  without  issue,"  his  share  to  go  to 
the  other,  and  "if  both  died  without 
issue,"  then  the  j^roperty  to  go  to  a 
third  person,  C;  the  words  "before 
twenty-one "   were    supplied    in    the 


latter  part,  so  that  the  clause  should 
read,  "if  both  died  before  twenty-one 
and  without  issue,"  then  the  property 
to  go  to  C:  Kirkpatrick  v.  Kirkpatrick, 
13  Ves.  476;  Sheppard  v,  Lessingham, 
Amb.  122;  Spalding  v.  Spalding,  Cro. 
Car.  185.  In  another  case,  a  similar 
gift  to  A  and  B,  and  if  either  died 
"without  leavimj  issue,"  then  to  the 
other,  and  if  both  should  die  "without 
issue,"  then  the  property  was  to  go 
over  to  C;  the  word  "leaving"  was 
supplied  in  the  last  clause,  so  that  it 
should  read  "if  both  died  without 
leaving  issue,"  then  over  to  C,  since 
the  latter  form  was  necessary  at  the 
time  to  render  the  executory  devise 
over  valid:  Radford  v.  Radford,  1 
Keen,  486.  These  examples  suffi- 
ciently illustrate  the  correction  by 
simply  supplying  words. 

Cases  of  Rejecting  Wo7-ds.  — Particu- 
lar words,  inconsistent  with  the  clearly 
expressed  provisions  and  purposes  of 
the  will,  may  be  rejected,  but  only  by 
an  inspection  of  the  will  itself,  without 
aid  from  extrinsic  evidence.  Thus 
where  freehold  lands  were  devised  to 
A  for  ninety-nine  years,  with  remain- 
der, after  the  death  of  A,  to  his  eldest 
son  in  tail,  and  then  to  his  other  sons 
successively,  the  words  giving  an  ab- 
solute term  of  ninety-nine  years  to  A 
were  rejected,  and  he  was  left  to  take 
a  life  estate  in  accordance  with  the 
other  limitations:  Cory  ton  v.  Helyar, 
2  Cox,  340;  and  see  Chapman  v.  Gil- 
bert, 4  De  Gex,  M.  &  G.  366.  In  a 
devise  to  A  and  to  his  heirs /or  ^AciV 
Zii'cs,  the  words  "for  their  lives"  were 
rejected  as  unmeaning  and  inconsis- 
tent: Doe  V.  Stenlake,  12  East,  515; 
Doe  V.  Thomas,  3  Ad.  &  E.  123;  Hugo 
V.  Williams,  L.  R.  14  Eq.  224.  In  a 
bequest  to  "my  aforesaid  nephew.s 
and  nieces,"  the  word  "aforesaid" 
was  rejected,  none  having  been  before 
mentioned  in  the  will:  Campbell  v. 
Bouskell,  27  Beav.  .325. 

Transposing  and  Changing  Words.  — 
If  the  testator's  language  is  without 
meaning  as  it  stands,  but  can  be  made 
intelligible  by  a  transposition  of 
words,  this  will  sometimes  be  done  to 
carry  out  the  intent  clear  from  the 
will  as  a  whole.  Thus  if  it  be  quite 
clear  from  the  context  that  in  describ- 
ing Whiteacre  he  means  Blackacre, 
and  in  describing  Blackacre  he  meana 


1217 


MISTAKE, 


§871 


instruments  operating  inter  vivos,  whether  they  are  exe- 


Whiteacre,  a  transposition  of  the 
names  will  be  allowed,  so  as  to  make 
the  disposition  correspond  with  the 
limitation:  See  Mosley  v,  Massey,  8 
East,  149;  Doe  v,  Allcock,  1  Barn.  & 
Aid.  137,  per  Holroyd,  J.  But  any 
such  correction  must  be  made  without 
the  aid  of  extrinsic  evidence;  it  must 
clearly  appear  from  the  will  what  the 
mistake  is,  and  must  be  equally  clear 
from  the  will  what  correction  is 
needed;  e.  g.,  a  will  contained  sev- 
eral numbered  schedules,  and  the  tes- 
tator in  a  certain  clause  referred  to 
one  number,  by  evident  mistake,  for 
another,  and  this  was  corrected:  Hart 
V.  Tulk,  2  De  Gex,  M.  &  G.  300.  In 
Marshall  v.  Hopkins,  15  East,  309, 
there  was  a  devise  of  a  "messuage, 
lands,  and  appurtenances  in  the  occu- 
pation of  A,"  and  these  words  "in 
the  occupation  of  A  "  were  read  as 
coming  directly  after  the  word  "  mes- 
suage, '  so  that  the  whole  should  be 
the  "messuage  in  the  occupation  of 
A,  lands  and  appurtenances,"  since 
the  rest  of  the  will  showed  certainly 
that  this  correction  was  necessary  to 
make  sense. 

*'0r"  Changed  to  "And."— One  of 
the  most  common  instances  of  correc- 
tion is  the  changing  "or"  to  "and," 
and  vice  versa.  This  change  is  most 
often  made  when  the  intention  of  the 
will  is  clear  to  provide  for  a  person 
and  his  issue,  but  in  the  gift  over  to 
third  persons  in  the  event  of  there  be- 
ing no  issue,  the  contingency  is  ex- 
pressed in  such  a  manner  that,  if  read 
literally,  it  would,  under  the  settled 
rules  of  law,  wholly  defeat  the  plain 
intention:  e.  g.,  a  devise  to  A  and 
to  his  heirs,  and  if  A  died  under 
twenty-one  or  without  issue,  then  the 
property  was  to  go  over  to  a  third 
person,  C;  A  died  under  twenty-one, 
but  leaving  a  child;  "  or "  was  read 
"and,"  so  that  it  was  held  that  both 
events  must  happen,  viz.,  A's  death 
under  twenty-one,  and  his  death  with- 
out issue,  before  tlie  gift  over  to 
C  could  take  efifect:  See  SouUe  v. 
Gerrard,  Cro.  Eliz.  525;  Moore,  422; 
Walsh  V.  Peterson,  3  Atk.  193;  Fram- 
lingham  v.  Brand,  3  Atk.  390;  Created 
V.  Greated,  26  Beav.  621;  Miles  v. 
Dyer,  5  Sim.  435.  Also,  where  there 
was  a  gift  to  A  in  either  of  two  events, 
his  attaining  the  age  of  twenty-five 
2  E(i  JuB,— 77 


or  his  marrying,  and  a  gift  of  the 
property  over  to  B  in  case  A  died 
under  twenty-five  or  died  unmarried, 
the  last  "or  "was  reatl  "and"  as  a 
matter  of  necessity,  to  make  it  corre- 
spond with  the  meaning  of  the  gift  to 
A:  Grant  v.  Dyer,  2  Dow,  73.  The 
cases  are  numerous  in  which  "or"  has 
been  changed  to  "and,"  but  these 
instances  are  sufficient  as  illustra- 
tions. 

*'  And"  Changed  to  "Or."  —  In  the 
same  manner  "and"  is  occasionally 
read  "or,"  for  the  purpose  of  carrying 
out  the  testator's  intention;  but  never 
without  an  imperative  necessity  for 
the  change,  apparent  on  the  face  of 
the  will:  See  In  re  Sanders's  Trusts, 
L.  R.  1  Eq.  675;  In  re  Kirkbride's 
Trusts,  L.  R.  2  Eq.  400;  e.  g.,  where 
the  will  gave  a  bequest  to  a  cl<tsi>  of 
persons  ac  a  particular  time,  —  at  the 
testator's  death,  —  "and  to  such  of 
them  as  shall  then  be  living,"  the 
word  "and "was  a  plain  mistake  for 
"or,"  and  a  change  to  "or  "  was  ne- 
cessary to  carry  into  efifect  the  plain 
intent:  Hetherington  v.  Oakinan,  2 
Younge  &  C.  Ch.  299;  Maynard  v. 
Wright,  26  Beav.  285.  These  exam- 
ples show  that  the  power  of  courts  to 
correct  actual  mistakes  in  wills,  as  a 
part  of  their  function  of  interpreta- 
tion, by  supplying,  rejecting,  trans- 
posing, or  substituting  words,  is  con- 
fined within  very  narrow  and  well- 
defined  linifts,  and  is  never  to  be 
exercised  except  when  the  general 
purpose  or  scheme  of  the  will  is  clear 
beyond  a  doubt,  and  as  clearly  and 
positively  demands  the  correction,  in 
order  that  tliis  purpose  and  scheme 
may  be  carried  into  efi'ect. 

As  I  have  before  stated,  these  are 
all  the  instances  of  true  nmtokes  in  the 
language  of  wills  which  furnish  an  oc- 
casion for  the  power  to  correct.  In 
order  to  complete  this  general  view, 
however,  I  will  add  a  few  illustrations- 
of  misdcscriptionf',  either  of  property 
given  or  of  the  beneficiaries  to  whom 
it  is  given,  which  become  known  iroin 
the  general  evidence  of  the  surround- 
ing circumstances  which  is  always  ad- 
missible. Such  mkdescrijitiojis,  being 
discovered  by  the  extrinsic  evidence, 
may  be  harmonized,  explained,  and 
made  effective  through  the  instru- 
mentality of  such   evidence.     But  it 


§871 


EQUITY   JURISPRUDENCE. 


1218 


cuted  contracts,  such  as  deeds  of  conveyance,  mortgages, 


should  be  carefully  observed  that  this 
process  of  adjusting  the  misdcscrip' 
tiona  to  the  actual  conditions  of  fact 
is  in  no  proper  sense  a  correction  of 
mistakes. 

Misdcscri'^ytion  of  the  Property  Given. — 
In  respect  to  such  misdescriptions  the 
maxim  Falsa  demonstratio  non  nocet, 
often  controls  and  prevents  a  failure 
of  the  gift.  Where  the  description 
consists  of  two  parts,  one  of  winch  is 
accurate  and  sufficient  if  it  stood 
alone,  and  the  second  is  incomplete 
and  erroneous,  this  maxim  generally 
applies,  —  always  does  so  if  the  prop- 
erty answers  to  the  accurate  part  of 
the  description,  and  there  is  no  other 
property  of  the  testator  to  which  such 
description  in  any  of  its  parts  can  ap- 
ply. Thus  if  the  property  is  accu- 
rately described  in  other  respects,  an 
error  as  to  the  county  in  which  it  is 
stated  to  be  situated  is  immaterial,  if 
the  testator  had  no  other  property 
answering  to  the  description:  Hastead 
V.  Searle,  1  Ld.  Raym.  728.  If  the 
property  is  commonly  known  by  some 
particular  name,  as  Whiteacre,  and  is 
devised  by  that  name,  the  addition  of 
some  further  erroneous  description,  as 
that  it  is  in  the  occupancy  of  A, 
while  in  fact  it  was  in  that  of  B,  does 
not  defeat  the  gift:  Blague  v.  Gold, 
Cro.  Car.  447;  and  see  Howard  v. 
Conway,  1  Coll.  C.  0.  87;  Stephens  v. 
Powys,  1  De  Gex  &  J.  24.  Lands 
being  correctly  described  as  at  or  near 
A,  in  the  parish  of  B,  the  inaccurate 
addition  of  their  being  in  the  testa- 
tator's  occupation  would  not  defeat 
the  gift:  White  v.  Birch,  36  L.  J. 
Ch.  174;  but  see  Doe  v.  Parkin,  5 
Taunt.  321.  Under  the  description, 
"my  farm  called  Whiteacre,  in  the 
occupation  of  A,"  lands  forming  part 
of  the  farm,  but  not  occupied  by  A, 
■would  be  included  in  the  devise:  Good- 
title  V.  Southern,  I  Moore  &  S.  299; 
Down  V.  Down,  7  Taunt.  343;  and  see, 
in  respect  to  such  kinds  of  description, 
Slingsby  v.  Grainger,  7  H.  L.  Cas. 
273,  per  Lord  Cranworth;  Press  v. 
Parker,  2  Bing.  456;  Pol  den  v.  Bas- 
tard, L.  R.  1  Q.  B.  156;  Doe  v.  Mar- 
tin,  4  Barn.  &  Adol.  771;  Bodenham  v. 
Pritchard,  1  Barn.  &  C.  350;  Waite  v. 
Morland,  12Jur.,  N.  S.,  763. 

Description  Consisting  of  Several 
Terms.  —  If  the  description  is  ambig- 


uous, it  is  a  leading  principle  that  if 
there  are  several  terms  of  the  descrip- 
tion applied  to  the  subject-matter  of 
the  gift,  every  such  term  may  be  ma- 
terial, and  if  there  is  property  corre- 
sponding with  the  description  in  every 
particular,  it  alone  will  in  general  pass, 
to  the  exclusion  of  other  property 
which  answers  to  the  description  only 
in  part.  For  example,  a  testator  hav- 
ing said  that  he  owned  certain  lands 
in  A  subject  to  a  mortgage,  devised 
the  said  lands;  this  was  held  not  to  in- 
clude lands  of  the  testator  in  A  which 
were  not  mortgaged:  Pullin  v.  Piillin, 
3  Bing.  47.  A  devise  of  lauds  at  A, 
held  of  B,  in  tiie  occupation  of  C, 
would  not  carry  land  not  in  Cs  occu- 
pation, there  being  other  lands  in  his 
occupation  and  so  answering  to  the 
description:  Morrell  v.  Fisher,  4 
Ex.  591.  Where  a  testator  devised 
his  "  messuages  at,  in,  or  near  A, 
and  purchased  from  B, "  and  it  ap- 
peared that  he  owned  two  houses 
about  twenty  yards  from  A,  and  four 
other  houses  about  four  hundred  j'ards 
from  A,  and  that  all  six  had  been  pur- 
chased from  B  by  one  conveyance,  it 
was  held  that  the  devise  embi'aced 
only  the  two  first  mentioned,  as  being 
at,  in,  or  near  A:  Doe  v.  Bower,  3 
Barn.  &  Adol.  453. 

Property  Avsirering  the  Description. 
—  It  is  a  settled  general  rule  that 
where  there  is  property  answering  tlie 
description,  then  no  other  will  pass. 
Thus  if  an  estate  is  situated  in  two 
counties,  towns,  or  places,  A  and  B, 
even  if  there  is  no  division  line,  and 
the  whole  is  used  and  enjoyed  as  one 
property,  and  the  testator  devises 
only  by  the  description,  "my  house, 
lands,  farms,  etc.,  in  A,"  that  part  of 
the  estate  alone  which  is  in  A  will 
pass  by  the  gift:  Webber  V.  Stanley,  16 
Com.  B.,  N.  S.,  698;  Pedley  v.  Dodds, 
L,  R.  2  Eq.  819:  Smith  v.  Ridgway, 
L.  R.  I  Ex.  331;  Lister  v.  Pickford, 
34  Beav.  576;  Doe  v.  Oxenden,  3 
Taunt.  147;  4  Dow,  65;  but  see  Har- 
man  v.  Gurner,  35  Beav.  478.  The 
testator  had  purchased  a  house  and 
some  lands,  situated  in  two  towns, 
from  A,  and  he  devised  by  description 
all  his  "house,  farm,  and  lands  situate 
in  "  one  of  the  towns,  and  the  land  sit- 
uate in  the  other  town  was  held  not 
to   be   included  in   the   gift:   Doe  v. 


1219 


MISTAKE. 


§871 


leases,  or  executory  agreements,  such  as  bonds,  policies  of 
insurance,  notes,  bills  of  exchange,  and  the  like.'  There 
is,  of  course,  no  power  to  reform  wills.''  The  relief  of 
cancellation  may  be  granted  with  respect  to  deeds  of 
conveyance,  mortgages,  agreements  concerning  land,  and 
other  similar  transactions,  subject  always  to  the  impor- 
tant limitation  that  the  party  can  obtain  no  adequate 
remedy  at  law.^  With  respect  to  mistakes  in  awards,  the 
jurisdiction  exists,  but  will  be  exercised  only  within  very 
narrow  limits.  If  a  mistake  appears  on  th^  face  of  the 
award  itself,  or  in  some  contemporaneous  writing,  or  is 
voluntarily  admitted  by  the  arbitrator,  or  he  states  cir- 
cumstances which  clearly  show  an  error,  equity  may  re- 
lieve by  setting  aside  or  perhaps  correcting  the  award; 
otherwise  there  is  no  ground  for  interference.*     A  court 


Lyford,  4  Moore  &  S.  550.  A  testator 
possessed  four  pieces  of  land,  A,  B, 
C,  and  D,  all  held  under  one  lease, 
and  devised  the  A,  B,  and  C  tracts, 
and  the  D  tract  was  held  not  to  pass: 
"West  V.  Lawday,  11  H.  L.  Cas.  375. 
On  the  other  hand,  a  devise  mention- 
ing four  houses  as  given,  the  court 
held  from  the  context  that  five  were 
meant  and  were  included  in  the  de- 
vise: Sampson  v.  Sampson,  L.  R.  8 
Eq.  479. 

Names  of  Beneficiaries.  —  Cases  of 
mistakes  in  the  names  of  devisees,  and 
legatees  are  very  numerous.  In  very 
many  instances  the  ambiguity  is  such 
that  extrinsic  evidence  is  necessary  to 
identify  the  person  intended.  This 
particular  kind  of  error  properly  be- 
longs, therefore,  to  the  general  subject 
of  extrinsic  evidence  in  aid  of  the  in- 
terpretation of  wills.  Where  there  is 
some  error  in  the  name,  the  benefi- 
ciary is  sometimes  connected  with 
other  description  which  will  identify 
the  individual,  and  obviate  the  error 
by  bringing  it  within  the  maxim, 
Falsa  demonstratto  non  nocet;  e.  g.,  a 
bequest  to  A  B,  the  right  name,  with 
the  erroneous  addition,  "legitimate 
son  of  C,"  has  been  sustained:  Stan- 
den  v.  Standen,  2  Ves.  589;  Giles  v. 
Giles,  1  Keen,  688.  Where  a  devise 
was  to  the  second  son  of  Edward 
W.,  of  a  certain  place,  the  second  son 
of  Joseph  W.,  of  that  place,  was  held 


entitled  to  take:  Lord  Camoys  v.  Blun- 
dell,  1  H.  L.  Cas.  778.  Collateral  de- 
scriptions  of  the  beneficiary  are  often 
sufficient  to  identify  him,  and  to  obvi- 
ate an  error  in  his  name;  e.  g.,  under 
a  bequest  to  William  A.,  eldest  son  of 
Charles  A.,  it  was  held  that  Andrew 
A.,  who  was  the  eldest  son,  was  enti- 
tled: Pitcairn  v. "  Brase,  Finch,  403; 
and  see  Dowsett  v.  Sweet,  Amb.  175; 
Stringer  v.  Gardiner,  4  De  Gex  &  J. 
468.  Under  a  bequest  to  "  Clare  Han- 
nah, the  wife  of  A.,"  the  wife  of  A.  was 
held  entitled,  although  her  name  was 
simply  Hannah,  and  she  had  a  daugh- 
ter named  Clare  Hannah:  Adams  v. 
Jones,  9  Hare,  485;  and  see  Ryall  v. 
Hannam,  10  Beav.  536;  Hodgson  v. 
Clarke,  1  De  Gex,  F.  &  J.  394.  These 
are  a  very  few  out  of  a  great  number 
of  examples  of  errors  in  the  names  and 
descriptions  of  beneficiaries  which  have 
been  corrected  by  the  context,  and  in 
the  light  of  the  surrounding  circum- 
stances. 

*  See  cases  cited  ante,  under  §  870. 

*  Sherwood  v.  Sherwood,  45  Wis. 
357;  30  Am.  Rep.  757;  [Sturgis  v. 
Work,  122  Ind.  134;  17  Am.  St.  Rep. 
349;  Chambers  v.  Watson,  56  Iowa, 
676.] 

»  See  ante,  §  870;  [post,  §  1376.] 

*  Mordue  v.  Palmer,  L.  R.  6  Ch.  22; 
Morgan  v.  Matlier,  2  Ves.  15;  Knox 
V.  Symmonds,  1  Ves.  369;  Mills  v. 
Bowyers'  Soc,  3  Kay  &  J.  66;  Hough- 


§  871  EQUITY   JURISPRUDENCE.  1220 

of  equity  may,  perhaps,  under  special  circumstances,  ex- 
ercise its  jurisdiction  by  correcting  mistakes  in  judgments 
and  decrees  and  other  records,  where  the  error  is  clerical 
or  ministerial,  and  not  judicial,  and  there  is  no  other 
means  of  obtaining  the  relief.*  Where  an  instrument 
has  been  surrendered  or  discharged,  or  an  encumbrance 
or  charge  has  been  satisfied  through  mistake,  the  juris- 
diction may  be  exercised  by  granting  such  relief  as  will 
replace  the  party  entitled  in  his  original  position,  either 
by  setting  aside  the  formal  discharge,  or  by  compelling  a 
re-execution  of  the  instrum'^nt.'^  The  jurisdiction  ex- 
tends to  the  settlement  of  accounts,  made  according  to 
the  intention  of  the  parties,  but  based  upon  or  involving 
a  mistake.  Relief  will  be  granted  as  the  circumstances 
may  require,  either  by  setting  aside  the  settlement,  or  by 
permitting  a  party  to  surcharge  or  falsify.'  Finally,  the 
equitable  jurisdiction  may  be  exercised  by  the  relief  of 
a  pecuniary  recovery  for  money  paid  under  a  mistake, 
whenever  no  adequate  rem'edy  can   be  obtained  by  an 

ton  V.  Bankart,  3  De  Gex,  F.  &  J.  16;  Conn.  224;  Loss  v.  Obry,  22  K  J.  Eq. 

Haigh  V.  Haigh,  3  De  Gex,  F.  &  J.  52;  Wheeler  v.  Kirtland,  23  N.  J.  E-j. 

157;   Goodman  v.  Sayers,  2  Jacob  &  13;   Gump's   Appeal,  65  Pa.   St.  476; 

W.  249;  Young  v.  Walter,  9  Ves.  364;  Byrne   v,    Edmonds,    23    Gratt.    20U; 

Roosevelt  v.  Thurman,   1  Johns.  Ch.  Kearney  v.   Sacer,  37  Md.  264;   Bar- 

220;   Bouck  v.  Wilber,  4  Johns.   Ch.  thell  v.  Roderick,  34  Iowa,  517;  Pal- 

405;    Underbill    v.    Van    Cortland,    2  mer  v.  Bethard,  66  111.  529;  Chapman 

Johns.  Ch.  3.39;   17  Johns.  405;  Win-  v,  Hurd,  67  111.  234;  Stites  v.  Wied- 

ship  V.  Jewett,  1  Barb.  Ch.  173;  Harts-  ner,  35  Ohio  St.  555;  Pool  v.  Docker, 

horn   V.    Cuttrell,    2   N.    J.   Eq.  297;  92  111.501;  Young  v.  Morgan,  9  Neb. 

Ryan  V.  Blunt,  1  Dev.  Eq.  3S6;  [Boush  169;    [Smith    v.    Butler,    11    Or.    46; 

V.  Fisher,  70  Mich.  469.     In  Barrows  Greeley  v.  De  Cottes,  24  Fla.  475];  but 

V.  Sweet,  143  Mass.  316,  and  Frick  v.  see  Wardlaw  v.  Wardlaw,  50  Ga.  544. 
Christian  Co.,   1  Fed.  Rep.  250,    the         •'  Swaggerty  v.  Neilson,  8  Baxt.  3-'; 

mistake  was  admitted  by  the  arbitra-  Lemon   v.   Phoenix   etc.  Ins.  Co.,    3S 

tor.J     If  the  award  is  within  the  sub-  Conn.    294;    Scholefield   v.    Templer, 

mission,  no  mistake  of  the  arbitrator,  Johns,  155;  East  lud.  Co.  v.   Donald, 

either  of  law  or  of  fact,  established  by  9  Ves.  275;  East  Ind.  Co.  v.  Neave,  5 

extrinsic  evidence  will  be  a  ground  for  Ves.  173. 

the  interference  of  equity.     The  sub-         *  Gething  v.  Keighley,  L.  R.  9  Ch. 

ject  of  awards  and  of  the  proceedings  Div.  547;   Stuart  v.  Sears,   119  Mas-*. 

thereon   has   in  many  states  been  so  143;  Russell  v.  The  Church,  65  Pa.  St 


regulated  by  statute  that  the  juris-  9;  McCraev.  Hollis,  4  Desaus.  Eq.  122; 
diction  of  equity  over  them  has  be-  Mounin  v.  Beroujon,  61  Ala.  196;  Bar- 
come  unimportant,  if  not  obsolete,  nett        '" 

1  Barnesly    v.   Powell,    1    Ves.    Sr.  Wag 

119,  284,  289;  Colwell  v.  Warner,  36  173. 


come  unimportant,  if  not  obsolete.  nett  v.  Barnett,  6  J.  J.  Marsh.  499; 

1  Barnesly    v.   Powell,    1    Ves.    Sr.     Waggoner  v.  Minter,  7  J.  J.  Marsh. 


1221 


ACTUAL   FRAUD. 


§871 


action  at  law.*  The  affirmative  reliefs  of  reformation  and 
of  cancellation  are,  however,  subject  to  the  limitation 
that  they  are  never  conferred  against  a  bona  fide  pur- 
chaser for  value  and  without  notice.* 


SECTION   III. 

ACTUAL    FRAUD. 


§  872.  Objects  and  purposes. 

§  873.  Description;  essential  elements. 

§  874.  Four  forms  and  classes  of  fraud  in  equity. 

§  875.  Nature  of  actual  fraud. 

§§  876-899.  First.     Misrepresentations. 

§  877.  I.  The  form;  an  affirmation  of  fact. 

§  878.  Misrepresentation  of  matter  of  opinion. 

§  879.  II.  Tiie  purpose  for  which  the  representation  is  made. 

§  880.  Presumption  of  the  purpose  to  induce  action. 

§  881.  False  prospectuses,  reports,  and  circulars. 

§  882.  III.  Untruth  of  the  statement. 

g§  883-889.  IV.  The  intention,  knowledge,  or  belief  of  the  party  making  tb* 
statement. 

§  884.  The  knowledge  and  intention  requisite  at  law. 

§  885.  The  knowledge  or  intention  requisite  in  equity. 

§§  88(5-888.  Six  forms  of  fraudulent  misrepresentations  in  equity. 

§  889.  Requisites  of  a  misrepresentatiou  as  a  defense  to  the  specific  en- 
forcement of  contracts  in  equity. 

|§  890-897.  V.  Effect  of  the  representation  on  the  party  to  whom  it  is  made. 

§  890.  He  must  rely  on  it. 

§  891.  He  must  be  justified  in  relying  on  it. 

§  892.  When  he  is  or  is  not  justified  in  relying  on  it. 

§  893.  Information  or  means  of  obtaining  information  possessed  by  the 
parties  receiving  the  representation. 

§  894.  Knowledge  possessed  by  him;  patent  defects. 

§  895.  When  the  knowledge  or  information  must  be  proved  and   not 
presumed. 

§  896.  Words  of  general  caution. 

§  897.  Prompt  disaffirmance  necessary. 

§  898.  VI.  Materiality  of  the  misrepresentation. 

§  899.  Effects  of  a  misrepresentation. 

§§  900-907.  Second.     Fraudulent  concealments. 

§  901.  General  doctrine;  duty  to  disclose. 

§  902.  When  duty  to  disclose  exists. 


»  See  ante,  §§  851,  869. 


«  See  ante,  §  776. 


§  872  EQUITY   JURISPRUDENCE.  1222 

§  903.     Concealments  by  a  vendee. 

§  904.     Concealments  by  a  vendor. 

§  905.  Non-disclosure  of  facts  a  defense  to  the  specific  enforcement  of 
contracts  in  equity. 

§  906.     Concealments  by  buyers  on  credit.' 

§  907.     Contracts  and  transactions  essentially  fiduciary;  suretyship. 
§§  908,  909.     Liability  of  principals  for  the  fraud  of  their  agents. 
§§  910-921.      Third.     Jurisdiction  of  equity  in  cases  of  fraud. 

§  911.     Fundamental  principles  of  the  jurisdiction. 

§  912.     The  English  doctrine. 

§  913.     Exception:  fraudulent  wills. 

§  914.     The  American  doctrine. 

§  915.     Incidents  of  the  jurisdiction  and  relief. 

§916.     The  same;  ^l&intiS  partkeps  doli;  ratification. 

§  917.     The  same;  promptness;  delay  through  ignorance  of  the  fraud. 

§  91''.     Persons  against  whom  relief  is  granted;  bona  fide  purchasers. 

§  919.  Particular  instances  of  the  jurisdiction;  judgments;  awards; 
fraudulent  devises  and  bequests;  preventing  acts  for  the  bene- 
fit of  others;  suppressing  instruments. 

§  920.     The  same;  appointment  under  powers;  marital  rights;  trusts. 

§  921.  The  statute  of  frauds  not  an  instrument  for  the  accomplishmcufc 
of  fraud. 

§  872.  Objects  and  Purposes.  —  Fraud,  in  some  of  its 
phases,  has  long  been  an  occasion  for  the  exercise  of  ju- 
risdiction both  at  law  and  in  equity.  The  various  reliefs 
on  the  ground  of  fraud  which  are  possible  from  the  nature 
of  the  legal  and  the  equitable  modes  of  procedure  and 
remedies  are  the  following:  At  law:  1.  The  affirmative 
relief  of  rescission,  whereby  the  defrauded  party  is  per- 
mitted to  rescind  the  contract  or  other  transaction,  or, 
more  accurately,  to  treat  it  as  rescinded, —  to  restore  him- 
self thereby  to  his  original  position  of  right,  and  by 
means  of  an  appropriate  action  to  recover  back  the 
money  or  other  property  of  which  he  had  been  deprived, 
or  which  he  had  parted  with;  2.  The  affirmative  relief 
whereby  the  defrauded  party  suffers  the  transaction  to 
stand,  and  by  action  recovers  pecuniary  damages  as  com- 
pensation for  the  injury  sustained  by  him  from  the  de- 
ceit; 3.  Defensive  relief,  whereby  the  party  sets  up  the 
fraud  as  a  defense,  and  thereby  defeats  any  action  brought 
to  enforce  the  apparent  fraudulent  obligation.    In  equity: 


1223  ACTUAL  FRAUD.  §  872 

1.  The  affirmative  relief  of  cancellation,  whereby  the  de- 
frauded party  procures  an  instrument,  obligation,  trans- 
action, or  other  matter  affecting  his  rights  and  liabilities 
to  be  set  aside  and  annulled,  and  himself  to  be  restored 
to  his  original  position  of  right,  and  as  a  consequence  to 
re-establish  his  title,  or  to  recover  possession  and  enjoy- 
ment of  property;  2.  The  affirmative  relief  of  reformation 
by  which  a  written  instrument  is  corrected,  and  perhaps 
re-executed,  when,  through  fraud  of  the  other  party,  it 
failed  to  express  the  real  relations  which  existed  between 
the  two  parties;  3.  The  affirmative  relief  of  a  pecuniary 
recovery  where  the  liability  arose  from  the  fraud  of  the 
other  party,  and  no  cancellation  is  necessary  as  the  foun- 
dation of  the  recovery;  4.  Defensive  relief,  whereby  the 
fraud  is  set  up  by  way  of  defense  to  defeat  any  suit  brought 
to  enforce  an  apparent  obligation  or  liability.  In  the 
discussions  of  the  present  and  the  following  sections,  I 
propose,  in  the  first  place,  to  describe  the  nature  of  fraud 
in  equity,  actual  and  constructive,  to  explain  the  essen- 
tial elements  entering  into  the  conception  of  it,  to  define 
its  kinds  and  classes,  to  enumerate  its  most  important 
instances,  and  to  show  the  various  forms  which  it  ordi- 
narily assumes  in  the  affairs  of  mankind.  In  the  second 
place,  I  shall  describe  the  equitable  jurisdiction  occasioned 
by  fraud,  define  its  extent  and  limits,  explain  the  princi- 
ples which  regulate  its  exercise,  and  enumerate  the  im- 
portant instances  of  its  exercise,  and  the  various  reliefs, 
affirmative  and  defensive,  which  are  thereby  granted. 
The  full  treatment  of  some  of  these  peculiar  reliefs,  such 
as  cancellation  and  reformation,  is  postponed  to  a  subse- 
quent chapter.  This  discussion  deals  with  fraud  in 
equity,  and  will  only  refer  incidentally,  and  by  way  of 
illustration,  to  fraud  at  law.  Whatever  amounts  to  fraud, 
according  to  the  legal  conception,  is  also  fraud  in  the 
equitable  conception;  but  the  converse  of  this  statement 
is  not  true.  The  equitable  theory  of  fraud  is  much  more 
comprehensive  than  that  of  the   law,  and   contains  ele- 


§  873  EQUITY   JURISPRUDENCE.  1224 

ments  entirely  different  from  any  which  enter  into  the 
legal  notion. 

§  873.  Description — Essential  Elements.  —  It  is  utterly 
impossible  to  formulate  any  single  statement  which  shall 
accurately  define  the  equitable  conception  of  fraud,  and 
which  shall  contain  all  of  the  elements  which  enter  into 
that  conception;  these  elements  are  so  various,  so  differ- 
ent under  the  different  circumstances  of  equitable  cogni- 
zance, so  destitute  of  any  common  bond  of  unity,  that 
they  cannot  be  brought  within  any  general  formula.  To 
attempt  such  a  definition  would  therefore  be  not  only 
useless,  but  actually  misleading.  It  has  been  shown  in  a 
former  chapter*  that  the  jurisdiction  of  chancery  was 
originally  rested  upon  two  fundamental  notions,  equity 
and  conscience,  or  good  faith.  The  first  of  these  em- 
braced all  cases  where  a  party,  acting  according  to  the 
rules  of  the  law,  and  not  doing  anything  contrary  to  con- 
science or  good  faith,  might  obtain  an  undue  advantage 
over  another,  which,  though  strictly  legal,  equity  would 
not  permit  him  to  retain.  The  second  embraced  all 
those  cases  where  a  party,  although  perhaps  still  keeping 
within  the  limits  of  the  strict  law,  so  as  to  be  sustained 
by  the  law  courts,  had  committed  some  unconscientious 
act  or  breach  of  good  faith,  and  had  thereby  obtained  an 
undue  advantage  over  another,  which  advantage,  even 
though  legal,  equity  would  not  suffer  him  to  retain.  The 
relief  given  by  equity  in  a.ll  cases  of  fraud  is  plainly 
referable  to  this  second  head  of  the  original  jurisdiction. 
Every  fraud,  in  its  most  general  and  fundamental  con- 
ception, consists  in  obtaining  an  undue  advantage  by 
means  of  some  act  or  omission  which  is  unconscientious 
or  a  violation  of  good  faith  in  the  broad  meaning  given 
to  the  term  by  equity,  —  the  bona  fides  of  the  Roman  law. 
Furthermore,  it  is  a  necessary  part  of  this  conception 
that  the  act  or  omission  itself,  by  which  the  undue 
advantage  is  obtained,  should  be  willful;  in  other  words, 

»  Vol.  1,  §  55. 


1225  ACTUAL  FRAUD.  §  873 

should  be  knowingly  and  intentionally  done  by  the  party; 
but  it  is  not  essential  in  the  equitable  notion,  although  it 
is  in  the  legal,  that  there  should  be  a  knowledge  of  and 
an  intention  to  obtain  the  undue  advantage  wliich  results. 
The  willfulness  of  the  act  or  omission  is  the  element 
which  distinguishes  fraud  from  other  matters  by  which 
an  undue  advantage  may  be  obtained  so  as  to  furnish  an 
occasion  for  the  equitable  jurisdiction.  Thus  it  has  been 
shown  that  in  accident  an  occurrence  external  to  the  par- 
ties happens  without  any  intent  or  other  mental  condi- 
tion, and  an  undue  advantage  thereby  accrues  to  one  of 
them.'  In  mistake  there  is  indeed  a  mental  condition  or 
conviction  of  the  understanding,  but  it  wholly  results 
from  ignorance  or  misapprehension,  and  prevents  the 
free  action  of  the  will;  there  is,  therefore,  a  complete 
absence  of  willfulness  or  intention  in  the  true  and  legal 
meaning  of  those  terms.^  In  all  phases  of  fraud,  on  the 
other  hand,  there  is  a  mental  condition,  a  conviction  of 
the  understanding,  a  free  operation  of  the  will,  and  an 
intention  to  do  or  omit  the  very  act  by  which  the  undue 
advantage  is  obtained.  The  following  description  is  per- 
haps as  complete  and  accurate  as  can  be  given  so  as  to 
embrace  all  the  varieties  recognized  by  equity:  Fraud 
in  equity  includes  all  willful  or  intentional  acts,  omis- 
sions, and  concealments  which  involve  a  breach  of  either 
legal  or  equitable  duty,  trust,  or  confidence,  and  are  in- 
jurious to  another,  or  by  which  an  undue  or  unconscien- 
tious advantage  over  another  is  obtained.' 

*  [See  §  823.]  and  like  terms  are  employed  as  neces- 

*  [See  §  839.]  sary  ingredients  of  fraud,  are  inaccu- 
'  This  general  statement,  to  which  I     rate  and  misleading  when  applied  to 

have  added  the  necessary  terms  "will-  the  equitable  conception,  and  are  not 
ful  or  intentional,"  is  given,  slightly  even  appropriate  in  describing  fraud 
varied,  by  Mr.  Fonblanque:  1  Fon-  at  law.  It  would  also  be  very  iin- 
blauque's  Equity,  bk.  1,  c.  2,  sec.  3;  proper  to  include  "an  intent  to  de- 
adopted  by  Jud^e  Story:  1  Story's  ceive  "  as  one  of  the  essential  elements 
Eq.  Jur.,  sec.  187;  and  by  Mr.  Kerr:  of  fraud  in  equity.  The  proposed 
Keir  on  Fraud  and  Mistake,  42.  It  is  Civil  Code  of  New  York  gives  the  fol- 
plain  that  the  detinitions  sometimes  lowing  definitions  of  fraud  as  afifucting 
given  by  text-writers  and  judges,  in  the  entering  into  contracts  (sees.  757, 
which  "artifice,"  "trick,"  "subter^  758),  which  are  adopted  by  the  present 
fuge,"  "circumvention,"   "cunning,"  Civil  Code  of   California   (sees.   1672, 


874 


EQUITY    JURISrRUDENCE, 


1226 


§  874.  Four  Forms  and  Classes  of  Fraud  in  Equity.  — 
In  the  leading  and  celebrated  case  of  Earl  of  ChesterfieUl 
V.  Janssen,  Lord  Hardwicke,  while  not  attempting  to 
formulate  any  general  definition,  arranged  all  the  forms 
of  fraud  recognized  by  equity  in  four  classes,  — a  division 
based  upon  their  intrinsic  qualities,  and  which  has  been 
followed  by  nearly  all  subsequent  writers  and  judges. 
These  classes  are:  1.  Frauds  which  are  actual,  arising 
from  facts  and  circumstances  of  imposition;  2.  Frauds 
apparent  from  the  intrinsic  nature  and  subject  of  the  bar- 
gain itself;  3.  Frauds  presumed  from  the  circumstances 
and  condition  of  the  parties;  4.  Frauds  which  are  an  im- 
position and  deceit  on  third  persons  not  parties  to  the 
transaction.*     In  pursuance  of  the  order,  which  seems  to 


1573).  These  definitions,  in  accord- 
ance with  the  plan  of  these  codes, 
embrace  both  fraud  in  equity  and  at 
law:  "Actual  fraud,  within  the  mean- 
ing of  this  chapter  [i.  e.,  on  contracts], 
consists  in  any  of  the  following  acts, 
committed  by  a  party  to  the  contract, 
or  with  his  connivance,  with  intent  to 
deceive  another  party  thereto,  or  to  in- 
duce him  to  enter  into  the  contract: 
1.  The  suggestion,  as  a  fact,  of  that 
which  is  not  true,  by  one  who  does 
not  believe  it  to  be  true;  2.  The 
positive  assertion,  in  a  manner  not 
warranted  by  the  information  of  the 
person  making  it,  of  that  which  is  not 
true,  though  he  believes  it  to  be  true; 
3.  The  suppression  of  that  which  is 
true,  by  one  having  knowledge  or  be- 
lief of  the  fact;  4.  A  promise  made 
without  any  intention  of  performing 
it;  [see  Lawrence  v.  Gayetty,  78  Cal. 
126;  12  Am.  St.  Rep.  29;  Newman  v. 
Smith,  77  Cal.  22;]  5.  Any  other  act 
fitted  to  deceive." 

"Constructive  fraud  consists, — ^1. 
In  any  breach  of  duty  which,  without 
an  actually  fraudulent  intent,  gains  an 
advantage  to  the  person  in  fault,  or 
any  one  claiming  under  him,  by  mis- 
leading another  to  his  prejudice,  or  to 
the  prejudice  of  any  one  claiming  un- 
der him;  2.  In  any  snch  act  or  omis- 
sion as  the  law  specially  declares  to  be 
fraudulent,  without  respect  to  actual 
fraud."  These  codes  give  a  further 
and  somewhat   different  definition  of 


fraud  or  "  deceit "  as  the  ground  of  an 
obligation  imposed  by  law,  and  of  a 
legal  action  for  damages:  N.  Y.  Civ. 
Code,  sec.  849;  Cal.  Civ.  Code,  sec. 
1710. 

'  Earl  of  Chesterfield  v.  Janssen,  2 
Ves.  Sr.  125;  1  Atk.  301;  1  Lead  Cas. 
Eq.,  4th  Am.  ed.,  773.  In  his  most 
instructive  opinion,  Lord  Hardwicke 
said  upon  this  particular  subject: 
"  This  court  has  an  undoubted  juris- 
diction to  relieve  against  every  species 
of  fraud.  First,  then,  fraud,  which  is 
dolus  rnalus,  may  be  actual,  arising 
from  facts  and  circumstnnces  of  im- 
position, which  is  the  plainest  case. 
Secondly,  it  may  be  apparent  from  the 
intrinsic  nature  and  subject  of  the 
bargain  itself,  such  as  no  man  in  his 
senses  and  not  under  delusion  would 
make  on  the  one  hand,  and  as  no 
honest  and  fair  man  would  accept  on 
the  other,  which  are  inequitable  and 
unconscientious  bargains.  A  third 
kind  of  fraud  is  that  which  may  be 
presumed  from  the  circumstances  and 
condition  of  the  parties  contracting; 
and  this  goes  further  than  the  rule  of 
law,  which  is,  that  it  must  be  proved, 
not  presumed;  but  it  is  wisely  estab- 
lished in  this  court  to  prevent  taking 
surreptitious  advantage  of  the  weak- 
ness or  necessity  of  another,  which 
knowingly  to  do  is  equally  against 
conscience  as  to  take  advantage  of  his 
ignorance.  A  fourth  kind  of  fraud 
may  be   collected  or   inferred,  in  the 


1227 


ACTUAL   FRAUD. 


§874 


be  simple  and  natural,  I  shall  include  and  treat  under  tlie 
description  of  actual  fraud  those  cases  only  which  belong 
to  the  first  of  these  four  classes.  In  all  of  them,  and  this 
seems  to  be  the  essential  distinction  between  actual  and 
constructive  fraud,  there  is  the  element  of  falsity  in  fact, 
and  the  knowledge  of  the  falsity  and  the  intention  to  de- 
ceive in  Si  modified  and  partial  manner  at  least,  in  equity  no 
less  than  in  the  law.  In  the  three  other  classes  there  is  no 
necessary  element  of  falsity  in  fact,  and  the  fraud  in  each 
of  them  arises  rather  from  motives  of  expediency  and 
policy  than  from  any  intent  of  the  parties.* 


consideration  of  this  court,  from  the 
nature  and  circumstances  of  the  trans- 
action, as  being  an  imposition  and  de- 
ceit on  other  persons  not  parties  to  the 
fraudulent  agreement.  It  may  sound 
odd  that  an  agreement  may  be  in- 
fected by  being  a  deceit  on  others 
not  parties;  but  such  there  are,  and 
against  such  there  has  been  relief.  Of 
this  kind  have  been  marriage  broker- 
age contracts,  neither  of  the  parties 
therein  being  deceived;  but  they  tend 
necessarily  to  the  deceit  on  one  party 
to  the  marriage,  or  of  the  parent,  or 
of  the  friend."  He  adds  some  further 
illustrations  and  explanations  of  this 
fourth  class,  and  then  says:  "  Tlie 
last  head  of  fraud  on  which  there  hag 
been  relief  is  that  which  infects  catch- 
ing bargains  with  heirs,  reversioners, 
or  expectants,  in  the  life  of  tlieir 
fathers.  These  have  generally  been 
mixed  cases,  compounded  of  all  or 
several  species  of  fraud;  there  being 
sometimes  proof  of  actual  fraud,  which 
is  always  decisive."  Lord  Hardwicke 
plainly  does  not  intend  in  this  last  in- 
stance to  add  a  fifth  and  distinct  class; 
he  is  simply  giving  a  special  instance 
or  form,  which  may  fall  wholly  or 
partly  into  one  or  more  of  the  four 
preceding  classes. 

•  The  following  extract  shows  the 
opinion  of  one  of  the  ablest  of  modern 
equity  judges,  concerning  the  differ- 
ence between  "actual  fraud  "in  equity 
as  well  as  at  law,  and  constructive 
fraud.  In  Smallcombe's  Case,  L.  R. 
3  Eq.  769,  771,  Lord  Romilly  said: 
"I  must  say  that  to  treat  such  a 
transaction  as  a  fraud  is,  in  my 
opinion,  to  confound  moral  principles 


and  to  introduce  an  element  of  great 
confusion  into  the  doctrine  of  courts 
of  equity,  the  fundamental  principle 
of  which,  as  regards  fraud,  is,  as  it 
appears  to  me,  that  nothing  can  be 
called  fraud,  and  nothing  can  be 
treated  as  fraud,  except  an  act  which 
involves  grave  raoral  guilt.  I  feel 
strongl}',  and  I  have  frequently  en- 
deavored to  point  out,  the  injurious 
consequence  of  allowing  such  expres- 
sions to  be  used  as  'equitable  fraud,' 
or  '  that  which  courts  of  equity  call 
fraud,'  or  '  constructive  fraud,'  when 
in  fact  no  act  has  been  done  by  any 
one  which  involves  moral  culpability. 
The  only  exception,  that  I  am  aware 
of,  is.  that  the  phrase  'constructive 
fraud  '  has  sometimes  been  applied  to 
cases  where  an  innocent  partner  has 
been  made  liable  for  the  fraudulent 
acts  of  his  copartner.  The  expres- 
sion is  not  a  proper  one  even  there, 
because  the  innocent  party  has  been 
guilty  of  no  fraud,  out  he  is  in  many 
cases  properly  made  liable  for,  and 
compelled  to  redress,  the  wrong  com- 
mitted by  his  really  fraudulent  copart- 
ner. "  It  should  be  observed  that  this 
opinion  of  Lord  Romilly  is  opposed  to 
that  of  very  many  equally  able  judges, 
and  in  one  important  particular  it 
conflicts  with  direct  decisions.  It  is 
finally  settled  that  at  law  there  can 
be  no  fraud  without  moral  culpability; 
but  in  equity  even  actual  fraud  may 
exist  without  the  knowledge  and 
wrongful  intent  which  constitute  the 
immorality  at  law.  Furthermore,  the 
phrase  "constructive  fraud,"  or  "equi- 
table fraud,"  has  been  constantly  used 
by  courts  from  the  earliest  day;  and 


§§  875,  876  EQUITY    JURISPRUDENCE.  1228 

§  875.  Nature  of  Actual  Fraud.  —  Although  it  is  not 
possible  to  give  any  complete  definition  of  fraud,  yet  it  is 
possible  to  describe  the  various  elements  which  are  essen- 
tial to  the  conception  of  actual  fraud.  In  the  vast  major- 
ity of  instances,  actual  fraud  occurs  in  negotiations  or 
dealings  which  are  incidents  of  some  agreement,  executed 
or  executory.  Even  in  transactions  which  are  not  agree- 
ments, such  as  the  execution  of  a  will,  the  operation  and 
effect  of  fraud  are  the  same  as  in  the  case  of  agreements. 
There  are  undoubtedly  some  special  transactions  capable 
of  being  affected  by  fraud,  which  cannot  readily  be  brought 
within  this  general  description,  —  as,  for  example,  the 
fraudulent  obtaining  of  a  judgment  at  law.  These  special 
cases  will  be  considered  by  themselves.  With  all  these 
varieties  of  external  form,  actual  fraud  in  the  numberless 
agreements,  transactions,  and  dealings  of  mankind  may, 
in  its  intrinsic  nature,  be  reduced  to  two  essential  forms, — 
false  representation  and  fraudulent  concealments,  —  sug- 
gestio  falsi  and  suppressio  leri.  The  discussion  of  actual 
fraud  mainly  consists,  therefore,  in  analyzing  these  two 
forms  and  in  determining  their  necessary  constituents. 

§  876.  First.  Misrepresentations.  —  A  misrepresenta- 
tion, in  order  to  constitute  fraud,  must  contain  the  follow- 
ing essential  elements:  1.  Its  form  as  a  statement  of  fact; 
2.  Its  purpose  of  inducing  the  other  party  to  act;  3.  Its 
untruth;  4.  The  knowledge  or  belief  of  the  party  making 
it;  5.  The  belief,  trust,  and  reliance  of  the  one  to  whom 
it  is  made;  6.  Its  materiality.  These  elements  will  be 
examined  separately. 

it  would  produce  great  confusion   to  equity  it  may  be,  but  is  not  necessarily, 

refuse   the   name    "fraud"  to   those  willful.     In   constructive  fraud  there 

acts  which  have  hitherto  constituted  is  no   necessary  untruth.     The  equi- 

constructive   fraud,    and   to    describe  table  conception  of  constructive  fraud 

them  by  some  other  term.     The  set-  embraces  a  great  variety  of  transac- 

tled  terminology  of  the  law  is  one  of  tions;   some  are  absolutely  void  from 

its  most  important  features.    Although  illegality,  others  are  voidable,  others 

this   division  is   not   followed   by  all  still  simply  have  a  presumption  against 

writers, — e.  g.,  Story  and  Snell, — yet  their  validity,  and  require  affirmative 

"actual"     and     "constructive,"     in  proof  of  their  fairness.     In  construct- 

equity,  are  separated  by  a  very  clear  ive   fraud  the   invalidity   arises  from 

and  certsiin  line.     The  essential  fact  in  general  motives  of  policy,  good  morals, 

actual  fraud  is  unti'uth.     In  the  law  it  and  fair  dealing,  and  not  from  the  fact 

must    be    willful,  —  a    falsehood;    in  of  untruth.     [See  also  §  922.] 


1229 


ACTUAL    FRAUD. 


§  877 


§  877.  I.  The  Form  —  An  Affirmation  of  Fact.  —  A  mis- 
representation must  be  an  affirmative  statement  or  affirma- 
tion of  some  fact,  in  contradistinction  to  a  concealment 
or  failure  to  disclose,  and  to  a  mere  expression  of  opinion.* 
In  the  great  majority  of  instances  it  is  made  by  means  of 
language  written  or  spoken;  but  it  may  consist  of  conduct 
alone,  of  external  acts,  when,  through  this  instrumentality, 
it  is  intended  to  convey  the  impression,  or  to  produce  the 
conviction,  that  some  fact  exists,  and  such  result  is  a 
natural  consequence  of  the  acts.^  A  misrepresentation  of 
the  law  is  not  considered  as  amounting  to  fraud,  because, 

V.  Fay,  101  Mass,  134,  137;  Cooper 
V.  Lovering,  106  Mass.  77,  79;  Taylor 
V.  Fleet,  I  Barb.  471;  Oberlander  v. 
Spiess,  45  N.  Y.  175;  New  Brunswick 
etc.  R'y  V.  Conybeare,  9  H.  L.  Cas. 
711;  1  De  Gex,  F,  &  J.  578;  Attwood 
V.  Small,  6  Clark  &  F.  2.S2;  Lowndes 
V.  Lane,  2  Cox,  363;  Winch  v,  Win- 
chester, 1  Ves.  &  B.  375. 

*  It  was  so  held  in  Lovell  v.  Hicks, 
2  Younge  &  C.  46,  where  tictitioua 
and  fraudulent  experiments  were  per- 
formed, so  as  to  induce  a  party  to 
enter  into  a  contract  concerning  a  pat- 
ent right.  See  also  Crawshay  v. 
Thompson,  4  Man.  &  G.  357,  3b7;  Mc- 
Call  V.  Davis,  56  Pa.  St.  431;  94  Am. 
Dec.  92.  The  point  is  also  illustrated  by 
Denny  v.  Hancock,  L.  R.  6  Ch.  1,  al- 
though the  decision  was  rested  upon 
misdescription  rather  than  fraudulent 
misrepresentation.  A  purchaser  was 
so  misled  as  to  their  boundaries,  by  the 
appearance  of  the  grounds,  that  the 
contract  was  not  enforced.  This  was, 
of  course,  a  mistake  of  his;  but  the 
mistake  consisted  of  his  obtaining  from 
the  appearance  an  impression  which 
was  natural,  but  was  at  the  same  time 
contrary  to  the  real  fact;  the  appear- 
ance thus  operated  as  a  misdescription. 
When  two  parties  have  made  an  agree- 
ment, and  in  reducing  it  to  writing, 
one  of  them  knowingly  alters  it  in  a 
material  manner,  and  procures  the 
other  to  execute  or  to  accept  the  writ- 
ing in  ignorance  of  the  alteration,  this 
conduct  is  fraud:  Kilmer  v.  Smith, 
77  N.  Y.  226:  33  Am.  Rep.  613;  Hay 
V.  Star  Ins.  Co.,  77  N.  Y.  235;  33  Am. 
Rep.  607;  Rider  v.  Powell,  28  N.  Y. 
310;  [Bethell  v.  Bethell,  92  Ind.  318; 
Harrington   v.  Brewer,  56  Mich.  301.] 


'  In  Jennings  v.  Broughton,  5  De 
Gex,  M.  &  G.  125,  17  Beav.  234,  which 
was  brought  to  set  aside  the  sale  of 
shares  in  a  certain  mine  on  account 
of  misrepresentations  by  the  vendors. 
Knight  Bruce,  L.  J.,  stating  the  re- 
qxiisites  of  a  misrepresentation,  said 
(p.  130):  "First,  in  the  statements  or 
representations  concerning  the  mine, 
was  there  any  untrue  assertion  mate- 
rial in  its  nature,  that  is  to  say,  which, 
taken  as  true,  added  substantially  to 
the  value  or  promise  of  the  mine,  and 
was  not  evidently  conjectural  merely?  " 
Doggett  V.  Emerson,  3  Story,  700; 
Hough  V.  Richardson,  3  Story,  659; 
Daniel  v.  Mitchell,  1  Story,  172;  War- 
ner  v.  Daniels,  1  Wood.  &  M.  90;  Ham- 
matt  V,  Emerson,  27  Me.  308;  46  Am. 
Dec.  593;  Stone  v.  Denny,  4  Met.  151; 
Hazard  v.  Irwin,  18  Pick.  95;  Rohr- 
schneiderV.  Knickerbocker  Ins.  Co.,  76 
N.  Y.  216;  32  Am.  Rep.  290;  Ver- 
planck  V.  Van  Buren,  76  N.  Y'.  247; 
Dambmann  v.  Schulting,  75  N.  Y.  55, 
61;  Beardsley  v.  Duntley,  69  N.  Y. 
577;  Perkins  v.  Partridge,  30  N.  J.  Eq. 
82;  Leutzv.  Earnhart,  12  Heisk.  711; 
Derrick  v,  Lamar  Ins.  Co.,  74  111.  404; 
McShane  v.  Hazlehurst,  50  Md.  107; 
Cowles  v.  Watson,  14  Hun,  41; 
Slaughter's  Adm'r  v.  Gerson,  13  Wall. 
379;  McAleer  v.  Horsey,  35  Md, 
439;  Printup  v.  Fort,  40  Ga.  276; 
Bowman  v,  Caruthers,  40  Ind,  90;  Bab- 
cock  V.  Case,  61  Pa,  St.  4'J7;  100  Am. 
Dec.  654;  Thorn  v.  Helmer,  4  Abb. 
App.  408;  Morris  Canal  Co.  v.  Eminett, 
9  Paige,  168;  37  Am.  Dec.  388;  Steb- 
bins  V.  Eddy,  4  Mason,  414;  Winston 
V,  Gwathmey,  8  B.  Mon.  19;  Suessen- 
guth  V,  Bingenheinier,  40  Wis,  370; 
Gifford  V.  CarvUl,  29  Cal,  689;  Pike 


§877 


EQUITY   JURISPRUDENCE. 


1230 


as  it  is  generally  said,  all  persons  are  presumed  to  know 
the  law;  and  it  might  perhaps  be  added  that  such  a 
statement  would  rather  be  the  expression  of  an  opinion 
than  the  assertion  of  a  fact.^  A  statement  of  intention 
merely  cannot  be  a  misrepresentation  amounting  to  fraud, 
since  such  a  statement  is  not  the  affirmation  of  any 
external  fact,  but  is,  at  most,  only  an  assertion  that  a 
present  mental  condition  or  opinion  exists.'^  That  the 
fact,  however,  concerning  which  the  statement  is  made 
is  future  does  not  of  itself  prevent  the  misrejiresentation 
from  being  fraudulent.  The  statement  of  matter  in  the 
future,  if  affirmed  as  a  fact,  may  amount  to  a  fraudulent 
misrepresentation,  as  well  as  a  statement  of  a  fact  as  ex- 
isting at  present.' 


^  Eaglesfield  v.  Marquis  of  London- 
derry, L.  R.  4  Ch.  Div.  693;  Rashdall 
V.  Ford,  L.  R.  2  Eq.  750,  754;  Upton 
V.  Tribilcock,  91  U.  S.  45;  Grant 
V.  Grant,  56  Me.  573;  Reed  v. 
Sidener,  32  Ind.  373;  Drake  v.  La- 
tham, 50  111.  270;  Fish  v.  Clelaud,  33 
111.  238,  243;  Steamboat  Belfast  v. 
Boon,  41  Ala.  50,  68;  Smither  v.  Cal- 
vert, 44  Ind.  242;  Upton  v.  Engle- 
hart,  3  Dill.  496;  People  v.  San  Fran- 
cisco, 27  Cal.  655;  Jordan  v.  Stevens, 
51  Me.  78;  81  Am.  Dec,  556.  [Abbott 
V.  Treat,  78  Me.  121,  125;  Jaggar  v. 
Winslow,  30  Minn.  263.]  It  has  been 
shown  in  the  preceding  section  that 
■when  a  party  has  been  led  to  act  in 
ignorance  or  mistake  of  the  law, 
through  the  inequitable  conduct  of  an- 
other, r.e  may  be  relieved  on  the  ground 
of  mistake.:  See  ante,  §  847. 

^  Citizens'  Bank  v.  First  Nat.  Bank 
of  N.  0.,  L.  R.  6  H.  L.  352;  Jorden 
V.  Money,  5  H.  L.  Cas.  185;  Long  v. 
Woodman,  58  Me.  49;  Grove  v. 
Hodges,  55  Pa.  St.  504,  519;  [Gray  v. 
Suspension  Car  Truck  Co.,  127  111.  187; 
Love  V.  Teter,  24  W.  Va.  741.] 

It  must  not  be  understood  that  no 
rights  would  flow  from  such  astatement. 
A  representation  of  a  future  intention, 
absolute  in  form,  deliberately  made  for 
the  purpose  of  influencing  the  conduct 
of  the  other  party,  and  then  acted  upon 
by  him,  is  generally  the  source  of  a 
right,  and  may  amount  to  a  contract, 
enforceable  as  such  by  a  court  of  equi- 


ty: See  De  Beil  v.  Thomson,  3  Beav, 
469;  12  Clark  &  F.  61,  note;  Hammers- 
ley  V.  De  Biel,  1 2  Clark  &  F.  45 ;  Bold  v. 
Hutchinson,  20  Beav.  250;  5  De  Gex, 
M.  &  G.  55S;  Neville  v.  Wilkinson,  1 
Brown  Ch.  543;  Money  v.  Jordan,  2 
De  Gex,  M.  &  G.  318,  332,  per  Lord 
Cranworth;  Ainslie  v.  Medlycott, 
9  Ves.  13,  21,  per  Sir  William 
Grant;  Jameson  v.  Stein,  21  Beav.  5; 
Gale  V.  Lindo,  1  Vern.  475;  Scott 
V.  Scott,  1  Cox,  366;  Maunsell  v. 
White,  4  H.  L.  Cas.  1039,  1056,  per 
Lord  Cranworth;  1  Jones  &  L.  5;j9, 
557;  Loxley  v.  Heath,  27  Beav.  523; 
1  De  Gex,  F.  &  J.  489;  Moore  v.  Hart, 
1  Vern.  110,  201;  Luders  v.  Anstey,  4 
"Ves.  501 ;  5  Ves.  213;  Saunders  v.  Cra- 
mer, 3  Dru.  &  War.  87;  Montgomery 
V.  Reilly,  1  Bligh,  N.  S.,  364:  Payne 
V.  Mortimer,  1  Giff.  118;  4  DeGex&  J. 
447;  Skidmore  v.  Bradford,  L.  R.  8 
Eq.  134;  Moorhouse  v.  Colvin,  15 
Beav.  341;  Caton  v.  Caton,  L.  R.  2 
H.  L.  127,  142. 

*  Piggott  V.  Stratton,  1  De  Gex,  F.  & 
J.,  33,  49,  per  Lord  Chancellor  Camp- 
bell, who  says  the  doctrine  is  "  well 
established  that  if  A  deliberately 
makes  an  assertion  to  B,  intending  it 
to  be  acted  upon  by  B,  and  it  is  acted 
upon  by  B,  A  is  estopped  from  saying 
that  it  is  not  true.  If  it  turns  out  to 
be  false,  A  is  answerable  for  the  dam- 
age which  may  have  accrued  to  B, 
and  B  is  entitled,  in  respect  of  any- 
thing done  in  the  belief  that  it  was 


1231  ACTUAL  FRAUD.  §  878 

§  878.  Misrepresentations  of  Matter  of  Opinion. — 
Since  the  very  corner-stone  of  the  doctrine  is  that  the 
statement  must  be  an  affirmation  of  a  fact,  it  has  some- 
times been  said,  but  very  incorrectly,  that  a  misrepre- 
sentation cannot  be  made  of  a  matter  of  opinion.  The 
true  rule  is,  that  a  fraudulent  misrepresentation  cannot 
itself  be  the  onere  expression  of  an  opinion  held  by  the 
party  making  it.  The  reason  is  very  simple;  while  the 
person  addressed  has  a  right  to  rely  on  any  assertion  of 
a  fact,  he  has  no  right  to  rely  upon  the  mere  expression 
of  an  opinion  held  by  the  party  addressing  him,  in  what- 
ever language  such  expression  be  made;  he  is  assumed 
to  be  equally  able  to  form  his  own  opinion,  and  to  come 
to  a  correct  judgment  in  respect  to  the  matter,  as  the 
party  with  whom  he  is  dealing,  and  cannot  justly  claim, 
therefore,  to  have  been  misled  by  the  opinion,  however 
erroneous  it  may  have  been.*  For  this  reason,  the  gen- 
eral praise  of  his  own  wares  by  a  seller,  commonly  called 

true,    to  object  to  any  denial   of    its  representation     of    an    existing     fact, 

truth  l)y  A":  Hutton  v.  Rossiter,  7  De  There  is  nothing  inconsistent  in  this 

Gex,  M.  &  G.  9,  22,  23;  Hawesv.  Mar-  result  with  the  rule  that  no  equitable 

chant,  1  Curt.  136;  Lobdellv.  Baker,  3  estoppel  arises  from  a  viere  promise. 
Met.  469;  Osgood  v.  Nichols,  5  Gray,         *  Jennings  v.  Broughton,  5  De  Gex, 

420;  Audenried,  v.  Betteley,  5  Allen,  M.  &  G.  125;  Mead  v.  Bunu,  32  N.  Y. 

384;  81  Am.  Dec.  755;  Plumerv.  Lord,  275;    Sawyer   v.    Prickett,    19   Wall. 

9  Allen,  455;  85  Am.  Dec.  773;  Kim-  146;  Hepburn  v.  Dunlop,  1  Wheat, 
ball  V.  ^tna  Ins.  Co..  9  Allen,  540;  189;  Hazard  v.  Irwin,  18  Pick.  95, 
85  Am.   Dec.   786;  Langdon  v.  Doud,  105;    Watts  v.  Cummins,  59  Pa.  St. 

10  Allen,  433,  437;  Andrews  v.  Lyons,  84;   Curry   v,    Keyser,    30   lud.    214; 

11  Allen,  349;  Turner  V.  Coffin,  12  Al-  Sieveking  v.  Litzler,  31  Ind.  13,  17; 
len,  401;  Fall  Pviver  Nat.  Bank  v.  Stow  v.  Bozeman,  29  Ala.  397;  Hub- 
.Buffington,  97  Mass.  498;  Vibbard  v.  bell  v.  Meigs,  50  N.  Y.  480,  489; 
Roderick,  51  Barb.  616;  Brookman  v.  Banta  v.  Savage,  12  Nev.  151;  Coil  v. 
Metcalt.  4  Rob.  (N.  Y.)  568;  Vander-  Pittsburg  F,  Coll.,  40  Pa.  St.  439, 
pool  V.  Brake,  28  Ind.  130;  Ridgway  445;  Pike  v.  Fay,  101  Mass.  134; 
V.  Morrison,  28  Ind.  201;  Davidson  V.  Mooney  v.  Miller,  102  Mass.  217; 
Young,  33  111.  145;  Chouteau  v.  God-  Cooper  v.  Lovering,  106  Mass.  77,  79; 
din,  39  Mo.  229;  [Edgington  v.  Fitz-  Gifford  v.  Carvill,  29  Cal.  589;  Sues- 
maurice,  29  Ch.  Div.  459;  Abbott  v.  senguth  v.  Bingenheimer,  40  Wis. 
Abbott,  18  Neb.  503;]  and  cases  in  370;  Speiglemyer  v.  Crawford,  6 
last  note.  Some  of  these  cases  may  be  Paige,  254;  Wambaugh  v.  Bimer,  25 
referred  to  the  doctrine  of  equitable  Ind.  SOS;  Juzan  v.  Toulmin,  9  Ala. 
estoppel;  but  it  is  plain  that  wliere  the  G62;  44  Am.  Dec.  448;  Glasscock  v. 
representation  is  that  of  a/acMnthe  Minor,  11  Mo.  655;  Smith  v.  Rich- 
future,  and  not  a  mere  promise,  and  it  ard.s,  13  Pet.  26;  Hough  v.  Richard- 
is  relied  upon,  and  turns  out  to  be  son,  3  Story,  659;  Warner  v.  Daniels, 
false,  the  rights  and  remedies  of  the  1  Wood.  &  M.  90;  [Holton  v.  Noble, 
injured  party  are  the  same  as  those  83  Cal.  7;  Nounuau  v.  Sutter  Co.  Lb 
which^arise  from  the  fraudulent  mia-  Co.,  81  Cal.  1.] 


§  878  EQUITY   JURISPRUDENCE.  1232 

"puffing,"  for  the  purpose  of  enhancing  them  in  the 
buyer's  estimation,  has  always  been  allowed,  provided  it 
is  kept  within  reasonable  limits;  that  is,  provided  the 
praise  is  general,  and  the  language  is  not  the  positive 
affirmation  of  a  specific  fact  affecting  the  quality,  so  as  to 
be  an  express  warranty,  and  is  not  the  intentional  asser- 
tion of  a  specific  and  material  fact,  known  to  the  party 
to  be  false,  so  as  to  be  a  fraudulent  misrepresentation.* 
The  foregoing  rule  as  to  expressions  of  opinion  cannot 
be  pushed  beyond  the  plain  reasons  upon  which  it  rests. 
Wherever  the  statement,  although  relating  to  matter  of 
opinion,  is  the  affirmation  of  a  fact,  it  may  be  a  fraudu- 
lent representation.  Such  an  affirmation  might  be  made 
in  several  forms.  The  very  fact  concerning  which  the 
statement  is  made  may  be  the  existence  of  an  opinion. 
The  existence  of  an  opinion  may  be  a  fact  material  to 
the  proposed  transaction,  and  a  statement  that  such  an 
opinion  exists  becomes  an  affirmation  of  a  material  fact, 
and  if  untrue,  it  is  a  misrepresentation.  The  opinion 
might  either  be  represented  as  held  by  a  third  person  or 
as  held  by  the  very  party  making  the  statement.  As  a 
single  illustration,  either  the  third  person  or  the  party 
himself  might  be  an  expert,  and  their  opinion  might  be 
material,  so  that  the  representation  that  the  opinion  was 
held  might  be  the  affirmation  of  a  most  material  fact. 
There  is  still  another  and  perhaps  more  common  form 
of  such  misrepresentation.  Wherever  a  party  states  a 
matter,  which  might  otherwise  be  only  an  opinion,  and 
does  not  state  it  as  the  mere  expression  of  his  own  opinion, 
but  affirms  it  as  an  existing  fact  material  to  the  trans- 
action, so  that  the  other  party  may  reasonably  treat  it  as 
a  fact,  and  rely  and  act  upon  it  as  such,  then  the  state- 
ment clearly  becomes  an  affirmation  of  fact  within  the 
meaning  of  the  general  rule,  and  may  be  a  fraudulent  mis- 
representation. The  statements  which  most  frequently 
come  within  this  branch  of  the  rule  are  those  concern- 

»  French  v.  Griffin,  18  N.  J.  Eq.  279;  Hunter  v.  McLaughlin,  43  Ind.  38, 


1233 


ACTUAL   FRAUD. 


§878 


ing  value.  The  foregoing  distinctions,  which  I  have 
attempted  to  explain,  and  whicli  have  sometimes  been 
lost  sight  of,  will  go  far,  I  think,  to  harmonize  whatever 
apparent  conflict  of  decision  may  be  found  in  some  of  the 
reported  cases.* 


'  It  cannot  be  denied  that  there  is 
apparently  a  direct  conflict  of  decis- 
ion upon  the  eflFect  of  representations 
concerning  value.  The  distinctions 
drawn  in  tlie  text  seem  to  me  to  be 
in  perfect  accordance  with  principle, 
and  to  be  just  and  practical,  and  they 
will  tend  to  remove  most  of  the  con- 
flict, which  is  apparent  rather  than 
real.  Statements  of  value  are  some- 
times nothing  more  than  the  expres- 
sion of  the  party's  own  opinion,  and 
there  is  a  group  of  decisions  in  which 
they  are  so  treated.  On  the  other 
hand,  statements  of  value  may  be 
atiiruiations  of  a  specific  material 
fact,  and  there  is  a  group  of  decisions 
in  which  they  are  so  treated,  and 
held  to  be  fraudulent  misrepresenta- 
tions. There  is  no  necessary  conflict 
between  these  two  groups  of  decisions, 
although  the  language  of  the  judicial 
opinions  has  not  always  recognized 
and  preserved  the  distinction  between 
the  two  forms.  Havgarth  v.  Wear- 
ing, L.  R.  12  Eq.  320,  827,  32S,  is 
directly  in  point,  and  sustains  the 
tlistinctions  stated  in  the  text  in  the 
fullest  manner.  The  plaintiff  had  in- 
herited a  piece  of  land.  She  was 
completely  ignorant  concerning  it  and 
its  value;  the  defendant  was  well  ac- 
quainted with  it  and  with  its  value. 
He  stated  to  her  that  it  was  not 
worth  more  than  one  hundred  pounds, 
and  she  therefore  sold  and  conveyed 
to  him  for  that  sum.  It  was  really 
worth  five  hundred  pounds,  which 
the  defendant  well  knew.  The  suit 
is  brought  to  set  aside  the  sale  and 
to  recover  the  land;  and  the  relief 
was  granted,  although  the  objection 
was  strongly  urged  that  such  a  rep- 
resentation was  merely  a  matter  of 
opinion.  The  court  first  decided  that 
no  fiduciary  relation  existed  between 
the  two  parties,  so  that  the  case  must 
depend  upon  general  rules  applicable 
alike  to  all  persons  dealing  with  each 
other.  Wickens,  V.  C,  said:  "Inde- 
pendently of  any  fiduciary  relation, 
this  court  holds  that  a  person  obtain- 
2  Eq.  Jue.— 78 


ing  a  conveyance  of  real  estate  on  the 
faith  of  certain  representations,  which 
are  afterwards  shown  to  be  untrue, 
must  submit  to  have  the  conveyance 
treated  as  fraudulent  and  void  against 
the  person  deceived.  In  this  case, 
the  representation  that  he  made  to 
her  was,  that  the  value  of  what  she 
had  to  sell  was  about  one  hundred 
pounds.  This  was  not  a  mere  pur- 
chaser's assessment  [i.  e.,  estimate  or 
opinion],  but  a  deliberate  statement 
made  to  her  by  a  person  having  full 
knowledge,  which  statement  was 
asked  by  her  for  her  guidance  in  the 
transaction,  and  was  acted  upon  by 
her  in  reliance  on  its  good  faith  add 
honesty."  See  also  Turner  v.  Har- 
vey, 1  Jacob,  169,  178,  179;  Rawlins 
v.  Wickham,  3  De  Gex  &  J.  304;  1 
Giff.  355  (a  misrepresentation  as  to 
amount  of  indebtedness):  Martin  v. 
Jordan,  60  Me.  531;  Coon  v.  Atwell, 
46  N.  H.  510;  Siniar  v.  Canaday,  53 
N.  Y.  298;  13  Am.  Rep.  523;  Van 
Epps  V,  Harrison,  5  Hill,  63;  40  Am. 
Dec.  314;  McAleer  v.  Horsey,  35  Md. 
439;  Reid  v.  Flippen,  47  Ga.  273; 
Morehead  v.  Eades,  3  Bush,  121; 
Sieveking  v.  Litzler,  31  Ind.  17;  Har- 
vey V.  Smith,  17  Ind.  272;  Davis  v. 
Jackson,  22  Ind.  233;  McP'adden  v. 
Robison,  35  Ind.  24;  Allin  v.  Milli- 
son,  72  111.  201;  Neil  v.  Cuinmings.  75. 
III.  170;  Faribault  v.  Sater,  13  Minn. 
223;  Gifford  v.  Carvill,  29  Cal.  589;. 
Cruess  v.  Fessler.  39  Cal.  336.  [la 
the  following  cases,  statements  of 
value  were  held  to  be  mere  expres-- 
sions  of  opinion:  Gordon  v.  Butler, 
105  U.  S.  553;  Southern  Development 
Co.  v.  Silva,  125  U.  S.  247;  Chrysler 
v.  Carraday,  90  N.  Y.  276;  43  Am. 
Rep.  166;  Akin  v.  Kellogg,  11» 
N.  Y.  441;  Dillman  v.  Nadlehoffer^ 
119  111.  567;  Rendell  v.  Scott,  70  Cal. 
514.] 

It  has  been  held  that  statements  as 
to  the  cost  of  property  cannot  be 
fraudulent  misrepresentations,  enti- 
tling the  injured  party  to  a  rescis- 
sion, if  no  fiduciary  relation  existed: 


§879 


EQUITY   JURISPRUDENCE. 


1234 


§  879.  II.  The  Purpose  for  Which  the  Representation 
is  Made. —  It  is  an  essential  requisite,  both  in  equity  and 
at  law,  that  the  representation,  whatever  be  its  form,  must 
be  made  for  the  purpose  and  with  the  design  of  procuring 
the  other  party  to  act, —  of  inducing  him  to  enter  into  the 
contract  or  engage  in  the  transaction.^  It  must  therefore 
be,  of  necessity,  preliminary  to  the  actual  conclusion  of 
the  transaction,  and  in  the  great  majority  of  instances  it 
is  made  during  and  forms  a  part  of  a  negotiation  between 
the  parties,  which  terminates  in  the  contract  or  other 
transaction.^  There  are,  however,  very  important  excep- 
tions to  ^this  general  statement.     There  are  cases  where 


Cooper  V.  Lovering,  106  Mass.  77,  79; 
Mooney  v.  Miller,  102  Mass.  217, 
220;  Hemmer  v.  Cooper,  8  Allen, 
334;  Tuck  v.  Downing,  76  111.  71; 
Noetling  v.  Wright,  72  111.  390;  Hoi- 
brook  V.  Connor,  60  Me.  578;  11  Am. 
Rep.  212.  In  this  last  case,  Mr. 
Justice  Dickerson  dissented,  holding 
■what  is,  as  it  seems  to  me,  the  more 
accurate  and  reasonalile  doctrine.  In 
Cowles  V.  Watson,  14  Hun,  41,  a  rep- 
resentation  that  property  cost  five 
hundred  thousand  dollars,  when  it 
only  cost  half  that  amount,  was  held 
a  statement  of  fact,  and  not  a  mere 
opinion.  In  the  following  cases, 
statements  involving  value  were  held 
representations  of  fact,  and  not  mere 
expressions  of  opinion:  Jordan  v. 
Volkenning,  72  N.  Y.  300,  306  (a 
gross  exaggeration  of  value);  Perkins 
V.  Partridge,  30  N.  J.  Eq.  82;  Leutz 
V.  Earnhart,  12  Heisk.  711;  Derrick 
V.  Lamar  Ins.  Co.,  74  111.  404;  Fox- 
worth  V.  Bullock,  44  Miss.  457;  [Mor- 
gan V.  Dinges,  23  Neb.  271;  8  Am. 
St.  Rep.  121;J  but  see  Suessenguth  v. 
Bingenheimer,  40  Wis.  370.  With 
respect  to  matters  of  ojjinion  stated 
as  facts,  or  stated  as  a  fact  to  be  held 
by  a  certain  person,  see  Haygarth  v. 
Wearing,  L.  R.  12  Eq.  320;  Attwood 
V.  Small,  6  Clark  &  F.  232;  Wake- 
man  V.  Dalley,  51  N.  Y.  27;  10  Am. 
Rep.  551;  Shaeffer  v.  Sleade,  7  Blackf. 
178.  [Vendor  referred  vendee  to  D 
for  D's  opinion,  knowing  D  to  be  a 
fugitive  from  justice,  and  intending 
to  mislead  vendee.  Held,  responsible 
for  D's  statements:  Witherwax  v. 
Riddle,   121   111.    140.]    In  Schramm 


V.  O'Connor,  98  111.  539,  a  mere  exag- 
geration of  the  value  and  excellence  of 
land  was  held  matter  of  opinion  only. 

^  Piawlins  v.  Wickham,  3  De  Gex  & 
J.  304;  Jennings  v.  Broughton,  5  De 
Gex,  M.  &  G.  126,  130;  Reynell  v. 
Sprye,  1  De  Gex,  M.  &  G.  660;  West- 
ern  Bank  v.  Addie,  L.  R.  1  Sc.  App. 
145;  West  v.  Jones,  1  Sim.,  N.  S., 
205,  208;  Traill  v.  Baring,  4  De  Gex, 
J.  &  S.  318,  326,  329;  Attwood  v. 
Small,  6  Clark  &  F.  232;  Att'y-Gen. 
V.  Ray,  L.  R.  9  Ch.  397;  Hill  v.  Lane, 
L,  R.  11  Eq.  215,  219;  Eaton  etc.  Co. 
V.  Avery,  83  N.  Y.  31;  38  Am.  Rep. 
389;  Rohrschneider  v.  Knickerbocker 
Ins.  Co.,  76  N.  Y.  216;  32  Am.  Rep. 
290;  Verplank  v.  Van  Buren,  76  N.  Y. 
247;  Smith  v.  Richards,  13  Pet.  26; 
Tyler  v.  Black,  13  How.  230;  Hough 
V.  Richardson,  3  Story,  659;  Smith  v. 
Babcock,  2  Wood.  &  M.  246;  Pratt  v. 
Philbrook,  33  Me.  17;  Harding  v. 
Randall,  15  Me.  332;  Hunt  v.  Moore, 
2  Pa.  St.  105;  Joice  v.  Taylor,  6  Gill 
&  J.  54;  25  Am.  Dec.  325;  McAleer  v. 
Horsey,  .S5  Md.  439;  Taymon  v. 
Mitchell,  1  Md.  Ch.  496;  Lanier  v. 
Hill,  25  Ala.  554;  Smith  v.  Robert- 
son, 23  Ala.  312;  Oswald  v.  McGehee, 
28  Miss.  340;  Slaughter's  Adm'r  v. 
Gerson,  13  Wall.  379;  Bowman  v. 
Caruthers,  40  Ind.  90.  [As  to  false 
representations  made  to  third  person, 
see  Chubbuck  v.  Cleveland,  37  Minn. 
466;  5  Am.  St.  Rep.  864;  National 
Bank  v.  Bamberger,  77  Tex.  48;  19 
Am.  St.  Rep.  738;  but  see  Crawford 
V.  Osmun,  70  Mich.  561.] 

■^  Harris  v.  Kemble,  1  Sim.  Ill,  122; 
per  Sir  John  Leach. 


1235  ACTUAL    FllAUD.  §  SSO 

the  misrepresentations  cannot  be  said  to  form  a  part  of 
any  negotiation  or  treaty  between  the  parties.  The  false 
statements  may  be  made  with  the  design  that  they  should 
be  acted  upon  by  some  one,  but  without  any  design  or 
knowledge  of  their  being  acted  upon  by  any  particular 
person.  For  example,  it  is  now  well  settled  that  pros- 
pectuses issued  by  promoters  or  directors  of  companies, 
reports  or  circulars  and  similar  publications  addressed 
to  all  whom  it  may  concern,  may  be  fraudulent  misrep- 
resentations giving  rise  to  any  appropriate  equitable  or 
even  legal  relief.'  Such  being  the  object  of  tbe  repre- 
sentation, it  must  relate  to  and  be  directly  connected  with 
the  very  contract  or  other  transaction  in  question;  must 
deal  with  its  subject-matter  or  other  material  terras,  and 
not  be  confined  to  other  and  distinct  relations,  transac- 
tions, or  matters  in  which  the  parties  are  concerned.  In 
the  language  of  an  eminent  judge,  a  misrepresentation 
concerning  any  subject-matter  "must  be  material  in  its 
nature, —  that  is  to  say,  one  which,  taken  as  true,  would  add 
substantially  to  the  value  or  promise  of"  that  subject- 
matter.^ 

§  880.  Presumption  of  the  Design  to  Induce  Action.  — 
In  order  that  a  statement  may  be  a  fraudulent  mis- 
representation, the  party  making  it  need  not  have  any 
malignant  feeling  towards  the  other,  nor  any  desire  to 
injure,  nor  need  he  be  actuated  by  any  corrupt  or  wicked 

'The  leading  case  is  Kisch  v.  Cent.  Scott,    24   Wis.  81;    [Smith  v.   Chad- 

R'y  of  Venezuela,  3  De  Gex,  J.  &  S.  wick,  20   Ch.  Div.  27;    Edgington  v. 

122;  L.  R.  2  H.  L.  99.     See  also  Bar-  Fitzinaurice,  29  Ch.  Div.  459;  Arnison 

rett'd   Case,   3   De   Gex,  J.   &   S.  30;  v.  Smith,  41  Ch.  Div.  M8;  Bosley  v. 

Reese  River  Min.  Co.  v.  Smith,  L.  R.  N.  M.  Co.,  123  K  Y.  555.]     The  re- 

4  H.  L.  64;  Smith's  Case,  L.  R.  2  Ch.  lief  may  be  a  rescission  of  the  purchase 

C04;  Ross  v.  Estates  Invest.  Co.,  L.  R.  made  by  the  defrauded  person,  or  any 

3  Ch.  682;  Hallows  v.  Fernie,  L.  R.  3  other   proper  equitable  remedy,  or  a 

Ch.  467,  475;  New  Brunswick  etc.  R'y  recovery  of  damages  at  law  from  the 

v.  Muggeridge,  lDrew&  S.  363;  Peek  fraudulent  directors,  officers,  or  pro- 

v.  Gurney,  L.  R.  6  H.  L.  377;  Swift  moters.     This  subject   is   more   fully 

V.  Wiuterbotham,  L.  R.  8  Q.  B.  244;  examined  posi,  §  881. 

l'a<Mock    V.     Fletcher,    42    Vt.    389;  "-'  Jennings  v.  Broughton,  5  De  Gex, 

Kohrschneider  v.  Knickerbocker  Ins.  M.  &  G.   126,  130,  per  Knight  Bruce, 

Co.,  76  N.  Y.  216;  32  Am.  Rep.  290;  L.  J.;  Harris  v.  Kemble,  1  Sim.  lilt 

Phelps  V.  Wait,  .SO  N.  Y.  78;  Bruff.v.  [See  also  §§  890,  898.] 
Mali,    36   N.    Y.    200;    McClellan   v. 


880 


EQUITY   JURISPRUDENCE. 


1236 


motive;  for  equity  looks  at  the  relations  of  the  statement 
towards  the  real  facts,  and  the  results  which  will  naturally 
flow  from  it,  rather  than  at  the  mental  condition,  temper, 
and  feelings  of  the  person  who  makes  it.*  If,  therefore,  a 
representation  made  prior  to  the  transaction,  and  directly 
relating  to  it,  is  of  such  a  character  that  it  would  natu- 
rally and  reasonably  induce,  or  tend  to  induce,  any  ordi- 
nary person  to  act  upon  it,  and  enter  into  the  contract  or 
engage  in  the  transaction,  and  is  in  fact  followed  by  such 
action  on  the  part  of  the  other  person,  then  it  will  be 
presumed  that  it  was  made  for  the  purpose  and  with  the 
design  of  inducing  that  person  to  do  what  he  has  done, — - 
that  is,  to  enter  into  the  agreement  or  engage  in  the 
transaction.  The  design  will  be  inferred  from  the  nat- 
ural and  necessary  consequences.^     It  is  not  necessary 


'  Traill  v.  Baring,  4  De  Gex,  J.  &  S. 
318,  326,  328;  Gibson  v.  D'Este,  2 
Younge  &  C.  Ch.  542;  Wilde  v.  Gib- 
son,  1  H.  L.  Cas.  605. 

»  Traill  v.  Baring,  4  De  Gex,  J.  &  S. 
318,  326,  328;  Jennings  v.  Bronghton, 

5  De  Gex,  M.  &  G.  126,  130;  Rawlina 
V.  Wickham,  3  De  Gex  &  J.  304;  Key- 
nell  V.  Sprve,  1  De  Gex,  M.  &  G.  660, 
708-710;  Wilson  v.  Short,  6  Hare,  366, 
377;  Conybeare  v.  New  Brunswick  etc. 
Co.,  1  De  Gex,  F.  &  J.  578;  9  H.  L. 
Cas.  711;   Attwood  v.  Small,  6  Clark 

6  F.  232;  West  v.  Jones,  1  Sim.,  N. 
S.,  205;  Aberaman  Iron  Works  v. 
Wickens,  L.  R.  4  Ch.  101;  5  Eq.  485; 
Leyland  v.  Illingworth,  2  De  Gex,  F. 
&  J.  248;  Western  Bank  of  Scotland 
V.  Addie,  L.  R.  1  H.  L.  S.  145.  Tor- 
rance V.  Bolton.  L.  R.  8  Ch.  118,  14 
Eq.  124,  is  a  very  illustrative  case  of 
the  etfect  of  misrepresentations  in 
equity.  A  vendee  was  misled  by  a 
wrong  description  of  the  property 
sold.  The  description  was  held  to  be 
misleading;  that  the  onus  was  on  the 
vendor  to  show  that  the  purchaser  was 
not  misled;  that  an  actual  fraudulent 
intent  —  an  intent  to  deceive  —  was 
not  necessary  to  set  aside  a  contract  of 
sale;  it  is  enough  that  such  contract 
is  unconscientious.  The  case  of 
National  Exch.  Co.  v.  Drew,  2  Macq. 
103,  contains  a  very  full  and  instruct- 
ive discussion  of  fraud.  The  com- 
pany sued  defendants  to  recover  a  sum 


of  money  which  it  had  advanced  to 
enable  them  to  purchase  stocks  of  the 
company.  Defendants  set  up  false 
representations,  by  which  they  were 
induced  to  make  the  purchase.  The 
house  of  lords  held  that  the  loan  and 
the  purchase  formed  one  transaction, 
and  the  fraud  vitiated  the  whole. 
The  case  of  Reynell  v.  Sprye,  1  D© 
Gex,  M.  &  G.  660,  illustrates  in  the 
clearest  manner  the  principles  of  equity 
in  dealing  with  fraud.  I  quote  a  pas- 
sage from  the  opinion  of  Crauwortli, 
L.  J.,  which  bears  not  only  upon  the 
element  now  under  consideration,  — 
the  purpose  of  inducing  the  other  per- 
son to  act, — but  also  upon  the  more 
difficult  question  of  the  kuowledge  and 
intent  to  mislead  of  the  one  making 
the  statement.  He  says  (p.  70S): 
"Once  make  out  that  there  has  been 
anything  like  deception,  and  no  con- 
tract resting  in  any  degree  on  that 
foundation  can  stand.  It  is  impos- 
sible so  to  analyze  the  operations  of 
the  human  mind  as  to  be  able  to  say 
how  far  any  particular  representation 
may  have  led  to  the  formation  of  any 
particular  resolution,  or  the  adoption 
of  any  particular  line  of  conduct.  No 
one  can  do  this  with  certainty  even  as 
to  himself,  still  less  as  to  another. 
Where  certain  statements  have  been 
made,  all  in  their  nature  capable,  more 
or  less,  of  leading  the  party  to  tvhom 
they  art  addressed  to  adopt  a  particular 


1237  ACTUAL   FRAUD.  §  881 

that  all  the  representations  by  which  a  party  is  induced 
to  act  should  be  untrue.  The  cases  hold  that  where  cer- 
tain statements  have  been  made  all  in  their  nature  capa- 
ble, more  or  less,  of  leading  the  party  to  whom  they  are 
addressed  to  adopt  a  particular  line  of  conduct,  and  any 
one  of  them  is  untrue,  the  whole  contract  or  other  trans- 
action is  considered  as  having  been  obtained  fraudu- 
lently; the  court  cannot  discriminate  among  the  different 
statements,  nor  sa}''  that  the  untrue  representation  is 
not  the  very  one  which  induced  the  party  to  act.  The 
foregoing  general  proposition,  that  it  is  sufficient  if  the 
statement  is  of  such  a  character  as  would  naturally  in- 
duce any  ordinary  person  to  enter  upon  a  particular  line 
of  conduct,  and  is  actually  followed  by  such  conduct,  is 
the  practical  rule  by  which  the  courts  determine  whether 
a  misrepresentation  possesses  the  particular  element  of 
fraud  —  the  purpose  or  design  —  now  under  consideration.' 
§  881.  False  Prospectuses,  Reports,  Circulars,  and  the 
Like. — The    nature    of   fraudulent    misrepresentations, 

line  of  conduct,  it  is  imposaible  to  say  court,  a  fraudulent  misrepresentation, 

of   any   one    such    representation    so  even  though  it  was  not  so  originally, 

made,  that  even  if   it  had  not   been  These  are  all  principles  of  such  obvi- 

made,  the  same  resolution  would  have  ous  justice  as  to  require  neither  argu- 

been   taken,  or  the  same  conduct  fol-  ment  nor  authority  to  illustrate  and 

lowed.    Where,  therefore,  in  a  negotia-  enforce  them,  and  they  need  but  to 

tion  between  two  parties,  one  of  them  be  stated,  in  order  to  command  imme- 

induces  the  other  to  contract  on  the  diate  assent.     The  only  question  can 

laith  of  the  representations  made  to  be  in  each  particular  case,  how  far  the 

him,  any  one  of   which  has  been  un-  facts  bring  it  within  the  principle " : 

true,  the  whole  contract  is  considered  Nicol's    Case,   3    De    Gex  &  J.    387, 

in  this  court  as  having  been  obtained  per  Chelmsford,   L.   C,   and   Turner, 

fraudulently.     Who  can  say  that  the  L.  J.       See   also  Taylor  v.    Fleet,    1 

untrue  statement  may  not  have  been  Barb.  471;  Wells  v.  Millett,  23  Wis. 

precisely  that  which  turned  the  scale  64;  Eaton  etc.  Co.  v.  Avery,  83  N.  Y. 

in  the  mind  of  the  party  to  whom  it  31;  38  Am.  Rep.  389;  Rohrschneider  v, 

was  addressed?     The  case  is  not  at  all  Knickerbocker  Ins.  Co.,  76  N.  Y.  216; 

varied  by  the  circumstance  that  the  32  Am.  Rep.  290. 

untrue  representation,  or  any  of   the         '  It  may  be  observed  that  the  two 

untrue   representations,    may   in    the  requisite     elements   of    a    fraudulent 

first  instance  have  been  the  result  of  misrepresentation    which    have    been 

innocent   error.     If,    after    the    error  examined,  —  that   the   representation 

has  been  discovered,   the  party  who  must  be  an  affirmation  of    fact,  and 

has    innocently    made    the    incorrect  the  design  of  inducing  the  other  party 

representation,  suffers  the  otlier  party  to  act, — are  recognized  and  adopted 

to  continue  in  error,  and  to  act  on  the  alike  by  courts  of  law  and  of  equity; 

belief  that  no  mistake  has  been  made,  decisions    at    law   may    therefore    be 

this,  from  the  time  of  the  discovery,  properly  cited  to  illustrate  these  two 

becomes,  in  the  contemplation  of  this  requisites  in  equity. 


§  881  EQUITY    JURISPRUDENCE.  1238 

their  requisite  element  of  being  designed  and  naturally- 
operating  to  induce  third  persons  to  act,  and  other  im- 
portant features,  are  so  fully  illustrated  by  the  rules  con- 
cerning the  effect  of  prospectuses,  circulars,  reports,  and 
other  similar  documents  issued  by  the  promoters,  direc- 
tors, or  officers  of  corporations,  as  established  by  very- 
recent  decisions,  that  a  brief  statement  of  these  rules  may 
be  proper.  I  do  not  intend  at  present  to  consider  the 
general  subject  of  the  relations  subsisting  between  cor- 
porations, or  their  directors  or  officers,  on  the  one  side 
and  stockholders,  creditors,  or  third  persons  dealing  with 
them  on  the  other,  but  simply  to  give  the  conclusions 
which  have  been  settled  by  the  courts  concerning  the 
effect  of  such  documents,  published  by  or  in  the  name  of 
the  company,  addressed  to  all  whom  they  may  concern, 
which  have  misled  third  persons,  and  induced  them  to 
purchase  shares  of  stock  in  the  corporation.  These  con- 
clusions cannot  be  better  expressed  than  in  the  very  lan- 
guage which  has  been  used  by  eminent  judges:  "  Those 
who  issue  a  prospectus,  holding  out  to  the  public  the  great 
advantages  which  accrue  to  persons  who  will  take  shares  in 
a  proposed  undertaking,  and  inviting  them  to  take  shares 
on  the  faith  of  the  representations  therein  contained,  are 
bound  to  state  everything  with  strict  and  scrupulous  ac- 
curacy, and  not  only  to  abstain  from  stating  as  fact  that 
which  is  not  so,  but  to  omit  no  one  fact  within  their 
knowledge  the  existence  of  which  might  in  any  degree 
affect  the  nature,  or  extent,  or  quality  of  the  privileges  or 
advantages  which  the  prospectus  holds  out  as  inducements 
to  take  shares." '  While  mere  exaggerated  views  of  the 
prospects  and  advantages  of  the  company  contained  in  a 
prospectus,  circular,  or  report  might  not  be  fraudulent, 
still  all  statements  should  be  fair,  bona  fide,  and  honest.' 

>  New  Brunswick  etc.  R'y  v.  Mug-  v.    Lacon,  L.  R.   6  Eq.  249,  263,  per 

eerido-e,    1   Drew.  &  S.  363,  381,  per  Lord  Hatherley. 

Kindersley    V.  C;  Cent.  R'y  of  Ven-         *  Kisch  v.  Cent.  R'y  of  Ven..  3  Da 

ezuela    v.  Kisch,  L.  R.  2   H.  L.  99,  Gex,  J.  &S.  122,  135,  perTurner,  L.  J.; 

113.  per  Lord  Cnelmsford;  Henderson  Denton  v.  Macueil,  L.  R.  2  Eq.  352. 


1239  ACTUAL    FRAUD.  §  881 

"  If  it  can  be  shown  that  a  material  representation  which 
is  not  true  is  contained  in  the  prospectus,  or  in  any  docu- 
ment forming  the  foundation  of  the  contract  between  the 
company  and  the  share-holder,  and  the  share-holder  comes 
within  a  reasonable  time,  and  under  proper  circumstances, 
to  be  released  from  that  contract,  the  courts  are  bound  to 
relieve  him  from  it.  Contracts  of  this  description  be- 
tween an  individual  and  a  company,  so  far  as  misrepre- 
sentation or  suppression  of  the  truth  is  concerned,  are  to 
be  treated  like  contracts  between  any  two  individuals."  ' 
It  is  settled,  therefore,  that  a  person  who  has  been  induced 
by  the  misrepresentations  of  such  documents  to  purchase 
shares  of  stock  or  to  enter  into  a  contract  with  the  com- 
pany for  their  purchase  may,  if  he  acts  without  delay 
upon  learning  the  truth,  obtain  relief  against  the  com- 
pany, either  by  being  struck  off  from  the  list  of  stockhold- 
ers and  contributaries  in  the  proceeding  instituted  for  its 
winding  up  and  final  settlement,  or  by  means  of  an  equi- 
table suit  brought  against  the  company  for  the  purpose  of 
rescinding  his  purchase  of  shares,  and  of  recovering  back 
the  money  which  he  paid  for  them.  He  may  even,  in  a 
proper  case,  obtain  relief  against  the  fraudulent  directors 
personally  by  means  of  an  equitable  suit  for  an  account- 
ing and  repayment  of  the  money,  or  by  means  of  an  ac- 
tion at  law  for  the  recovery  of  damages  on  account  of  the 
deceit.^     Relief  against  the  directors  personally  requires 

>  In  re  Reese  River  Mining  Co.,  L.  11  Eq.  215;  McNiell's  Case,  L.  R.  10 

R  2  Ch.  604,  60y,  per  Turner,  L.  J.  Eq.  oOS;  Kent  v.  P'reehold   etc.  Co., 

»  Kisch  V.  Cent.  R'y  of  Venezuela,  3  L.  R.  4  Eq.  5S8;  Smith  v.  Reese  River 

De  Gex,  J.  &  S.  122;  Central  R'y  etc.  Mining  Co.,   L.   R.   2  Eq.  264;  Rohr- 

V.  Kisch,   L.  R.   2   H.   L.    99;    Reese  Schneider  v.  Knickerhocker  Ins.  Co., 

River  Mining  Co.  v.  Smith,  L.  R.  4  76  N.  Y.  216;  32  Am.  Rep.  290;  [Smith 

H.  L.  64;  New  Sombrero  etc.   Co.  v.  v.  Chadwick,  20  Ch.  I)iv.  27;  Edging- 

Erlanger,  L.  R.  5  Ch.  Div.  73;  In  re  ton  v.  Fitzmaurice,  29  Ch.  Biv.  459; 

Hereford  etc.  Co.,  L.  R.  2  Ch.  Div.  Arnison  v.    Smith,  41    Ch.    Div,  .'US; 

621;  In  re  Coal  Gas  Co.,  L.  R.  1  Ch.  Bosley  v.  N.  M.  Co.,  123  N.  Y.  555.] 

Div.  182;  In  re  London  etc.  Bank,  L.  In  the  following  cases  relief  was  re- 

R.  7  Ch.  55;  In  re  Estates  Investment  fused    on  the  ground  tliat  the  repre- 

Co.,  L.  R.  4  Ch.  497;  Ross  v.  Estates  sentations  were  not  fraudulent,  smce 

Investment  Co.,  L.  R.  3  Ch.    682;  3  they   were   either   mere   estimates  of 

Eq.    122;  In   re   Reese  River  Mining  value   in  a  business    which   was  well 

Co.,  L.  R.  2  Ch.  604;  Peek  v.  Gurney,  known  to  be  very  hazardous,   or  even 

L.  R.  13  Eq.  79;  Hill  v.  Lane,  L.  R.  ambiguous,  or  were   simply  exagger- 


§  881 


EQUITY   JURISPRUDENCE. 


1240 


a  much  stronger  case  of  fraud  than  relief  against  the 
company.  The  purchase  of  shares  may  be  set  aside,  and 
the  purchaser  relieved  from  his  liability  as  a  contribu- 
tory, without  any  knowledge  of  the  untruth  on  the  part 
of  those  who  issued  the  document.  Recovery  from  the 
directors  personally  requires  knowledge  of  the  untruth  on 
their  part,  or  else  that  the  statement  should  be  made  un- 
der such  circumstances  that  knowledge  will  be  imputed  to 
them/  It  is  also  settled  that  the  stockholder  must  take 
the  requisite  proceedings  to  be  relieved  against  the  com- 
pany at  once  upon  his  discovery  of  the  truth;  any  unrea- 
sonable delay,  and  any  act  on  his  part  tending  to  show 
acquiescence,  will  debar  him  of  relief.' 


ations:  In  re  Mercantile  Trading  Co., 
L.  R.  4  Ch.  475:  Hallows  v.  Fernie, 
L.  R.  3  Ch.  467,  475;  3  Eq.  520;  In 
re  Coal  Co..  L.  R.  20  Eq.  114;  Ship  v. 
Crosskill,  L.  R.  10  Eq.  73,  82,  83; 
Heymauu  v.  European  etc.  R'y,  L.  R. 
7  Eq.  154;  Denton  v.  Macneil,  L.  R. 
2  Eq.  352.  The  misrepresentation 
must  be  the  proximate  cause  of  the  pur- 
chase of  the  shares:  Barrett's  Case,  3 
De  Gex,  J.  &  S.  30. 

iHillv.  Lane,  L.  R.  11  Eq.  215; 
Peek  V.  Gurney,  L.  R.  13  Eq.  79;  6 
H.  L.  377;  Ship  v.  Crosskill,  L.  R, 
10  Eq.  73,  82,  83;  Henderson  v.  Lacon, 
L.  K  5  Eq.  249;  Cargill  v.  Bower, 
L.  R.  10  Ch.  Div.  502.  [See  also  Derry 
V.  Peek,  14  App.  Cas.  (H.  L.)  337, 
cited  post,  note  to  §  SS4;  Hubbard  v. 
Weare,  79  Iowa,  678.]  For  examples 
of  actions  at  law,  see  Swift  v.  Win- 
terbotham,  L.  R.  8  Q.  B.  244;  Bag- 
ehaw  V.  Seymour,  4  Com.  B.,  N.  S., 
873;  Clarke  v.  Dicksiu,  6  Com.  B., 
N.  S.,  453. 

The  rule  issectled  in  England,  that 
a  director  of  a  corporation  is  not  liable 
for  the  fraud  of  co-director.«  or  other 
officers  or  agents, —  e.  g.,  in  false  pros- 
pectuses,—  unless  he  has  either  ex- 
pressly authorized  or  tacitly  permitted 
its  commission:  Cargill  v.  Bower,  L. 
R.  10  Ch.  Div.  502;  following  Weir  v. 
Barnett,  L.  R.  3  Ex.  Div.  32;  on  ap- 
peal, L.  R.  3  Ex.  Div.  238;  and  holding 
that  Peek  v.  Gurney,  L.  R.  6  H.  L. 
377,  is  not  opposed  to  this  view. 

^  The  decisions  require  promptness 
on   bis   part.     In  one  of   the  cases  a 


delay  of  three  months  after  learning 
the  facts  was  held  fatal:  Sharpley  v. 
Louth  etc.  R'y,  L.  R.  2  Ch.  Div,  663; 
Smith's  Case,  L.  R.  2  Ch.  604;  Peek 
V.  Gurney,  L.  R.  13  Eq.  79;  Ashley's 
Case,  L.  R.  9  Eq.  263;  Scholey  v. 
Central  R'y  etc.,  L.  R.  9  Eq.  266,  note; 
Heymann  v.  European  etc.  R'y,  L.  R. 
7  Eq.  154;  Whitehouse'a  Case,  L.  R. 
3  Eq.  790;  Mixer's  Case,  4  De  Gex  & 
J.  575,  586.  [See  also  §§  917,  965.] 
When  a  person  has  thus  been  induced 
to  purchase  shares,  he  cannot  rescind 
his  purchase  and  be  struck  off  from  the 
list  of  contributaries,  nor  maintain  an 
action  against  the  company  for  that 
purpose,  nor  to  recover  back  the 
amount  paid,  after  the  winding  up  of 
the  company,  nor  even  after  the  pro- 
ceedings to  wind  up  have  been  com- 
menced, since  after  the  establisliment 
of  these  proceedings  by  an  order  of  the 
court  the  corporation  is  ended  as  a 
legal  being;  but  this  restriction  does 
not  seem  to  apply  to  suits  brought  to 
enforce  a  liability  against  the  fraudu- 
lent directors  personally:  Burgess's 
Case,  L.  R.  15  Ch.  Div.  507;  Oakes  v. 
Turquand,  L.  R.  2  H.  L.  325;  Stone 
V.  City  &  Co.  Bank,  L.  R.  3  C.  P. 
D.  2S2;  Houldsworth  v.  City  of  Glas- 
gow Bank,  L.  R.  5  App.  C.  317,  323; 
Tennent  v.  City  of  Glasgow  Bank,  L. 
R.  4  App.  C.  615,  621;  Kent  v.  Free- 
hold etc,  Co.,  L.  R.  3  Ch.  493;  In  re 
London  etc.  Bank,  L.  R.  12  Eq,  331; 
In  re  Overend  etc.  Co.,  L.  R.  3  Eq. 
576. 


1241  ACTUAL   FRAUD.  §§  882-884 

§  882.  III.  Untruth  of  the  Statement.  —  The  statement 
of  fact  must  be  untrue,  or  else  there  is  no  misrepresenta- 
tion. The  entire  doctrine  of  the  law  and  of  equity  con- 
cerning that  species  of  fraud  which  consists  in  suggestio 
falsi  is  based  upon  the  assumption  that  the  representa- 
tion is  in  fact  untrue,  as  this  very  name  itself  shows. 
This  is  the  premise  of  fact  which  is  assumed  in  every  case 
wliich  discusses  the  nature  of  fraud,  and  decides  whether 
it  does  or  does  not  exist  in  any  particular  instance.  This 
requisite  element  needs,  therefore,  no  examination  and  no 
citation  of  special  authorities;  it  is  not  susceptible  of  any 
exception  or  limitation. 

§  883.  IV.  The  Intention,  Knowledge,  or  Belief  of  the 
Party  Making  the  Statement. — This  element — the  mental 
state  or  condition  of  the  party  making  the  representa- 
tion—  is  the  most  important  and  characteristic  feature 
of  fraud,  both  in  equity  and  at  law.  It  is,  moreover,  that 
constituent  of  fraud  with  respect  to  which  there  exists 
the  principal  difference  or  divergence  between  the  theory 
which  prevails  in  equity  and  that  which  forms  a  part  of 
the  law.  It  will  aid  us,  therefore,  in  obtaining  a  more 
accurate  notion  of  the  equitable  conception  by  compari- 
son, to  present  a  very  brief  summary  of  the  doctrine  on 
this  subject  which  has  been  settled  by  courts  of  law. 

§  884.  The  Knowledge  and  Fraudulent  Intention  Re- 
quisite at  Law.  —  The  court  of  queen's  bench  at  one  time 
maintained,  in  a  series  of  decisions,  the  following  doc- 
trines: Whenever  one  party  to  a  transaction.  A,  made  a 
representation  of  fact  which  was  in  reality  untrue,  and  the 
other  party,  B,  relied  upon  the  statement,  and  was  in- 
duced by  it  to  do  or  to  omit  something,  and  thereby  suf- 
fered some  damage,  such  representation  was  fraudulent, 
and  A  was  liable  for  his  actual  fraud,  even  though  he  had 
made  the  statement  without  any  knowledge  of  its  un- 
truth,—  his  liability  was  independent  of  his  knowledge 
or  ignorance  of  its  actual  falsity.  This  theory  admitted 
the  possibility  of  fraud  at  law  where  there  was  no  moral 


§  884  EQUITY   JURISPRUDENCE.  1242 

delinquency;  it  denied  that  moral  wrong  was  an  essential 
element  in  the  legal  conception  of  fraud.  The  same  view 
was  for  a  time  accepted  and  adopted  by  a  considerable 
number  of  decisions  in  different  American  states.'  These 
cases  have,  however,  been  overruled,  and  the  theory  itself 
has  been  abandoned,  in  England,  and  even  generally,  if 
not  universally,  throughout  the  states  of  our  own  country.^ 
It  is  now  a  settled  doctrine  of  the  law  that  there  can  be 
no  fraud,  misrepresentation,  or  concealment  without  some 
moral  delinquency;  there  is  no  actual  legal  fraud  which 
is  not  also  a  moral  fraud.'  This  immoral  element  consists 
in  the  necessary  guilty  knowledge  and  consequent  intent 
to  deceive,  —  sometimes  designated  by  the  technical  term, 
the  scienter.  The  very  essence  of  the  legal  conception 
is  the  fraudulent  intention  flowing  from  the  guilty  knowl- 
edge. No  misrepresentation  is  fraudulent  at  law,  unless 
it  is  made  with  actual  knowledge  of  its  falsity,  or  under 
such  circumstances  that  the  law  must  necessarily  impute 
such  knowledge  to  the  party  at  the  time  when  he  makes 
it.  It  is  well  settled  that  fraudulent  misrepresentations 
may  assume  the  three  following  forms  or  phases  at  law: 
1.  A  party  making  an  untrue  statement  has  at  the  time 
an  actual,  positive  knowledge  of  its  falsity;  he  states  what 
he  absolutely  knows  to  be  untrue.  This  is  the  simplest, 
plainest,  and  most  direct  species  of  fraud.  2.  A  party 
making  an  untrue  statement  does  not  at  the  time  have 
any  belief  that  it  is  true.  The  making  an  untrue  state- 
ment, of  the  truth  of  which  the  party  of  course  has  no 

1  Fuller  V.  Wilson,  3  Q.   B.   58;    3  Rep.  727,  and  cases  cited;  Cooper  v. 

Q.    B,    1009;   Taylor    v.    Ash  ton,    11  Schlesiuger,  111  U.S.  148;  Bullitt  v. 

Mees.  &  W.  401;  Evans  v.  Collins,  5  Farrar,  42  Minn.  8;  18  Am.  St.  Rep. 

Q.  B.  804.  485.] 

*  [A  line  of  cases  holds  that  the  igno-  ^  Evans  v.  Collins,  5  Q.  B.  820,  re- 
ranee  of  a  party  making  a  positive  as-  versing  5  Q.  B.  804;  Barley  v.  Wal- 
sertion  is  decisive  of  his  fraud,  without  ford,  9  Q.  B.  197;  Moens  v.  Heyworth, 
regard  to  the  unreasonableness  of  his  10  Mees.  &  W.  147;  Ormrod  v.  Huth, 
belief  in  the  truth  of  the  assertion.  14  Mees.  &  W.  650.  Untrue  repre- 
These  cases  thus  adopt  the  equitable  sentations  honestly  made  do  not  con- 
rule  stated  in  §  887.  See,  by  way  of  stitute  fraud  at  law:  Wakeman  v. 
illustration,  Chatham  Furnace  Co.  v.  Dalley,  51  N.  Y.  27;  10  Am.  Rep.  551; 
Moffatt,   147   Mass.   403;   9  Am.   St.  Marsh  v.  Falker,  40  N.  Y.  662,  5G6. 


1243 


ACTUAL  PRAUD. 


§  884 


knowledge,  and  which  he  does  not  even  believe  to  he  true, 
is  tantamount  to  the  making  of  a  statement  which  tlie 
party  knows  to  he  untrue.  3.  Finally,  a  party  making 
an  untrue  statement,  having  at  the  time  no  knowledge 
whatever  on  the  subject,  and  no  reasonable  grounds  to  be- 
lieve it  to  be  true,  is  guilty  of  fraud,  and  his  claiming  that 
he  believed  it  to  be  true  cannot  remove  its  fraudulent 
character.  A  definite  statement  of  what  the  party  does 
not  know  to  be  true,  where  he  has  no  reasonable  grounds 
for  believing  it  to  be  true,  will,  if  false,  have  the  same 
legal  effect  as  a  statement  of  what  the  party  positively 
knows  to  be  untrue.*     In  each  of  these  three  phases  there 


'  Evans  V.  Edmonds,  13  Com.  B.  777, 
786.  per  Maule,  J.;  Smout  v.  Ilbery, 
10  Mees.  &  W.  1,  10,  per  Alderson.  B.; 
Taylor  v.  Ashton,  11  Mees.  &  W.  401; 
Young  V.  Covell,  8  Johns.  23;  5  Am. 
Dec.  316;  Benton  v.  Pratt,  2  Wend. 
385;  20  Am.  Dec.  623;  Tyson  v.  Pass- 
more,  2  Pa.  St.  122;  44  Am.  Dec.  181; 
Fisher  v.  Worrall,  5  Watts  &  S.  478, 
483;  Joice  v.  Taylor,  6  Gill  &  J.  54; 
25  Am.  Dec.  325.  In  Evans  v.  Ed- 
monds, 13  Com.  B.  777,  Maule,  J., 
said:  "I  conceive  that  if  a  man, 
having  no  knowledge  whatever  on  the 
subject,  takes  upon  himself  to  repre- 
sent a  certain  state  of  facts  to  exist, 
he  does  so  at  his  peril;  and  if  it  be 
done  either  with  a  view  to  secure 
some  benefit  to  himself,  or  to  deceive 
a  third  person,  he  is  in  law  guilty  of 
a  fraud,  for  he  takes  upon  himself  to 
warrant  his  own  belief  of  the  truth  of 
that  which  he  so  asserts."  In  Young 
v.  Covell,  8  Johns.  23,  5  Am.  Dec.  316, 
the  court  said  of  an  action  for  deceit, 
that  "  it  cannot  be  maintained  without 
proving  actual  fraud  in  the  defendant, 
or  an  intention  to  deceive  the  plaintiff 
by  false  representations.  The  simple 
fact  of  misrepresentation,  unaccom- 
panied by  fraudulent  design,  is  not 
sufficient."  See  also  Stitt  v.  Little,  63 
N.  Y.  427 ;  Eaton,  C. ,  &  B.  Co.  v.  Avery, 
83 N.  Y.  31;  38  Am.  Rep.  389;  Hubbell 
V.  Meigs,  50  N.  Y.  480;  Hathorne  v. 
Hodges,  28  N.  Y.  486;  Hathaway  v. 
Johnson,  55  N.  Y.  93;  14  Am.  Rep. 
186;  Indianapolis  etc.  R.  R.  v.  Tyner, 
63  N.  Y.  653,  655;  Butler  v.  Collins, 
12  Cal.  457;  McBean  v.  Fox,  1  111. 
App.  177;  Collins  v.  Evans,  6  Q.  B. 


820;  Ormrod  v.  Huth,  14  Mees.  &  W. 
650;     Pasley    v.    Freeman,    3    Term 
Rep.  51;  National  Exch.  Co.  v.  Drew, 
2  Macq.  103.     [This  third  rule  of  the 
text  was  denied  in  the  recent  case  of 
Derry  v.  Peek,  14  App.    Cas.   (H.  L  ) 
3.37;  reversing  Peek  v.  Derry,  37  Cl>. 
Div.  541;  followed  in  Glasier  v.  Rolls, 
42   Ch.  Div.  436;  Angus   v.    Clifford, 
(1891),  2  Ch.  449;   Low  v.  Bouverie, 
(1891),  3  Ch.  82.     The  house  of  lords, 
in  Derry  V.  Peek,  14  App.  Cas.  (H.  L.) 
337,  unanimously  held  that  the  absence 
of  reasonable  grounds  for  belief,  while 
it   may  be  evidence  of   a   fraudulent 
intent,  does  not,  of  itself,  constitute 
such  fraud   as  will   justify  an  action 
for  damages  either  at  law  or  in  equity. 
Lord  Bramwell  remarks  (p.  351):  "To 
believe  without  reasonable  grounds  is 
not  moral   culpability,  but   (if   there 
be  such  a  thing)  mental  culpability." 
Lord    Herschell,    who   delivered    the 
leading    opinion,    sums    up    (p.   374): 
"First,  in  order  to  sustain  an  action 
of  deceit,  there  must  be  proof  of  fraud, 
and   nothing  short  of  it  will  suffice. 
Secondly,  fraud  is  proved  when  it  is 
shown  that  a  false  representation  has 
been  made  (1)  knowingly,  or  (2)  with- 
out  belief   in   its   truth,  or   (3)   reck- 
lessly, careless  whether  it  be  true  or 
false.     Although   I  have  treated  the 
second  and   third  as  distinct  cases,  I 
think  the  third  is  but  an  instance  of 
the  second,  for  one  who  makes  a  state- 
ment  under  such   circumstances  can 
have  no  real  belief  in  the  truth  of  what 
he  states.     To  prevent  a   false  state- 
ment being  fraudulent,  there  must,  I 
think,  always  be  an  honest  belief   ia 


§  885  EQUITY   JURISPRUDENCE.  1244 

is  moral  wrong,  and  a  very  slight,  if  any,  difference  in  the 
degree  of  the  culpability.  In  each  there  is  actual  knowl- 
edge of  the  untruth,  or  else  the  law  conclusively  imputes 
knowledge  to  the  party,  and  treats  him  as  though  actually 
possessing  it. 

§  885.  Knowledge  or  Intention  Requisite  in  Equity. — 
There  are  undoubtedly  some  authorities  which,  taken 
literally,  would  make  moral  wrong  a  necessary  ingredient 
of  fraud  in  equity  as  well  as  at  law,  since  they  require  a 
guilty  knowledge  of  the  untruth  as  an  essential  element.^ 
This  view  is,  however,  certainly  incorrect.  It  is  fully  set- 
tled by  the  ablest  courts,  English  and  American,  that 
there  may  be  actual  fraud  —  not  merely  constructive 
fraud  —  in  equity  without  any  feature  or  incident  of 
moral  culpability;  that  the  actual  fraud  consisting  of 
misrepresentation  is  not  necessarily  immoral.  A  person 
making  an  untrue  statement,  without  knowing  or  believ- 
ing it  to  be  untrue,  and  without  any  intent  to  deceive, 
may  be  chargeable  with  actual  fraud  in  equity.*     What- 

ita  truth."  The  decision,  though,  of  that  there  are  two  classes  of  fraud, 
course,  binding  on  English  courts,  has  the  first  by  means  of  willful  misrepre- 
been  most  severely  criticised  both  in  sentation,  and  the  second  by  procuring 
England  and  in  this  country:  see  acts  to  be  done  by  persona  under  du- 
especially  an  article  by  Sir  Frederick  ress  or  incapacity,  adds:  "  In  order 
Pollock  in  5  Law  Quarterly  Review,  to  constitute  a  fraud  of  the  first  class, 
410.  It  should  be  noticed  in  this  con-  there  must  be  a  representation,  express 
nection  that  in  exercising  the  concur-  or  implied,  false  within  the  knoicledge 
rent  jurisdiction  to  award  damages  for  of  the  party  making  it,  reasonably  re- 
fraud  the  English  courts  of  equity  lied  upon  by  the  other  party,"  etc. 
follow  the  legal  detiaition  of  fraud,  *  In  Traill  v.  Baring,  4  De  Gex,  J. 
and  not  the  equitable.  Thus  in  Ark-  &  S.  318,  328,  Turner,  L.  J.,  said:  "I 
Wright  V.  Newbold,  17  Ch.  Div.  320,  desire,  in  the  first  place,  to  absolve 
Cotton,  L.  J.,  remarks:  "An  action  the  defendants  from  all  imputation  of 
of  deceit  is  a  common-law  action,  and  any  intention  of  actual  fraud.  But 
must  be  decided  on  the  same  princi-  that  by  no  means  disposes  of  the  case; 
pies,  whether  it  be  brought  in  the  for  there  are  many  states  of  circum- 
ohaucery  division  or  any  of  the  com-  stances  in  which  there  ia  technical 
mou-law  divisions. "  This  language  ia  fraud,  in  which  transactions  are  fraud- 
adopted  by  Lord  Blackburn  in  Smith  ulent  in  the  eyes  of  this  court,  or 
V.  Chad  wick,  9  App.  Cas.  (H.  L.)  193;  characterized  by  the  designation  of 
and  by  Lord  Herschell  in  Derry  v.  fraud,  although  there  may  be  no  moral 
Peek,  at  p.  360.  These  equitable  ac-  fraud.  The  question  really  here  is, 
tions  of  deceit,  therefore,  furnish  no  whether  this  case  does  or  does  not 
authority  for  determining  when  the  fall  within  the  range  of  those  cases  in 
equitable  remedies  of  rescission,  can-  which  this  court  holds  a  transaction 
celtation,  etc.,  are  proper.]  to  be  fraudulent,  although  it  may  not 
'  Thus  in  Adams's  treatise,  6th  Am.  be  morally  so."  In  Ship  v.  Crosskill, 
ed.,  176,  364,  the  author,  after  stating  L.   R.    10   Eq.   73,   83,   Lord  Romilly 


1245  ACTUAL   FRAUD.  §  886 

ever  would  be  fraudulent  at  law  will  be  so  in  equity;  but 
the  equitable  doctrine  goes  farther,  and  includes  instances 
of  fraudulent  misrepresentations  which  do  not  exist  in 
the  law.  There  are,  however,  well-established  limits  to 
this  equitable  conception,  which  should  be  carefully  ob- 
served. Every  wrongful  act,  even  by  persons  in  positions 
of  trust  and  confidence,  which  gives  occasion  for  a  rem- 
edy is  not  fraudulent.  Breaches  of  their  duty  by  per- 
sons in  fiduciary  relations,  acts  of  agents  in  excess  of 
their  authority,  and  the  like,  are  not,  as  such,  instances  of 
actual  fraud,  although  they  may  sometimes  fall  within 
the  division  of  "  constructive  fraud." '  I  shall,  in  further 
illustration  of  this  subject,  enumerate  and  describe  the 
different  phases  and  forms  of  fraudulent  misrepresenta- 
tions recognized  by  equity,  some  of  them  being  identical 
with  those  found  in  the  law. 

§  886.  Forms  of  Fraudulent  Misrepresentations  in 
Equity.  —  1.  Where  a  party  makes  a  statement  which  is 
untrue,  and  has  at  the  time  an  actual,  positive  knowledge 
of  its  untruth,  and  the  necessarily  resulting  intent  to  de- 
ceive, —  the  scienter  at  law.  This  is  the  most  direct,  and 
in  some  respects  the  highest,  form  of  fraud.'     Wherever 

said:  "  I  fully  adopt  the  distinction  of  authority  by  an  agent  is  not  equi- 

expressed    by    Lord    Redesdale,    be-  table  fraud. 

tween   fraud   properly  so   called,  and  '  In  Patch  v.  Ward,  L.  R.    3  Ch. 

what    is    called    constructive    fraud,  203,  207,  Lord  Cairns  well  describes 

where  persons  have  really  been  guilty  this  form  as  follows:  "Actual  fraud, 

of  no  moral  fraud,  but  by  a  species  of  such  that  there  is  on  the  part  of  the 

construction  of  equity  they   are  said  person   chargeable  with   it  the  malus 

to  be  guilty  of  a  fraud."    In  using  the  animus,  the  mala  mens  putting  itself 

word  "constructive"  here,  the  master  in  motion  and  acting  in  order  to  take 

of  rolls  plainly  does  not  refer  to  that  an  undue  advantage  of  some  other  per- 

main  division   of   fraud   called  "con-  sou  for   the  purpose  of  actually  and 

structive  "  in  contrast  with  the  divis-  knowingly  defrauding   him ":  Hill  v. 

ion  called  "actual."     He  is  speaking  Lane,  L.  R.  11  Eq.  215;  Ship  v.  Cross- 

of   those   instances   belonging   to   the  kill,  L.  R.  10  Eq.  73,  82,  83;  Hender- 

general   division  "actual,"   in   which  son  v,  Lacon,  L.  R.  5   Eq.  249,  262; 

the  fraud  arises  from  the  construction  Rawlins  v.  Wickham,  3  De  Gex  &  J. 

of  equity,  in  contradistinction  to  the  304,  312;  Reynell  v.  Sprye,  I  De  Gex, 

fraud  at  law,  which  must  always  be  M.  &  G.  660,  691;  West  v.  Jones,   1 

immoral.     See  also  Hovenden  v.  Lord  Sim.,  N.  S.,  205,  208;  Chesterfield  v. 

Annesley,  2  Schoales  &  L.  607,  617,  Janssen,  2  Ves.  Sr.   124,  155;  Neville 

per  Lord  Redesdale;  Rawlins  v.  Wick-  v.  Wilkinson,  1  Brown  Ch.  54S,  546; 

ham,  3  De  Gex  &  J.  304,  316.  Attwood  v.  Small,  6  Clark  &  F.  232; 

1  Stewart  v.    Austin,   L.  R.   3  Eq.  Evans  v.    Bicknell,   6  Ves.    173,    182; 

299,  306,  holding  that  an  act  in  excess  Bankhead  v.  Alloway,  6  Cold.  56,  76j 


886 


EQUITY   JURISPHUDENCE. 


1246 


the  facts  of  the  statement  are  the  acts  of  the  very  party 
making  it,  which  are  represented  as  having  been  done 
by  him,  if  the  statement  is  untrue,  the  knowledge  of  its 
untruth  is  necessarily  and  conclusively  imputed  to  the 
party.  In  all  cases  involving  such  kind  of  misrepresen- 
tation, if  knowledge  of  the  untruth  be  a  requisite  element 
of  the  liability,  such  knowledge  will  be  conclusively  pre- 
sumed.^ In  suits  involving  misrepresentations  of  this 
form,  if  the  party  charged  with  the  fraud  is  examined 
as  a  witness  in  his  own  behalf,  the  better  rule  is,  that  he 
cannot  be  asked,  as  a  part  of  his  examination  in  chief, 
whether  or  not  he  believed  his  representation  to  be  true.^ 
2.  If  a  person  makes  an  untrue  statement,  and  has  at  the 
time  no  knowledge  of  its  truth,  and  even  has  no  belief 
in  its  truth,  he  is  chargeable  with  fraud  in  equity  as 
well  as  in  law.  Making  a  statement  which  the  party  does 
not  believe  to  be  true  is  only  slightly  removed  in  culpa- 
bility from  the  making  a  statement  which  the  party 
knows  to  be  false.* 


Wampler  v.  Wampler,  30  Gratt.  454; 
Laidlaw  v.  Organ,  2  Wheat.  178,  195; 
Smith  V.  Richards,  13  Pet.  26,  36; 
Frenzel  v.  Miller,  37  lud.  1;  10  Am. 
Dec.  62. 

^  This  conclusion  necessarily  follows 
from  the  form  of  the  representation 
and  the  nature  of  man's  mind  and 
memory.  lu  Henderson  v.  Lacon,  L. 
Pt.  5  Eq.  249,  262,  the  suit  was  brought 
to  hold  directors  of  a  company  per- 
sonally liable  for  false  representations 
contained  in  a  prospectus  which  un- 
truly stated  that  they  had  done  cer- 
tain acts.  Page  Wood,  V.  C.  (Lord 
Hatherley),  after  holding  that  in  such 
a  suit  it  is  necessary  to  fix  upon  the 
directors  the  scienter  as  in  an  action  for 
deceit,  that  they  must  have  guilty 
knowledge  of  the  untruth  of  their 
statements,  adds:  "  In  this  instance  it 
appears  to  me  that  the  scienter  is  clearly 
fixed  upon  the  directors,  from  the 
moment  you  find  a  representation  con- 
cerning tlteir  own  acts  which  is  incor- 
rect, and  which  tlieymust  be  taken  to 
have  known  to  be  incorrect,  and  to 
have  knowingly  stated,  and  thereby 
to  have  misled  the  party  complaining 
of  the  misrepresentation."    See  also 


Ship  V.  Crosskill,  L.  R.  10  Eq.  73,  83, 
84;  New  Brunswick  etc.  Co.  v.  Mug- 
geridge,  1  Drew.  &  S.  363. 

*  Hine  v.  Campion,  L.  R.  7  Ch.  Div. 
344.  To  allow  the  party  charged  un- 
der such  circumstances  to  testify  ia 
his  own  behalf  that  he  had  a  belief, 
or  that  he  had  no  wrongful  intent,  and 
the  like,  is  a  violation,  as  it  seems  to 
me,  of  the  plainest  and  most  funda- 
mental principles  of  judicial  evidence. 
If  he  asserts  his  belief  or  denies  his  in- 
tent, and  reliance  is  placed  in  what  he 
says,  then  his  liability  is  destroyed 
and  the  controversy  is  ended. 

*  Jennings  v.  Broughton,  5  De  Gex, 
M,  &  G.  126,  130;  Haight  v.  Hayt,  19 
N.  Y.  464;  White  v.  Merritt,  7  N.  Y. 
352;  57  Am.  Dec.  527;  Doggett  v.  Em- 
erson, 3  Story,  700;  Hough  v.  Rich- 
ardson, :-5  Story,  659;  Daniel  v.  Mitch- 
ell, 1  Story,  172;  Warner  v.  Daniels, 
1  Wood.  &  M.  90;  Hammatt  v.  Emer- 
son, 27  Me.  308;  46  Am.  Dec.  598;  Stone 
v.  Denny,  4  Met.  151;  Hazard  v.  Ir- 
win, 18  Pick.  95;  Twitchell  v.  Bridge, 
42  Vt.  68;  Cabot  v.  Christie,  42  Vt.  121 ; 
1  Am.  Rep.  313;  Fisher  v.  Mellen,  103 
Mass.  503  (asserting  as  fact  known  to 
the  party  what  was  only  opiaiou). 


1247  ACTUAL   FRAUD.  §  887 

§  887.  The  Same.  —  3.  Where  a  person  makes  an  un- 
true statement,  and  has  at  the  time  no  knowledge  of  its 
truth,  and  there  are  no  reasonable  grounds  for  his  believ- 
ing it  to  be  true,  he  is  chargeable  Avith  fraud,  although 
he  had  no  absolute  knowledge  of  its  untruth,  and  may 
claim  to  have  had  a  belief  in  its  truth/  This  is  the 
mode  in  which  the  rule  is  ordinarily  laid  down  by  courts 
of  law,  and  sometimes  by  courts  of  equity.  The  equity 
cases  have,  however,  settled  the  rule  in  somewhat  broader 
terms,  omitting  entirely  the  qualification  "that  there  are 
no  reasonable  grounds  for  the  person's  believing  his 
statement  to  be  true."  In  other  words,  it  is  settled  in 
equity  by  an  overwhelming  array  of  authority  that  where 
a  person  makes  a  statement  of  fact,  which  is  actually  un- 
true, and  he  has  at  the  time  no  knowledge  whatever  of 
the  matter,  he  is  chargeable  with  fraud,  and  his  claim  to 
have  believed  in  the  truth  of  his  statement  cannot  be 
regarded  as  at  all  material.  The  definite  assertion  of 
something  which  is  untrue,  concerning  which  the  party 
lias  no  knowledge  at  all,  is  tantamount  in  its  effects  to 
the  assertion  of  something  which  the  party  knows  to  be 
untrue.^ 

'  Jennings  v.  Broughton,  5  De  Gex,  only  an  absence  of  knowledge:  Raw- 

M.  &  G.  126,  130;  [Southern  Develop-  lins  v.  Wickham,  3   De  Gex  &  J.  304, 

nient   Co.    v.    Silva,    125   U.    S.   247:  313,  316;  Traill  v.  Baring,  4  De  Gex, 

Bethell  v.  Bethell,  92  Ind.  318,  327.]  J.   &  S.  318,  326,  328,  .329;  West  v. 

'  It   might,    perhaps,   be   said   that  Jones,  1  Sim.,  N.  S.,  205.  208;  Att'y- 

these  two  modes  of   stating  the  doc-  General  v.  Ray,  L.  R.  9  Ch.  397,  405; 

trine  were  virtually  the  same;  because  Smith  v.  Reese  R.  M.  Co.,  L.  R.  2  Eq, 

if  the  party  had  no  knowledge  at  all  264,    269;    Pulsford   v.    Richards,    17 

concerning   the   matter,  he   certainly  Beav.  87,  94;  Hart  v.  Swaine,  L.  R.  7 

would  have  no  reasonable  grounds  for  Ch.  Div.  42,  46.     In  this  last  case  the 

believing   his   statement   to   be   true,  court  say:   "The  defendant  took  upon 

It  is  plain,  however,  that  the  equity  himself  to  assert  that  to  be  true  which 

courts    intend    their   language   to   be  has  turned   out   to   be  false,   and  he 

broader  than  that  of  the  law  courts,  made  this  assertion  for  the  purpose  of 

and  to  include  instances  not   falling  benefiting   himself.     Though  he  may 

within  the  legal  formula.     The  qual-  have  done  this  believing  it  to  be  true, 

ification    "there    are    no    reasonable  tlie  result   is   that  he  is  guilty  of  a 

grounds  for  believing  his  statement"  fraud."     In  Rawlins  v.  Wickham,   3 

seems  to  imply  circumstances  which  De  Gex  &  J.  304,  Turner,  L.  J.,  said: 

operate   affirmatively   to  prevent    the  "  If  upon  a  treaty  for  purchase  one  of 

party   from    forming   a   belief.      The  the  parties  to  the  contract  makes  a 

language    of    the    equity    courts,    in  representation  materially  affecting  the 

omitting   this   qualification,  seems  to  subject-matter    or    the    contract,    he 

be  wholly   negative,   and   to  require  surely  cannot  be  heard  to  say  that  he 


§  888  EQUITY   JURISPRUDENCE,  1248 

§  888.  The  Same.  —  4.  Where  a  person  makes  a  state- 
ment of  fact  which  is  untrue,  but  at  the  time  of  making 
it  he  honestly  believes  it  to  be  true,  and  this  belief  is 
based  upon  reasonable  grounds  which  actually  exist,  the 
misrepresentation  so  made  is  not  fraudulent  either  in 
equity  or  at  law.^  This  general  proposition  is  subject, 
however,  to  the  two  following  important  limitations: 
5.  Where  such  an  untrue  statement  is  made  in  the  hon- 
est belief  of  its  truth,  so  that  it  is  the  result  of  an  inno- 
cent error,  and  the  truth  is  afterwards  discovered  by  the 
person  who  has  innocently  made  the  incorrect  represen- 
tation, if  he  then  suffers  the  other  party  to  continue  in 
error,  and  to  act  on  the  belief  that  no  mistake  has  been 
made,  this,  from  the  time  of  the  discovery,  becomes,  in 
equity,  a  fraudulent  representation,  even  though  it  was 
not  so  originally .'^  6.  Finally,  if  a  statement  of  fact,  ac- 
tually untrue,  is  made  by  a  person  who  honestly  believes 
it  to  be  true,  but  under  such  circumstances  that  the  duty 

knew  nothing  of  the  truth  or  falsehood  Converse  v.  Blumrich,   14  Mich.   109, 

of  that  which  he  represented,  and  still  123;  90  Am.  Dec.  230;  Allen  v.  Hart, 

more  surely  he  cannot  be  allowed  to  72  111.  104;  Wilcox  v.  Iowa  W.  Univ., 

retain  any  benefit  which  he  has  de-  32  Iowa,  367;  Hammond  v.  Pennock, 

rived    if    the   representation    he   has  61   N.  Y.   145,   151,   152;  Hawkins  v. 

made   turns    out    to    be    untrue.     It  Palmer,  57  N.  Y.  664;  Sharp  v.  Mayor, 

would  be  most  dangerous  to  allow  any  40  Barb.  256;  Twitchell  v.  Bridge,  42 

doubt  to  be  oast  iipon  this  doctrine  ":  Vt.  6S;  Beebe  v.  Knapp,  28  Mich.  53; 

Torrance  v.  Bolton,  L.  R.  8  Ch.   118;  Stone  v.  Covell,  29  Mich.  359;  Freu- 

14   Eq.   124;  Aberaman  Iron  Works,  zel  v.  Miller,  37  Ind.  1;  10  Am.  Rep. 

L.  R.  4  Ch.  101;  5  Eq.  485;  Peek  v.  62;     Graves    v.    Lebanon    Bank,     10 

Gurney,  L.  R.  13  Eq.  79,   113;  Smith  Bush,  23;  19  Am.  Rep.  50;  Bankhead 

v.   Richards,    13   Pet.   26;    Hough   v.  v.  Alloway,  6  Cold.  56;  Thompson  v. 

Richardson,  3   Story,    659;   Smith   v.  Lee,  31  Ala.  292;  Elder  v.  Allison,  45 

Babcock,  2  Wood.   &  M.  246;  Mason  Ga.  13;  [Potter's  Appeal,  56  Conn.  1; 

v.  Crosby,   1  Wood.  &  M.  342;  Ham-  7  Am.  St.  Rep.  272;  McMuUm's  Adm'r 

matt  v.  Emerson,  27  Me.  308,  326;  46  v.   Sanders,  79  Va.   356,  362;  Mohler 

Am.  Dec.  598;  Harding  v.  Randall,  15  v.  Carder,  73  Iowa,  582.] 

Me.  332;  Hazard  v.  Irwin,    18  Pick.  '  Cabot  v.  Christie,  42  Vt.  121,  126; 

95;    Stone   v.    Denny,    4    Met.     151;  1  Am.  Rep.  313;  Fisher  v.  Mellen,  103 

Marsh  v.  Falker,  40  N.  Y.  562;  Ben-  Mass.  503;   Wakeman   v.    Dalley.  51 

nett  V.  Judson,  21  N.  Y.  238;  Craig  N.  Y.  27;  10  Am.  Rep.  551;  Marsh  v. 

v.   Ward,    36  Barb.   377;    Taymon  v.  Falker,  40  N.  Y.  562,  566;   Weed  v. 

Mitchell,    1    Md.   Ch.   496;    Smith   v.  Case,  55  Barb.  534;  Hartford  Ins.  Co. 

Mitchell,  6  Ga.  458;  Reese  v.  Wyman,  v.  Matthews,  102  Mass.  221;  Wheeler 

9  Ga.  430,  439;  Thompson  v.  Lee,  31  v.  Randall,  48  111,  182. 

Ala.  292;  Oswald  v.  McGehee,  28  Miss.  ^  Rgynell  v,  Sprye,  1  De  Gex,  M.  & 

340;  Mitchell  v.  Zimmerman,  4  Tex.  G.    660,    709,    per    Lord    Cranworth; 

75;  51  Am.  Dec.  717;  York  v.  Gregg,  Traill  v.  Baring,  4  De  Gex,  J.  &  S. 

9  Tex.  85;  Buford  v.  Caldwell,  3  Mo.  318,  .329,  330,  per  Turner,  L.  J.;  Un- 

477;  Glasscock  v.  Minor,  11  Mo.  655;  derhill  v.  Korwood,  10  Ves.  209,  225. 


1249  ACTUAL  FRAUD.  §  SS9 

of  knowing  the  truth  rests  upon  him,  which,  if  fulfilled, 
would  have  prevented  him  from  making  the  statement, 
such  misrepresentation  may  be  fraudulent  in  equity,  and 
the  person  answerable  as  for  fraud;  forgetfulness,  igno- 
rance, mistake,  cannot  avail  to  overcome  the  pre-existing 
duty  of  knowing  and  telling  the  truth.* 

§  889.  Requisites  of  a  Misrepresentation  as  a  Defense 
to  the  Specific  Enforcement  of  Contracts  in  Equity. — 
Having  thus  described  the  elements  of  a  misrepresenta- 
tion, with  reference  to  the  knowledge  or  belief  of  the 
person,  in  order  that  it  may  constitute  fraud  in  the  con- 
templation of  equity,  and  having  explained  the  various 
forms  or  phases  which  such  a  misrepresentation  may  as- 
sume, it  will  be  proper  to  present  in  this  connection  those 
special  features  and  qualities  of  a  misrepresentation  which 
apply  to  the  particular  case  of  a  defense  to  suits  for  the  en- 
forcement of  contracts;  the  entire  view  of  this  subject  will 
thus  be  completed.  In  setting  up  a  material  misrepresen- 
tation to  defeat  the  specific  performance  of  a  contract,  the 
element  of  a  scienter,  of  knowledge,  of  belief  with  or  without 
reasonable  grounds,  or  of  intent,  is  wholly  unnecessary  and 
immaterial.  So  far  as  this  most  essential  element  of  a 
fraudulent  misrepresentation  is  concerned, it  is  sufficient  to 
defeat  a  specific  performance  that  the  statement  is  actually 
untrue  so  as  to  mislead  the  party  to  whom  it  is  addressed; 
the  party  making  it  need  not  know  of  its  falsity,  nor  have 
any  intent  to  deceive;  nor  does  his  belief  in  its  truth  make 
any  difference.  With  respect  to  its  effect  upon  the  spe- 
cific performance  of  a  contract,  a  party  making  a  state- 
ment as  true,  however  honestly,  for  the  purpose  of  influ- 
encing the  conduct  of  the  other  party,  is  bound  to  know 

1  Burrowes   v.    Lock,    10  Ves.  470,  G.  339.  345;  Hutton  v.  Rossiter,  7  De 

475;  Rawlins  v.  Wickham,  3  De  Gex  Gex,  M.  &  G.  9;  Ayre's  Case,  25  Beav. 

&  J.  304,  313,  316;  Traill  v.  Baring,  4  513,  522;  Ainslie  v.  Medlycott,  9  Ves. 

De  Gex,  J.  &  S.  318,  .329,  330;  Puis-  12,  21;  Henderson  v.  Lacon.   L.  R.  5 

ford   V.    Richards,    17    Beav.    87,    94;  Eq.  249,  262;  Swan  v.  North  Br.  etc. 

Smith  V.  Reese  River  M.  Co.,  L.  R.  2  Co.,  2  Hurl.  &  C.  175,  IS.S;  Bal.cock  v. 

Eq.  264,  269;  Slim  v.  Croucher,   1  De  Case,  61    Pa.  St.  427,  430;  100   Ain. 

Gex,  F.  &  J.  518,  523,  524;  2  GifF.  .37;  Dec.  654. 
Price  V.  Macaulay,  2  De  Gex,  M.  & 
2  Eq.  Jue.  —  79 


§  890  EQUITY    JURISPRUDENCE.  1250 

that  it  is  true,  and  must  stand  or  fall  by  his  representa- 
tion.^ The  point  upon  which  the  defense  turns  is  the 
fact  of  the  other  party  having  been  misled  by  a  rep- 
resentation calculated  to  mislead  him,  and  not  the  exist- 
ence of  a  design  to  thus  mislead.  It  follows  as  a  plain 
consequence  of  this  general  doctrine  that  if  a  party  makes 
a  misrepresentation,  whereby  another  is  induced  to  enter 
into  an  agreement,  he  cannot  escape  from  its  effects  by 
alleging  his  forgetfulness  at  the  time  of  the  actual  facts.'^ 
Where  the  misrepresentation  does  not  extend  to  the  entire 
scope  of  the  agreement,  or  even  to  any  of  its  most  impor- 
tant parts,  but  relates  merely  to  some  incidental,  subor- 
dinate, or  collateral  feature  of  it,  the  court,  instead  of 
denying  all  relief  to  the  plaintiff,  may  direct  a  specific 
performance,  with  an  abatement  of  the  price,  or  other 
form  of  compensation,  to  the  defendant.'  Of  course,  when 
the  representation  is  so  coupled  with  knowledge,  or  want 
of  belief,  or  intent,  as  to  constitute  actual  fraud  in  any  of 
its  phases,  it  will  a  fortiori  defeat  the  remedy  of  specific 
performance. 

§  890.     V.   Effect  of  the  Representation  on  the  Party  to 
Whom  It  is  Made  —  His  Reliance  upon  It.  —  Another  ele- 

•  In  re  Banister,  L.  R.  12  Ch.  Div.  gation    that   he   knew   of   the   wrong 

LSI,  142;  Ainslie  V.  Medlycott,  9  Ves.  statement.    The  question  of  his  knowl- 

J3,  21;  Dyer  V.  Hargrave,  10  Ves.  50i);  edge,    belief,    or    intent    was   wholly 

Wall  V.  Stubbs,  1  Madd.  80.     The  fol-  immaterial,  because  the  decision  need 

lowing  are  recent  cases  which  furnish  not  turn  upon  it.     It  is  the  fact  of  the 

examples  of  misrepresentations  which  other  party's  being  misled,  and  not  the 

have  been  set  up  to  defeat  a  specific  design  to  mislead  him,  which  consti- 

performance:  Powell  v.  Elliot,  L.  R.  tutes  the  defense  in  this  class  of  cases. 

10  Ch.  424;  Harnett  v.  Baker,  L.  R.  It    is    apparent,    therefore,    that   the 

20   Eq.    50;    Upperton   v.  Nickolson,  language  which  judges  have  used  con- 

6  Ch.  436;  10  Eq.  228;  Whittemore  v.  cerning     misrepresentations    in    such 

Whittemore  L.  R.   8  Eq.  603;  Denny  cases  should  not  be  confounded  with 

V.   Hancock,  L.  R.  6  Ch.  1;  Leyland  the    terms    which    are    employed    in 

v.  Illingworth,  2  De  Gex,  F.  &  J.  248,  describing  the  elements  of  a  misrepre- 

252,254;  Price  v.  Macaulay,  2  De  Gex,  sentation    in   order   that   it    may   be 

M. '&  G.  339;    Swimm   v.    Bush,    23  fraudulent. 

Mich.  99;  Holmes's  Appeal,  77  Pa.  St.  ^  Burrowes  v.  Lock,  10  Ves.  470,  476; 

50;  [Isaacs  v.  Skrainka,  95  Mo.  517;  Price  v.  Macaulay,  2  De  Gex,  M.  &  G. 

Kelly  V.  C.  P.  R.  R.  Co.,  74  Cal.  557;  339;  Bacon  v.  Bronson,  7  Johns.  Ch. 

5   Am.    St.    Rep.    470.]     In   none   of  194;  11  Am.  Dec.  449.     The  same  is 

these  cases,  with  one  or  two  excep-  true  in  suits  for  rescission  and  other 

tions,  was  there  the  slightest  sugges-  relief  based  upon  actual  fraud. 

tion  of  any  intent  to  deceive  on  the  *  See  several  of  the  cases  in  the  last 

part  of  the  vendor;  nor  even  an  alle-  note  but  one. 


1251 


ACTUAL   FRAUD. 


890 


ment  of  a  fraudulent  misrepresentation,  without  which 
there  can  he  no  remedy,  legal  or  equitable,  is,  that  it  must 
be  relied  upon  by  the  party  to  whom  it  is  made,  and  must 
be  an  immediate  cause  of  his  conduct  which  alters  his 
legal  relations.  Unless  an  untrue  statement  is  believed 
and  acted  upon,  it  can  occasion  no  legal  injury.  It  is 
essential,  therefore,  that  the  party  addressed  should  trust 
the  representation,  and  be  so  thoroughly  induced  by  it 
that,  judging  from  the  ordinary  experience  of  mankind, 
in  the  absence  of  it  he  would  not,  in  all  reasonable  prob- 
ability, have  entered  into  the  contract  or  other  transac- 
tion.'    It  is  not  necessary  that  the  false  representation 


*  It  is  certainly  incorrect  to  lay 
down  this  rule  as  it  is  often  found 
both  in  judicial  opinions  and  text- 
books, namely:  "The  inducement 
must  be  so  strong  that  without  it  the 
party  would  not  have  entered  into  the 
contract."  It  is  clearly  impossible, 
from  the  nature  of  the  case,  to  state 
such  a  future  and  contingent  matter 
with  absolute  certainty;  the  mode  in 
which  the  rule  is  formulated  in  the 
text  is  the  only  one  consistent  with 
the  truth,  and  is  all  that  the  law  really 
means  or  can  demand.  In  the  great 
case  of  Attwood  v.  Small,  6  Clark  & 
F.  232,  447,  in  which  the  whole  doc- 
trine of  fraud  was  fully  explained, 
Lord  Brougham  thus  states  this  rule: 
"Now,  my  lords,  what  inference  do 
I  draw  from  these  cases?  It  is  this, 
that  general  fraudulent  conduct  signi- 
fies nothing;  that  general  dishonesty 
of  purpose  signifies  nothing;  that  at- 
tempts to  overreach  go  for  nothing, 
unless  all  this  dishonest}'  of  purpose, 
all  this  fraud,  all  this  intention  and 
design,  can  be  connected  with  the  par- 
ticular transaction,  and  not  only  con- 
nected with  the  particular  transaction, 
but  nni-^t  be  made  to  be  the  very  ground 
upon  which  this  transaction  took  place, 
and  must  have  given  rise  to  this  con- 
tract." The  rule  was  also  well  ex- 
pressed in  Pulsford  v.  Richards,  17 
Beav.  87,  96:  "To  use  the  expression 
of  the  Roman  law,  it  must  be  a  repre- 
sentation dans  locum  contraclui,  —  that 
is,  a  representation  giving  occasion  to 
the  contract, — the  proper  interpreta- 
tion of  which  appears  to  me  to  be  the 
assertion  of  a  fact  on  which  tlie  person 


entering  into  the  contract  relied,  and 
in  the  absence  of  which  it  is  reasonable 
to  infer  that  he  would  not  have  entered 
into  it;  or  the  suppression  of  a  fact 
the  knowledge  of  which  it  is  reason- 
able to  infer  would  have  made  hira 
abstain  from  the  contract  altogether  ": 
Reynell  v.  Sprye,  1  De  Gex,  M.  &  G. 
660,  691,  70S,  709;  Jennings  v.  Brough- 
ton,  5  De  Gex,  M.  &  G.  126;  Rawlins 
V.  Wickham,  3  De  Gex  &  J.  304;  Nel- 
son V.  Stocker,  4  De  Gex  &  J.  458; 
Lord  Brooke  v.  Rounthwaite,  5  Hare, 
298,  300;  Vigers  v.  Pike,  8  Clark  & 
F.  562,  650;  Conybeare  v.  New  Bruns- 
wick etc.  Co.,  1  De  Gex,  F.  &  J.  578; 
Smith  V.  Reese  River  M.  Co.,  L.  R.  2 
Ch.  604,  613;  2  Eq.  264;  Evans  v, 
Bicknell,  6  Ves.  174,  182-192;  Nicol'a 
Case,  3  De  Gex  &  J.  387;  Hough  v. 
Richardson,  3  Story,  659;  Daniel  v. 
Mitchell,"  1  Story,  172;  Mason  v. 
Crosby,  1  Wood.  &  M.  342;  Tuthill  v. 
Babcock,  2  Wood.  &  M.  298;  Ferson 
V.  Sanger,  1  Wood.  &  M.  138;  Pres- 
cott  v.  Wright,  4  Gray,  461;  Taylor 
V.  Fleet,  1  Barb.  471,  475;  Morris 
Canal  Co.  v.  Emmett,  9  Paige,  168;  37 
Am.  Dec.  388;  Masterton  v.  Beers,  1 
Sweeny,  406;  6  Rob.  (N.  Y.)  368; 
Levick  V.  Brotherline,  74  Pa.  St.  149, 
157;  Percival  v.  Harger,  40  Iowa,  286; 
Bryan  v.  Hitchcock,  43  Mo.  527; 
Klopenstein  v.  Mulcahy,  4  Nev.  296; 
Slaughter's  Adni'r  v.  Gerson,  13  Wall. 
379;  Wampler  v,  Wampler,  30  Gratt. 
454;  McShane  v.  Hazlehurst,  50  Md. 
107;  McBean  v.  Fox,  1  111.  App.  177; 
Roseman  v.  Canovan,  43  Cal.  110; 
Loner  v.  Warren,  68  N.  Y.  426;  Chester 
V.  Conistock,  40  N.  Y.  575,  nota:  Tay. 


§  891  EQUITY   JURISPRUDENCE.  1252 

should  be  the  sole  inducement;  others  may  concur  with 
it  in  influencing  the  party.  Where  several  representa- 
tions have  been  made,  and  one  of  them  is  false,  the  court 
has  no  means  of  determining,  as  was  well  said  by  Lord 
Cranworth,  that  this  very  one  did  not  turn  the  scale.* 
The  misrepresentations  must,  however,  be  concerning 
something  really  material.  Statements,  although  false, 
respecting  matters  utterly  trifling,  which  cannot  affect 
the  value  or  character  of  the  subject-matter,  so  that  if  the 
truth  had  been  known  the  party  would  not  probably  have 
altered  his  conduct,  are  not  an  occasion  for  the  interposi- 
tion of  equity.^ 

§  891.  The  Party  must  be  Justified  in  Relying  on 
the  Representation. — The  foregoing  requisite,  that  tlie 
representation  must  be  relied  upon,  plainly  includes  the 
supposition  that  the  party  is  justified,  under  all  the  cir- 
cumstances, in  thus  relying  upon  it.  This  branch  of  the 
rule  presents  by  far  the  greatest  practical  difficulties  in  the 
decision  of  cases,  because,  although  the  rule  is  well  set- 
tled, and  is  most  clearly  just,  its  application  must  depend 
upon  the  facts  of  each  particular  case,  and  upon  evidence 
which  is  often  obscure  and  conflicting.  In  determining 
the  effect  of  a  reliance  upon  representations,  it  is  most 
important  to  ascertain,  in  the  first  place,  whether  the 
statement  was  such  that  the  party  was  justified  in  relying 
upon  it,  or   was  such,  on  the  other  hand,  that  he  was 

lor  V.  Guest,  58  N.  Y.  262;  Laidhaw  v.  »  Reynell  v.  Sprye,  1  De  (iex,  M.  & 

Organ,  2  Wheat.  178,  195;  [Farrar  v.  G.  660,  708,  709;    [ante,  %  880,  note;] 

Churchill,    135  U.  S.    609;    Hicks  v.  Addington  v.  Allen,  11  Wend.  374  (an 

Stevens,  121  111.  186;  Parker  v.  Hayes,  action  for  deceit,  in  which  the  court 

39  N.  J.  Eq.  469;  Severance  v.  Ash,  said:     "Although   other  inducements 

81   Me.  278;    Cochrane  v.  Pauscault,  besides  the  representations  may  have 

54  Md.   1;   Houghton  v.  Graybill,  82  operated    in   the   giving   credit,  it   is 

Va.  573;   RufFuer  v.  Ridley,   81  Ky.  enough  if  the  vendor  is  moved  by  such 

165;  Powell    v.  Adams,   9S   Mo.    598;  representations,  so  that  without  them 

Sears  v.  Hicklin,  13  Col.  143;  Estep  v.  the  goods  would  not  have  been  parted 

Armstrong,  69  Cal.  536.     If  the  words  with  ":    [Linhart  v.  Foreman's  Adm'r, 

used  were  capable    of  two  meanings,  77  Va.  540.] 

one  true  and  the  other  false,  the  plain-  *  Percival  v.  Harger,  40  Iowa,  286; 

tiff  in  an  action  of  deceit  must  show  Winston  v.  Gwathmey,  8  B.  Mon.  19; 

that  he  took  them  in  the  false  sense:  Geddes   v.    Pennington,  5   Dow,  159. 

Smith  V.  Chadwick.  9  App.  Cas.  (H.  L.)  [See  also  §§  879,  898.] 
187;  affirming  20  Ch.  Div.  27.] 


1253  ACTUAL   FRAUD.  §  891 

bound  to  inquire  and  examine  into  its  correctness  him- 
self. In  respect  to  this  alternative,  there  is  a  broad  dis- 
tinction between  statements  of  fact  which  really  form  a 
part  of,  or  are  essentially  connected  with,  the  substance 
of  the  transaction,  and  representations  which  are  mere 
expressions  of  opinion,  hope,  or  expectation,  or  are  mere 
general  commendations.  It  may  be  laid  down  as  a  gen- 
eral proposition  that  where  the  statements  are  of  the 
first  kind,  and  especially  where  they  are  concerning  mat- 
ters which,  from  their  nature  or  situation,  may  be  as- 
sumed to  be  within  the  knowledge  or  under  the  power  of 
the  party  making  the  representation,  the  party  to  whom 
it  is  made  has  a  right  to  rely  on  them,  he  is  justified  in 
relying  on  them,  and  in  the  absence  of  any  knowledge  of 
his  own,  or  of  any  facts  which  should  arouse  suspicion 
and  cast  doubt  upon  the  truth  of  the  statements,  he  is 
not  bound  to  make  inquiries  and  examination  for  him- 
self. It  does  not,  under  such  circumstances,  lie  in  the 
mouth  of  the  person  asserting  the  fact  to  object  or  com- 
plain because  the  other  took  him  at  his  word;  if  he 
claims  that  the  other  party  was  not  misled,  he  is  bound 
to  show  clearly  that  such  party  did  know  the  real  facts; 
the  burden  is  on  him  of  removing  the  presumption  that 
such  party  relied  and  acted  upon  his  statements.*     The 

'  Reynell  v.  Sprye,  1  De  Gex,  M.  &  description   is  a  representation   of    a 

G.  660,    691,    708;  Rawlins  v.  Wick-  fact,"   etc.     See    also   Dyer   v.   Har- 

ham,  3  De  Gex  &  J.  304;  Conybeare  grave,  10  Ves.  505;  Fenton  v.  Browne, 

V.  New  Brunswick  etc.  Co.,  1  De  Gex,  14    Ves.     144;    Wall    v.     Stubbs,     1 

F;   &  J.    578.     In   Leyland   v.  lUing-  Madd,    80;    Stewart    v.    Alliston,     1 

worth,    2  De   Gex,  F.    &  J.  248,  253,  Mer.    26;     Trower    v.    Newcome,    3 

254,  in   which  it   was  held   that   the  Mer.  704;  Lowndes  v.  Lane,    2  Cox, 

purchaser    had  a    right    to    rely    on  363;  Scott  v.  Hanson,  1  Sim.  13;  Har- 

a  certain    statement    made     by     the  ria   v,    Kemble,    1  Sim.   Ill;  5  Bligh, 

vendor,  and    was    not    bound   to   in-  N.  S.,  730;    Price  v.  Macaulay;  2  De 

quire  for  himself.  Turner,  L.  J.,  said:  Gex,   M.  &   G.  339;    Aberaman   Iron 

"If  the  question   had  been,  whether  Works,  L.  R.  4  Ch.    101;   5  Eq.  485; 

the   supply   of   water    was    adequate  Martin   v.  Cotter,  3  Jones  &  L.  496, 

or  inadequate,   the  case    would  prob-  507;  Brealey  v.   Collins,  Youuge,  317; 

ably   have   fallen  within   the   author-  Lord  Brooke  v.  Rounthwaite,  5  Hare, 

ities     referred    to,  in    opposition    to  298;  Cox  v.  Middleton,  2  Drew.  209; 

the  purchaser's  claim.     It  would  have  Farebrother  v,  Gibson,  1  De  Gex  &  J. 

been   a    question   of    opinion,  not   of  602;    Cook  v.    Waugh,    2   Giff.    201; 

fact,   and   the  purchaser  would   have  Johnson  v.  Smart,  2  Giff.  151 ;  Boyntoa 

been  put  upon  inquiry.     But  there  is  v.  Hazelboom,  14  Allen,   107;  92  Am. 

no  such   question  in  this  case. '   The  Dec.  73S;  Best  v.  Stow,  2  Sand.  Ch. 


891 


EQUITY   JURISPRUDENCE. 


1254 


rule  is  equally  well  settled  with  respect  to  the  second  al- 
ternative. Where  the  representation  consists  of  general 
commendations,  or  mere  expressions  of  opinion,  hope, 
expectation,  and  the  like,  and  where  it  relates  to  matters 
which,  from  their  nature,  situation,  or  time,  cannot  be 
supposed  to  be  within  the  knowledge  or  under  the  power 
of  the  party  making  the  statement,  the  party  to  whom  it 
is  made  is  not  justified  in  relying  upon  it  and  assuming 
it  to  be  true;  he  is  bound  to  make  inquiry  and  examina- 
tion for  himself  so  as  to  ascertain  the  truth;  and  in  the 
absence  of  evidence,  it  will  be  presumed  that  he  has  done 
so,  and  acted  upon  the  result  of  his  own  inquiry  and  ex- 
amination.^    Any  representation,  in  order  that  one  may 


298;  Holmes's  Appeal,  77  Pa.  St.  50; 
Swimm  V.  Bush,  23  Mich.  99;  Beards- 
ley  V.  Duntley,  69  N.  Y.  577;  Wilkiu 
V.  Barnard,  61  N.  Y.  628;  McShane  v. 
Hazlehurst,  50  Md.  107;  Slaughter's 
Adm'rv.  Gerson,  13  Wall.  .379;  Drake 
V.  Latham,  50  III.  270;  Fish  v.  Cle- 
land,  33  111.  238;  Banta  v.  Palmer, 
47  111.  99;  David  v.  Park,  103  Mass. 
501;  Bradbury  v.  Bardin,  35  Conn. 
577;  Batdorf  v.  Albert,  59  Pa.  St.  59; 
Watts  V. Cummins,  59  Pa.  St.  84;  Bran- 
don v.  Forest  Co. ,  59  Pa.  St.  1 87 ;  Spald- 
ing V.  Hedges,  2  Pa.  St.  240;  Morehead 
V.  Eades,  3  Bush,  121  (a  very  instruct- 
ive case);  [Redgrave  v.  Hurd,  20  Ch. 
Div.  1;  Hicks  V.  Stevens,  121  III.  18(5; 
Hull  v.  Fields,  76  Va.  594;  Linhart  v. 
Foreman's  Adm'r,  77  Va.  540;  Rorer 
Iron  Co.  V.  Trout,  83  Va.  397;  5  Am. 
St.  Rep.  28ri;  Dilhnan  v.  Nadlehoifer, 
119  111.  567;  Bank  of  Woodland  v, 
Hiatt.  58  Cal.  234;  Wenzel  v.  Shulz, 
78  Cal.  221;  Gammill  v.  Johnson,  47 
Ark.  335.  J 

'  Dyer  v.  Hargrave,  10  Ves.  505; 
Fenton  v.  Browne,  14  Ves.  144; 
Brealey  v.  Collins,  Younge,  317:  Lord 
Brooke  v.  Rounthvvaite,  5  Hare,  298; 
Abbott  v.  Sworder,  4  De  Gex  &  S. 
448;  Colby  v.  Gadsden,  34  Beav.  416; 
Attwood  v.  Small,  6  Clark  &  F. 
232;  Hough  v.  Richardson,  3  Story, 
659;  Pratt  v.  Philbrook,  33  Me.  17; 
Brown  v.  Leach,  107  Mass.  364;  Vea- 
Bey  V.  Doton,  3  Allen,  380;  Clark  v. 
Everhart,  63  Pa.  St.  .347;  Winters'a 
Appeal,  61  Pa.  St.  307;  Tindall  v.  Har- 
kiason,    19    G-a.    448;     Glasscock    v. 


Minor,  11  Mo.  655;  Wright  v.  Gully, 
28  Ind.  475.  As  illustrations,  in  the 
often-quoted  case  of  Jennmgs  v. 
Broughton,  5  De  Gex,  M.  &  G.  12G, 
17  Beav.  234,  it  was  held  that  in  a 
contract  for  the  sale  of  a  mine,  there 
was  an  essential  difference  between  a 
representation  of  what  was  actually 
to  be  seen  or  had  been  seen  at  the 
works,  —  the  veins  of  ore,  the  amount 
of  ore  actually  mined,  and  the  like,  — 
and  a  general  statement  of  the  expec- 
tations, prospects,  and  capacities  of 
the  mine,  —  the  latter  being  in  their 
very  nature  contingent  and  specula- 
tive, and  respecting  which  the  buyer 
was  as  able  to  judge  as  the  seller. 
[See  also  Southern  Development  Co. 
V.  Silva,  125  U.  S.  247.]  In  Trower  v. 
Newcome,  3  Mer.  704,  an  advowson 
had  been  sold  at  auction,  the  written 
description  stating  that  "a  voidanc" 
of  the  preferment  was  likely  soon  to 
occur,"  but  not  speaking  at  all  of  the 
then  present  incumbent.  At  the  sale, 
the  auctioneer  verbally  announced 
that  "  the  living  would  be  void  on 
the  death  of  a  person  aged  eighty- 
two."  This  statement  was,  of  course, 
made  without  authority,  and  so  did 
not  bind  the  vendor;  for  otherwise  it 
seems  to  be  a  representation  in  the 
clearest  possible  manner  of  a  most 
material  fact.  In  truth,  the  then  in- 
cumbent was  only  thirty-two  years 
old.  Sir  William  Grant  held  that  the 
representation  in  the  written  descrip- 
tion was  so  vague  and  general,  and  so 
entirely    a  matter  of  speculation  or 


1255 


ACTUAL   FRAITD. 


892 


be  justified  in  relying  upon  it,  must  be,  m  some  degree  at 
least,  reasonable;  at  all  events,  it  must  not  be  so  self-con- 
tradictory or  absurd  that  no  reasonable  man  could  believe 
it.  It  must  not,  also,  be  so  vague  and  general  in  its  terms 
that  it  conveys  no  certain  meaning/ 

§  892.  When  He  is  or  is  not  Justified  in  Relying.  — 
As  a  generalization  from  the  authorities,  the  various 
conditions  of  fact  and  circumstance  with  respect  to  the 
question  how  far  a  party  is  justified  in  relying  upon  the 
representation  made  to  him  may  be  reduced  to  the  four 
following  cases,  in  the  first  three  of  which  the  party  is 
not,  while  in  the  fourth  he  is,  justified  in  relying  upon 
the  statements  which  are  offered  as  inducements  for  him 
to  enter  upon  certain  conduct:'   1.   When,  before  enter- 


opinion,  that  the  purchaser  was  only 
put  on  inquiry  by  it,  and  could  not 
claim  to  have  been  misled.  In  Scott 
V.  Hanson,  ]  Sim.  13,  1  Russ.  &  M. 
128,  a  statement  that  the  land  sold 
"was  uncommonly  rich  water-mead- 
ow," was  only  a  general  commenda- 
tion. In  Hume  v.  Pocock,  L.  R.  1 
Ch.  379.  I  Eq.  423,  it  was  held  that 
the  mere  assertion  by  a  vendor  that 
he  has  a  good  title,  on  which  the  ven- 
dee relies  without  any  investigation, 
is  not  necessarily  such  a  misrepresen- 
tation as  will  defeat  an  enforcement 
of  the  contract.  In  Jefferys  v.  Fairs, 
L.  R.  4  Ch.  Div.  448,  a  representation 
made  without  knowledge  or  any  possi- 
ble intent  to  mislead  was  held  no 
ground  for  interference,  because  it 
was  of  such  a  nature  that  the  pur- 
chaser took  his  chance. 

^  Trower  v.  Newcome,  3  Mer.  704, 
per  Sir  William  Grant;  Irving  v. 
Thomas,  18  Me.  418,  424,  per  Shipley, 
J.;  Savage  v.  Jackson,  19  Ga.  305; 
Halls  V.  Thompson,  1  Smedes  &  M, 
443. 

=*  The  doctrine  is  so  admirably  sum- 
med up  by  Lord  Langdale,  M.  R., 
in  Claphara  v.  Shillito,  7  Beav.  146, 
149,  150,  that  I  shall  extract  a  passage 
from  his  opinion:  "Cases  have  fre- 
quently occurred  in  which,  upon  enter- 
ing into  contracts,  misrepresentations 
made  by  one  party  have  not  been,  in 
any  degree,  relied  on  by  the  other 
party.     If    the   party  to   whom    the 


representations  were  made  himself 
resorted  to  the  proper  means  of  veri- 
fication, before  he  entered  into  the 
contract,  it  may  appear  that  he  relied 
upon  the  result  of  his  own  investiga- 
tion and  inquiry,  and  not  upon  the 
representations  made  to  him  by  the 
other  party.  Or  if  the  means  of  in- 
vestigation and  verification  be  at  hand, 
and  the  attention  of  the  party  receiv- 
ing the  representations  be  drawn  to 
them,  the  circumstances  of  the  case 
may  be  such  aa  to  make  it  incumbent 
on  a  court  of  justice  to  impute  to  him 
a  knowledge  of  the  result,  which  upon 
due  inquiry  he  ought  to  have  obtained, 
and  thus  the  notion  of  a  reliance  on 
the  representations  made  to  him  may 
be  excluded.  Again,  when  we  are 
endeavoring  to  ascertain  what  reliance 
was  placed  on  representations,  we 
must  consider  them  with  reference  to 
the  suV)ject-matter  and  the  relative 
knowledge  of  the  parties.  If  the  sub- 
ject is  capable  of  being  accurately 
known,  and  one  party  is,  or  is  sup- 
posed to  be,  possessed  of  accurate 
knowledge,  and  the  other  is  entirely 
ignorant,  and  a  contract  is  entered 
into  after  representations  made  by  the 
party  who  knows,  or  is  supposed  to 
know,  without  any  means  of  verifica- 
tion being  resorted  to  by  the  other, 
it  may  well  enough  be  presumed  that 
the  ignorant  man  relied  on  the  state- 
ments made  to  him  by  him  who  was 
supposed  to  be  better  informed;  but  if 


§  893  EQUITY   JURISPRUDENCE.  12E5 

ing  into  the  contract  or  other  transaction,  he  actually 
resorts  to  the  proper  means  of  ascertaining  the  truth  and 
verifying  the  statement;  2.  When,  having  the  oppor- 
tunity of  making  such  examination,  he  is  charged  with 
the  knowledge  which  he  necessarily  would  have  obtained 
if  he  had  prosecuted  it  with  diligence;  3.  When  the 
representation  is  concerning  generalities  equally  within 
the  knowledge  or  the  means  of  acquiring  knowledge  pos- 
sessed by  both  parties;  4.  But  when  the  representation 
is  concerning  facts  of  which  the  party  making  it  has,  or 
is  supposed  to  have,  knowledge,  and  the  other  party  has 
no  such  advantage,  and  the  circumstances  are  not  those 
described  in  the  first  or  the  second  case,  then  it  will  be 
presumed  that  he  relied  on  the  statement;  he  is  justified 
in  doing  so. 

§  893.  Information  or  Means  of  Obtaining  Information 
Possessed  by  the  Party  Receiving  the  Representation.  —  I 
purpose  to  examine  under  this  head  the  first  two  cases 
mentioned  in  the  foregoing  summary;  they  are  the  ones 
which  present  by  far  the  greatest  practical  difficulties  in 
tlie  administration  of  justice.  If,  after  a  representation  of 
fact,  however  positive,  the  party  to  whom  it  was  made  in- 
stitutes an  inquiry  for  himself,  has  recourse  to  the  proper 
means  of  obtaining  information,  and  actually  learns  the 
real  facts,  he  cannot  claim  to  have  relied  upon  the  mis- 
representation and  to  have  been  misled  by  it.  Such  claim 
would  simply  be  untrue.  The  same  result  must  plainly 
follow  when,  after  the  representation,  the  party  receiving 
it  has  given  to  him  a  sufficient  opportunity  of  examining 
into  the  real  facts,  when  his  attention  is  directed  to  the 

the  subject  is  in  its  nature  uncertain,  third   and  fourth   cases   in    the   text 

if  all  that  ia  known  about  it  is  matter  above  are  discussed  in  the  preceding 

of  inference  from  something  else,  and  paragraph  (§  891).     The  first  and  sec- 

if    the   parties  making   and  receiving  ond  are  in  reality  only  one;  they  in- 

representations   on  the   subject   have  volve  the  same  principle,  and  the  only 

equal  knowledge  and  means  of  acquir-  difference  between  them  is  in  the  mode 

iug  knowledge,   and  equal  skill,   it  is  of  proof,  —  a  fact  being  directly  proved 

not  easy  to  presume  that  representa-  by  direct  evidence  in  the  first,  which 

tions  made  by  one  would  have  much,  or  ia  irresistibly  inferred  by  a  legal  pre- 

any,  influence  upon  the  other."    The  sumption  in  the  second. 


1257 


ACTUAL   FRAUD. 


§  893 


sources  of  information,  and  he  commences,  or  purports 
or  professes  to  commence,  an  investigation.  The  plain- 
est motives  of  expediency  and  of  justice  require  that  he 
should  he  charged  with  all  the  knowledge  which  he  might 
have  obtained  had  he  pursued  the  inquiry  to  the  end  with 
diligence  and  completeness.  He  cannot  claim  that  he  did 
not  learn  the  truth,  and  that  he  was  misled.^ 


^  One  ground  of  this  latter  branch 
of  the  rule  is  the  practical  impossi- 
bility in  any  judicial  proceeding  of 
ascertaining  exactly  how  much  knowl- 
edge the  party  obtained  by  his  inquiry; 
and  the  opportunity  which  a  contrary 
rule  would  give  to  a  party  of  repudi- 
ating an  agreement  or  other  transaction 
fuifly  entered  into,  with  which  he  had 
become  dissatisfied:  Nelson  v.  Stocker, 
4  De  Gex  &  J.  458;  Conybeare  v.  New 
Brunswick  etc.  Co.,  1  De  Gex,  F.  &  J. 
578;  Nicol's  Case,  3  De  Gex  &  J.  387; 
Cargill  V.  Bower,  L.  R.  10  Ch.  Div.  502; 
Pratt  V.  Philbrook,  33  Me.  17;  Brown 
V.  Leach,  107  Mass.  364;  Clark  v.  Ev- 
erhart,  63  Pa.  St.  347;  Wright  v.  Gully, 
28  Ind.  475;  Glasscock  v.  Minor,  11 
Mo.  655;  Tindall  v.  Harkinson,  19  Ga. 
448;  Wilkin  v.  Barnard,  61  N.  Y.  628; 
Morehead  v.  Eades,  3  Bush,  121  (a  very 
instructive  case,  in  which  this  aspect 
of  the  doctrine  is  discussed  by  Robert- 
son, J.);  David  v.  Park,  103  Mass. 
501;  Spalding  v.  Hedges,  2  Pa.  St. 
'J40;  Batdorf  v.  Albert,  59  Pa.  St.  59; 
Watts  V.  Cummins,  59  Pa.  St.  84; 
Brandon  v.  Forest  Co.,  59  Pa.  St.  187; 
Fish  V.  Cleland,  33  IIL  238;  Banta  v. 
Palmer,  47  111.  99;  Brown  v.  Leach, 
107  Mass.  364;  Rockafellow  v.  Baker, 
41  Pa.  St.  319;  80  Am.  Dec.  624.  [See 
also  the  important  case  of  Colton  v. 
Stanford,  82  Cal.  352;  16  Am.  St.  Rep. 
137;  Southern  Development  Co.  v. 
Silva,  125  U.  S.  247;  Farrarv.  Church- 
ill, 135  U.  S.  609;  Herron  v.  Herron, 
71  Iowa,  428.]  In  illustration  of  the 
first  branch  of  the  rule  given  in  the 
text.  Lord  Holt  said,  in  deciding  an 
action  at  law  for  deceit  (the  principle 
being  the  same  in  law  and  in  equity), 
as  follows:  Lysney  v.  Selby,  2  Ld. 
Ilaym.  1118,  'll20:  "If  the  vendor 
gives  in  his  particular  of  the  rents,  and 
the  vendee  says  he  will  trust  him  and 
inquire  no  further,  but  rely  on  his 
particular,  then,  if  the  particular  be 
false,  an  action   will  lie;   but   if   the 


vendee  will  go  and  inquire  further 
what  the  rents  are,  then  it  seems  un- 
reasonable he  should  have  any  action, 
though  the  particular  be  false,  because 
he  did  not  rely  on  the  particular." 
The  great  case  of  Attwood  v.  Small,  6 
Clark  &  F.  232,  is  an  admirable  illus- 
tration of  the  second  branch  of  the 
rule,  and  was  finally  decided  in  the 
house  of  lords  by  an  application  of 
its  doctrine.  Attwood  had  bargained 
to  sell  his  works,  and  had  made  repre- 
sentations in  regard  to  them,  and  these 
statements  were  claimed  to  be  false. 
But  during  the  negotiations  the  ven- 
dee had  sent  a  committee  to  the  works 
for  the  express  purpose  of  examining 
into  the  truth  of  the  statements.  As 
a  matter  of  fact,  they  made  a  very  su- 
perficial and  incomplete  examination, 
and  did  not  discover  all  the  truth;  but 
they  had  the  opportunity  to  make  a 
thorough  investigation;  they  were  en- 
gaged in  the  same  business,  and  were 
therefore  experts;  they  were  satisfied 
with  what  they  saw,  and  reported 
favorably,  and  the  contract  was  con- 
cluded. On  a  suit  for  rescission  of  the 
agreement,  the  house  of  lords  held  that 
the  vendees,  by  their  own  acts,  had 
cut  off  any  claim  to  being  misled,  and 
must  be  charged  with  the  full  knowl- 
edge which  they  might  have  obtained. 
If  a  party  cJiooscs  to  judge  for  hmself, 
and  then  does  not  thoroughly  use  all 
the  opportunities  and  sources  of  infor- 
mation offered  or  open  to  him,  he  can- 
not be  permitted  to  set  up  his  own 
carelessness  or  imprudence,  and  claim 
to  have  been  misled.  Jennings  v. 
Broughton,  5  De  Gex,  M.  &  G.  126, 
17  Beav.  234,  illustrates  the  same  rule 
in  a  striking  manner.  Plaintiff  had 
bought  an  interest  in  a  mine,  state- 
ments concerning  it  having  been  made 
by  the  vendors.  The  suit  was  brought 
to  rescind  the  salu,  on  the  pround  that 
these  statemenis  were  j^rossly  fraudu- 
lent.   The  vendee  had  visited  the  mine. 


§  894  EQUITY   JURISPRUDENCE.  1258 

§  894.  Knowledge  Possessed  by  the  Same  Party  —  Pat- 
ent Defects.  —  The  same  principle  is  applied  under  a 
somewliat  different  condition  of  circumstances.  If  the 
party  receiving  a  misrepresentation  is,  at  the  time  when 
it  is  made,  either  from  knowledLO  acquired  previously  or 
obtained  at  that  very  moment,  fully  aware  of  the  truth, 
acquainted  with  the  facts  as  they  really  are,  he  cannot 
claim  to  be  misled,  and  cannot  defeat  or  disaffirm  or  re- 
scind the  transaction  on  the  ground  that  it  was  entered 
into  through  false  representations.  The  case  of  patent 
defects  is  merely  an  application  of  this  equitable  doctrine. 
If,  in  a  contract  of  sale  or  of  leasing,  representations  are 
made  by  the  vendor  concerning  some  incidents,  qualities, 
or  attributes  of  the  subject-matter  which  are  open  and 
visible,  so  that  the  falsity  of  the  statement  is  patent  to 
any  ordinary  observer,  and  it  is  made  to  appear  that  the 
purchaser,  at  or  shortly  before  the  concluding  the  contract, 
had  seen  the  thing  itself  which  constitutes  the  subject- 
matter,  then  a  knowledge  of  the  facts  is  chargeable  upon 
such  party;  he  is  assumed  to  have  made  the  agreement 
knowingly,  and  cannot  allege  that  he  w^as  misled  by  the 
false  representations.*  This  special  rule  concerning  pat- 
ent defects  requires  that  the  thing  concerning  which  the 
statements  are  made  should  be  seen  or  otherwise  person- 
ally known  by  the  purchaser,  and  that  the  defects  should 
be  plainly  open  and  patent  to  any  ordinary  observer,  and 

before  concluding  the  bargain,  to  look  ing   was  delivered  to  him  and  kept  in 

for  himself.    The  statements  were  con-  his  possession,  which,  if  examined  hy 

cerning  matters  which  he  might  have  him,  would  have  disclosed  all  the  real 

found  out  during  his  investigation,  and  facts  and  shown   the  untruth  of   the 

it  was  held  by  the  master  of  rolls  and  previous    statements.     He    was   held 

by  the  court  of  appeal   that  he  must  chargeable  with  the  knowledge  which 

be  taken  to  have  ascertained  the  truth,  he  might  and  ought  thus  to  have  ob- 

and  could  not  claim  to  have  been  misled  tained. 

by  the  misrepresentations.     Lowndes         '  Nelson  v.  Stocker,  4  De  Gex  &  J. 

V.  Lane,  2  Cox,  363,  is  another  illus-  458;  Dyer   v.   Hargrave,  10  Ves.  505; 

trative  case.     A  purchaser  had  bought  Bowles   v.  Round,  5  Ves.  508;   Pope 

property  consisting   partly  of  woods,  v.    Garland,    4    Younge    &    C.    394; 

on  the  representation  that  these  woods  Shackleton  v.  SutclifiFe,  1  De  Gex  &  S. 

had  yielded,  from  timber  cut  and  sold,  609;  Grant  v.  Munt,  Coop.  173;  Hough 

£250  a  year,  on  the  average,  for  fifteen  v.  Richardson,  3  Story,  659;   Veasey 

years.    This  statement  was  practically  v.  Doton,  3  Allen,  380;  Winter's  Ap- 

false,  and  was  very  misleading.     Buc  peal,  61  Pa.  St.  307;  Slaughter's  Adm'r 

before  concluding  the  contract  a  writ-  t.  Gerson,  13  Wall.  379. 


1259  ACTUAL  FRAUD.  §  895 

especially  that  no  means  should  be  used  to  conceal  them, 
or  to  divert  the  buyer's  attention  from  them,  or  in  any 
way  to  prevent  a  fair  inquiry.* 

§  895.  When  the  Knowledge  or  Information  must  be 
Proved,  and  not  Presumed.  —  The  principle  discussed  in 
the  two  preceding  paragraphs'  is  subject,  however,  to  the 
following  most  important  qualification,  which  is  based 
upon  the  proposition  heretofore  stated,  that  whenever  a 
positive  representation  of  fact  is  made,  the  party  receiv- 
ing it  is,  in  general,  entitled  to  rely  and  act  upon  it,  and 
is  not  bound  to  verify  it  by  an  independent  investigation. 
"Where  a  representation  is  made  of  facts  which  are  or 
may  be  assumed  to  be  within  the  knowledge  of  the  party 
making  it,  the  knowledge  of  the  receiving  party  concern- 
ing the  real  facts,  which  shall  prevent  his  relying  on  and 
being  misled  by  it,  must  be  clearly  and  conclusively  es- 
tablished by  the  evidence.  The  mere  existence  of  oppor- 
tunities for  examination,  or  of  sources  of  information,  is 
not  sufficient,  even  though  by  means  of  these  opportuni- 
ties and  sources,  in  the  absence  of  any  representation  at 
all,  a  constructive  notice  to  the  party  would-be  inferred; 
the  doctrine  of  constructive  notice  does  not  apply  where 
there  has  been  such  a  representation  of  fact.^  If  one 
party  —  a  vendor,  for  example  —  claims  that  the  invali- 
dating effects  of  his  misrepresentations  are  obviated,  and 
that  the  purchaser  was  not  misled  by  them,  either  because 
they  were  concerning  patent  defects  in  the  subject-matter, 
or  because  he  was  from  the  outset  acquainted  with  the 
real  facts,  or  because   he  had  made  inquiry,  and  had 

*  If  the  parties  do  not  stand  upon  an  ments  by  vendor  of  lands  as  to  boun- 
equality.  and  one,  having  better  means  daries,  title,  etc.,  may  be  relied  on, 
ot  liuowledge  than  the  other,  uses  any  though  the  vendee  might  have  con- 
means  to  conceal  the  true  facts,  or  to  suited  the  records:  Olson  v.  Orton,  28 
divert  the  inquiry  from  them,  the  Minn.  36;  but  see  Anderson  v.  Rai- 
transaction  thus  procured  would  be  ney,  100  N.  C.  321.  It  is  said,  on  the 
fraudulent:  Mead  v.  Bunn,  32  N.  Y.  other  hand,  that  grantor  cannot  claim 
275.  to  have  been  misled  by  similar  false 

*  That  is,  the  principle  underlying  statements  on  the  part  of  the  gran- 
the  first  and  second  cases  mentioned  tee,  being  conclusively  presumed  to 
ante,  in  §  892.  know  the  state  of  his  own  title:  Rob- 

*  Drysdale  v.  Mace,  2  Smale  &  G;  ins  v.  Hope,  57  Cal.  493.  See  also 
225,  230.     [It  is  held  that  false  state-  §  810.] 


§  896  EQUITY   JURISPRUDENCE.  1260 

thereby  ascertained  the  truth,  the  foregoing  qualification 
plainly  applies;  it  is  plainly  incumbent  on  the  vendor  to 
prove  the  alleged  knowledge  of  the  purchaser  by  clear 
and  positive  evidence,  and  not  to  leave  it  a  matter  of 
mere  inference  or  implication;  an  opportunity  or  means  of 
obtaining  the  knowledge  is  not  enough/  The  qualification 
applies  no  less  plainly  to  the  case  where  the  party  receiv- 
ing a  representation  has  given  to  him  an  opportunity  of 
examining  into  the  real  facts,  or  where  his  attention  is 
directed  to  the  sources  of  information.  The  mere  oppor- 
tunity or  the  means  of  investigation  are  not  sufiicient. 
Undoubtedly,  if  there  had  been  no  representation,  they 
might  or  would  have  put  the  party  upon  an  inquiry,  and 
would,  therefore,  amount  in  law  to  a  constructive  notice  of 
the  facts  which  might  have  been  learned  by  such  inquiry; 
but  the  positive  representation  of  a  fact  cannot  be  coun- 
teracted by  such  implication.  It  must  be  shown  that  the 
party  proceeded,  in  some  measure,  to  avail  himself  of  the 
opportunity,  —  that  he  took  some  steps  in  making  an  in- 
dependent investigation, — so  that,  although  his  examina- 
tion might  not  have  been  complete  and  successful,  yet  he 
must  be  charged  with  the  knowledge  he  would  have  ac- 
quired by  means  of  a  thorough  investigation.  In  other 
words,  it  must  appear  that,  through  the  opportunity  and 

'  Price  V.  Macaulay,  2  De  Gex,  M.  &  he  shown  clearly  to  have  had  information 

G.  339,  346,  per  Knight  Bruce,  L.  J. :  of  the  real  state  of  the  facts  communi- 

" Supposing,    however,    that   the   de-  cated  to  his  mind."     See  also  Wilson 

fendant   [a   purchaser]    had    actually  v.  Short,  (5  Hare,  366,  378;   Dyer  v. 

known   at  the  time  of  the  purchase  Hargrave,    10  Ves.    505;    Higgins  v. 

what  were  the  real  state  and  condi-  Samels,  2  Johns.  &  H.  460;  Harnett 

tion  of  the  subject-matter  of  the  con-  v.  Baker,  L.  R.  20  Eq,  50;  Rawlins  v. 

tract,  it  may  be  that  he  would  not  be  Wickham,  3   De  Gex  &  J.  304,  314, 

entitled  to  complain.     But  in  order  to  318-320;  Attwood  v.  Small,  6  Clark  & 

enable  a  vendor  to  avail   himself   of  F.   232;   Smith  v.  Reese  River  Co., 

that  defense  in  such  a  case,  he  must  L.  R.  2  Eq.  264;  Conybeare  v.  New 

show  very  clearly  that   the   purchaser  Brunswick  etc.  Co.,  1  De  Gex,  F.  & 

knew  that  to  be   untrue  which   was  J.  578;   9  H.  L.  Cas.  711;   Kisch   v. 

represented   to  him  as  true;    for   no  Cent.  R'y  of  Venezuela,  3  De  Gex,  J. 

man  can  be  heard  to  say  that  he  is  to  &  S.  122;  L.  R.  2  H.  L.  99,  125.     [See 

be  assumed  not  to  have  spoken   the  Redgrate  v,  Hurd,  20  Ch.  Div.  1,  and 

truth It  is  said  that   subse-  especially  the  remarks  of  Jessel,  M. 

quently  he  had  such  notice  as  miglit  R.,  at  p.  21;   Hicks  v.  Stevens,  121 

iMve  led  him  to  ascertain  how  the  facts  IlL  186;  Bank  of  Woodland  v.  Hiatt, 

stood.    That,  however,  ia  not  sufficient  58  CaU  234;  Wentzel  v.  Shulz,  78  CaL 

in  a  oase  of  misrepresentation;  he  must  221.] 


1261 


ACTUAL   FRAUD. 


895 


means  of  inquiry,  he  received  sovie  information  concern- 
ing the  actual  facts,  so  that,  from  considerations  of  ex- 
pediency, he  should  not  be  allowed  to  allege  his  failure 
to  obtain  all  the  knowledge  which  he  might  have  ac- 
quired.' 


Price  V.  Macaulay,  2  De  Gex,  M.  & 
G.  339,  346;  Gibson  v.  D'Este,  2  Younge 
&  C.  Ch.  542,  572;  the  great  case  of 
Attwood  V.  Small,  6  Clark  &  F.  2."^2, 
•well  illustrates  this  position.  The 
vendors  of  the  works  made  certain 
positive  representations  concerning 
the  property.  The  mere  fact  that  the 
.'endees  could  have  visited  the  works, 
and  by  a  personal  examination  have 
ascertained  all  the  facts  for  themselves, 
would  not  lessen  the  effect  of  this  rep- 
resentation. Even  had  the  vendors 
invited  the  purchasers  to  come,  given 
them  an  express  opportunity  to  inves- 
tigate, directed  their  attention  to  this 
means  of  verification,  etc.,  this  would 
not  have  altered  the  result.  The  ven- 
dees would  have  had  a  right  to  saj': 
"No,  you  have  made  a  statement  con- 
cerning an  existing  condition  of  fact 
which  is  all  within  your  own  knowl- 
edge; true,  we  can  come  and  verify 
this  statement  for  ourselves,  but  we 
are  willing  to  rely  on  your  representa- 
tion and  complete  the  purchase." 
Had  they  done  so,  they  would  have 
been  justified  in  doing  it,  and  could 
have  rescinded  the  contract.  But  they 
did  not  do  so.  They  acted  on  the  op- 
portunity; they  availed  themselves  of 
the  means;  they  took  some  steps  in 
making  an  investigation,  and  thus  some 
information  as  to  the  true  condition 
of  affairs  was  communicated  to  their 
minds.  That  the  investigation  was 
not  thorough,  and  the  knowledge  ob- 
tained perfect,  was  their  own  fault; 
whatever  it  was,  they  relied  on  it,  and 
not  on  the  representation  of  the  ven- 
dors. Cox  V.  Middleton,  2  Drew.  209, 
is  also  illustrative.  A  vendor,  in  ne- 
gotiating the  sale  of  a  house,  stated 
that  it  was  "substantially  and  well 
built,"  which  was  false.  Although  the 
vendee  could  very  easily  have  in- 
spected the  house,  and  examined  for 
himself  how  it  was  built,  he  was  not 
obliged  to  do  so,  and  did  not,  and  it 
was  held  that  this  opportunity  which 
he  had  did  not  impair  the  effect  of  the 
misrepresentation.     [See,  in  this  con- 


nection, the  case  of  P».edgrave  v.  Hurd, 
20  Ch.  Div.  1.  Tiie  decision  of  Foy,  J., 
in  that  case  M'as  reversed  by  the  court 
of  appeal  on  review  of  the  evidence, 
Baggallay,  L.  J.,  remarking  (p.  23) 
that  the  investigation  "was  of  a  mo:>t 
cursory  character,  which  could  not 
have  enabled  the  defendant  to  ascer- 
tain the  truth  or  the  falsity  of  the  rep- 
resentation that  had  been  made." 
Attwood  V.  Small,  6  Clark  &  F. 
2.32,  which  was  relied  upon  by  the 
court  below,  was  considered  and  ex- 
plained by  Jessel,  M.  R.,  who  con- 
cludes (p.  17):  "In  no  way,  as  it 
appears  to  me,  does  the  decision, 
or  any  of  the  grounds  of  decision,  in 
Attwood  V.  Small,  support  the  propo- 
sition that  it  is  a  good  defense  to  an 
action  for  rescission  of  a  contract  on 
the  ground  of  fraud  that  the  man 
who  conies  to  set  aside  the  contract 
inquired  to  a  certain  extent,  but  did 
it  carelessly  and  inefficiently,  and 
would,  if  he  had  used  reasonable  dili- 
gence, have  discovered  the  fraud."] 

It  is  also  decided  in  several  cases, 
that  where  a  vendor  makes  untrue 
statements  respecting  a  lease,  —  re- 
specting its  covenants  and  provisions, 
—  although  the  law  would  charge  the 
vendee  with  constructive  notice  of 
what  these  covenants,  etc.,  are,  yet 
such  notice  does  not  obviate  the  effects 
of  the  false  statements;  the  representa- 
tion overrides  what  would  otherwise 
be  taken  at  law  as  a  knowledge  on  the 
part  of  the  purchaser,  and  he  can  take 
advantage  of  it  as  against  the  vendor: 
Van  V.  Corpe,  3  Mvlne  &  K.  2G9; 
Flight  v.  Barton,  3  Mylne  &  K.  282; 
Pope  V.  Garland,  4  Younge  &  C  394, 
401. 

There  is  no  contradiction  between 
these  conclusions  and  tiie  rules  stated 
in  the  two  precetling  paragraphs  (§§ 
893,  894).  The  question  is.  Did  the 
party  rely  on  the  representation,  or 
on  his  own  knowledge?  To  obviate 
the  effect  of  the  representation,  it  must 
be  clearly  and  conclusively  shown  that 
he  relied  on  his  own  knowlcdije.     This 


§  896  EQUITY   JURISPRUDENCE.  1262 

§  896.  Words  of  General  Caution. — The  rule  that  some 
independent  knowledge  of  the  true  facts  must  be  brought 
home  to  the  party  receiving  such  a  representation,  in  or- 
der to  counteract  its  effects  in  misleading  him,  and  to 
prevent  his  reliance  upon  it,  is  of  wide  application. 
Nothing  done  by  the  party  making  the  statement,  and 
no  extrinsic  circumstances,  will  avail,  unless  they  clearly 
lead  to  the  conclusion  that  the  transaction  was  concluded 
upon  the  strength  of  information,  or  substantial  grounds 
for  forming  a  judgment,  other  than  the  representation 
itself.  A  positive  representation  of  fact  cannot  be  ob- 
viated by  any  general  statement  of  the  party  making  it, 
or  by  any  extrinsic  circumstances  which  merely  admit 
of  or  warrant  an  inference  contrary  to  the  representation, 
even  though  of  themselves  such  statements  or  such  cir- 
cumstances might  be  sufficient  to  put  the  other  party 
upon  the  inquiry.  This  is  simply  another  application  of 
the  principle  that  the  right  of  a  party  receiving  a  rep- 
resentation to  rely  upon  it  cannot  be  taken  away  or  inter- 
fered with  by  inference  or  implication.*  If,  therefore, 
the  party  accompanies  or  follows  his  misrepresentation 
by  words  of  general  caution,  or  by  advice  to  the  other 
that  he  consult  his  friends  or  professional  advisers  before 
concluding  the  agreement,  he  does  not  thereby  counter- 

the  general  doctrine  and  the  qualifica-  statements  have  not  misled,  because 
tion  both  demand.  But  neither  of  the  defecta  were  patent,  or  because 
them  requires  that  this  knowledge  be  the  buyer  was,  from  the  outset,  ac- 
perfect,  complete,  accurate.  Where  quainted  with  all  the  facts,  there  it  is 
there  is  an  opportunity  or  means  of  the  completeness  and  accuracy  of  the 
examination,  the  party  may  decline  to  purchaser's  knowledge  alone  which 
use  it,  for  he  has  a  right  to  rely  ou  the  counteracts  the  effect  of  the  represen- 
representation  of  fact,  and  to  remain  tation  and  shows  that  it  was  not  relied 
personally  in  ignorance.  If,  however,  upon  and  did  not  mislead;  in  such 
he  takes  steps  in  an  investigation,  and  case,  therefore,  it  must  be  shown  that 
thus  obtains  some  independent  knowl-  the  purchaser's  knowledge  of  all  the 
edge,  and  afterwards  concludes  the  material  facts  covered  by  the  misrep- 
agreement,  he  must  be  assumed  to  resentation  was  full,  accurate,  and 
have  concluded  it  upon  the  strength  perfect.  The  vital  question  in  each 
of  that  acquired  knowledge,  however  case,  however,  is.  Did  the  party  re- 
partial  and  deceptive,  and  not  upon  ceiving  tlie  representation  rely  upon  it 
the  representation.  Where,  how-  in  concluding  the  agreement  or  other 
ever,  there  is  no  investigation  made  transaction?  or  did  he  rely  upon  his 
after  the  representation,  in  order  to  own  knowledge? 
test  it,  but  the  vendor  claims  that  his         '  Wilson  v.  Short,  6  Hare,  366,  377. 


1263 


ACTUAL   FRAUD. 


897 


act  any  effect  upon  the  transaction  which  his  untrue 
statement  would  otherwise  produce.*  Nor  does  even  the 
sale  of  a  thing  "  with  all  its  faults  "  render  a  contract 
valid  which  might  otherwise  be  impeached  or  defeated 
by  means  of  the  vendor's  representations.' 

§  897.  Prompt  Disaffirmance  Necessary.  —  All  these 
considerations  as  to  the  nature  of  misrepresentations  re- 
quire great  punctuality  and  promptness  of  action  by  the 
deceived  party  upon  his  discovery  of  the  fraud.  The 
person  who  has  been  misled  is  required,  as  soon  as  he 
learns  the  truth,  with  all  reasonable  diligence  to  disaffirm 
the  contract,  or  abandon  the  transaction,  and  give  the 
other  party  an  opportunity  of  rescinding  it,  and  of  re- 


-  Reynell  v.  Sprye,  1  De  Gex,  M.  & 
6.  660,  709,  710,  per  Lord  Cranworth; 
Dobell  V.  Stevens,  3  Barn.  &  C.  623, 
625;  Prescott  v.  W^right,  4  Gray,  461; 
Russell  V.  Brauham,  8  Blackf.  277; 
[Hicks  V.  Stevens,  121  111.  186.]  In  the 
often  quoted  case  of  Reynell  v.  Sprye, 
1  De  Gex.M.  &G.  660,  Lord  Cranworth, 
in  answer  to  the  objection  that  Reynell 
was  cautioned  by  Sprye,  and  was  negli- 
gent in  not  consulting  his  advisers,  said: 
'*  No  such  question  can  arise  in  a  case 
like  the  present,  where  one  contract- 
ing party  has  intentionally  misled  the 
other,  by  describing  his  rights  as  being 
different  from  what  he  knew  them 
really  to  be.  In  such  a  case  it  is  uo 
answer  to  the  charge  of  imputed  fraud 
to  say  that  the  party  alleged  to  be 
guilty  of  it  recommended  the  other 
to  take  advice,  or  even  put  into  his 
hands  the  means  of  discovering  the 
truth.  However  negligent  the  party 
may  have  heen  to  whom  the  incorrect 
statement  has  been  made,  yet  that  is 
a  matter  affording  no  ground  of  de- 
fense to  the  other.  No  man  can  com- 
plain that  anotlier  has  too  implicitly 
relied  on  the  truth  of  what  he  has 
himself  stated." 

^  Where  this  condition  is  a  part  of 
the  agreement,  the  purcliaser  must 
take  the  subject-matter  with  all  its 
defects,  patent  or  latent;  but  the  ven- 
dor is  not  protected  against  his  false 
representations:  Schneider  v.  Heath, 
'A  Camp.  506;  Early  v.  Garrett.  9  Barn. 
&  C.  9:28;  Springwell  v.  Allen,  2  East, 


446,  note.  The  case  of  Harris  v.  Kem» 
ble,  1  Sim.  Ill,  120,  5  Bligh,  N.  S.,  730, 
which  came  before  Sir  John  Leach,  M. 
R.,Lord  Chancellor  Lyndhurst, and  the 
house  of  lords,  is  a  very  instructive  dis- 
cussion of  the  doctrine  concerning  mis- 
representations in  most  of  its  phases. 
A  contract  relating  to  a  theater  was 
made  between  the  joint  owners  of  it, 
for  a  sale  of  the  share  of  one  to  the 
other.  It  was  claimed  that  misrepre- 
sentations had  been  made  as  to  the 
profits.  These  representations  were 
based  upon  the  books  of  accounts, 
which  were  open  to  both  parties,  and 
were  justified  by  the  accounts  as  they 
appeared  on  the  books.  Sir  John 
Leach,  for  these  reasons,  held  against 
the  claim,  and  decided  that  the  repre- 
sentations did  not  avoid  the  contract. 
This  decision  was  beyond  all  doubt 
right,  if  the  premises  of  fact  were 
correct.  Lord  Lyndhurst  and  the 
house  of  lords,  considering  that  the 
agreement  was  unquestionably  pro- 
cured by  the  representations,  and 
that  they  were  made  for  the  purpose 
of  obtaining  it,  found  as  a  fact  that 
the  accounts  were  not  equally  plain 
to  both  parties;  on  the  contrary,  they 
■were  purposely  kept  in  such  a  manner 
that  the  party  not  familiar  with  tliem 
could  not  get  at  their  real  condition 
and  ascertain  the  true  state  of  the 
business  without  the  aid  of  an  expert 
accountant.  They  therefore  held  that 
tlie  party  had  been  niisled,  and  the 
contract  was  rescinded. 


§  898  EQUITY   JURISPRUDENCE.  1264 

storing  both  of  tliem  to  their  original  position.  He  is 
not  allowed  to  go  on  and  derive  all  possible  benefits  from 
the  transaction,  and  then  claim  to  be  relieved  from  his 
own  obligations  by  a  rescission  or  a  refusal  to  perform  on 
his  own  part.  If  after  discovering  the  untruth  of  the 
representations,  he  conducts  himself  with  reference  to 
the  transaction  as  though  it  were  still  subsisting  and 
binding,  he  thereby  waives  all  benefit  of  and  relief  from 
the  misrepresentations.* 

§  898.  VI.  Materiality  of  the  Misrepresentation.  — 
The  last  element  of  a  misrepresentation,  in  order  that  it 
may  be  the  ground  for  any  relief,  affirmative  or  defens- 
ive, in  equity  or  at  law,  is  its  materiality.  The  statement 
of  facts  of  which  it  consists  must  not  only  be  relied  upon 
as  an  inducement  to  some  action,  but  it  must  also  be  so 
material  to  the  interests  of  the  party  thus  relying  and 
acting  upon  it,  that  he  is  pecuniarily  prejudiced  by  its 
falsity,  is  placed  in  a  worse  position  than  he  otherwise 
would  have  been.  The  party  must  suffer  some  pecuniary 
loss  or  injury  as  the  natural  consequence  of  the  conduct 
induced  by  the  misrepresentation.  In  short,  the  repre- 
sentation must  be  so  material  that  its  falsity  renders  it 
unconscientious  in  the  person  making  it  to  enforce  the 
agreement  or  other  transaction  which  it  has  caused. 
Fraud  without  resulting  pecuniary  damage  is  not  a 
ground  for  the  exercise  of  remedial  jurisdiction,  equita- 
ble or  legal;  courts  of  justice  do  not  act  as  mere  tribunals 

>  See  cases  ante,  under  §§  817-820,  2  Barb.  37;  Masson's  Appeal,  70  Pa. 

as  to  effects  of    acquiescence   and    de-  St.    2G,    29;    Anthony  v.  Leftwich,  3 

lay;  [also po.s<,  §  917.]    Vigers  v.  Pike,  Rand.     258;    McCorkle    v.    Brown,    9 

8  Clark  &  F.  5G2,  630,  per  Lord    Cot-  Sinedes&  M.  107;  Gibbs  v.  Champion, 

tenham;  Whitney  v.  Allaire,  4  Denio,  3  Ohio,  335;  Pratt  v,  Carroll,  8  Cranch, 

554  (when  a  party,  after  the  making  471;  McMichael  v.  Kilmer,  76  N.  Y. 

a  contract,  but  before  its  performance,  36,  46;  Schiffer  v.  Dietz,  83  N.  Y.  300; 

discovers  the  fraud  of  the  other,  and  Vernol  v.  Vernol,   63   N.   Y.  45;  Vaa 

still  goes  on  and  performs  his  part,  he  Liew  v.  Johnson,  4  Hun,  415;  Parsons 

is  thereby  precluded  from  the  equita-  v.   Hughes,    9   Paige,   591;  Bassett  v. 

ble  remedy  of   cancellation,   and    also  Brown,    105    Mass.  551;    Northrop    v. 

from    the   remedy  of  recovering   back  Bushnell,  38  Conn.  498;  Bobb  v.  Wood- 

the  consideration,   but   not    from    the  ward,  50  Mo.  95;  [Acer  v.  Hotchkiss, 

legal  remedy  of  damages    for  deceit);  97  N.    Y.   395;    Menll  v.    Wilson,  66 

Woodcock  V.  Bennet,!  Cow.  711;  13  Mich.  232.] 
Am.  Dec.  568;  Voorhees  v.  De  Meyer, 


1265 


ACTUAL    FRAUD. 


§  899 


of  conscience  to  enforce  duties  which  are  purely  morah* 
If  any  pecuniary  loss  is  shown  to  have  resulted,  the  court 
will  not  inquire  into  the  extent  of  the  injury;  it  is  suffi- 
cient if  the  party  misled  has  been  very  slightly  preju- 
diced, if  the  amount  is  at  all  appreciable.^ 

§  899.  Effects  of  a  Misrepresentation. — Having  thus 
described  the  elements  of  a  fraudulent  misrepresentation 
in  equity,  I  will  add,  in  order  to  complete  the  account,  a 
brief  statement  of  its  effects  upon  the  rights  of  the  de- 
frauded, and  the  duties  of  the  defrauding  party.  Wher- 
ever an  agreement  or  other  like   transaction   has   been 


'  Fellowes  v.  Lord  Gwydyr,  1  Sim. 
63;  1  Russ .  &  M.  S3;  Slim  v.  Croucher, 
1  De  Gex,  F.  &  J.  518;  Flint  v.  Woodin, 
9  Hare,  61S;  Polhill  v.  Walter,  3  Barn. 
&  Adol.  114;  Clarke  v.  White.  12  Pet. 
178;  Wells  v.  Waterhouse,  22  Me.  131; 
Taylor  v.  Guest,  58  N.  Y.  262;  Wuest- 
hoflf  V.  Seymour,  22  N.  J.  Eq.  66; 
Marr's  Appeal,  78  Pa.  St.  06;  Ab- 
bey V.  Dewey,  25  Pa.  St.  413; 
Lindsey  v.  Lindsey,  34  Miss.  4,32; 
Braiiham  v.  Record,  42  Ind.  181; 
Rogers  v.  Hiargins,  57  111.  244;  Wells 
V.  Millet,  -23  Wis.  64;  Morrisou 
V.  Lo.ls,  39  Cal.  381;  Bartlettv.  Blaine, 
83  111.  25;  25  Am.  Rep.  346;  McShane 
V.  Hazlehurst,  50  Md.  107;  Bennett  v. 
Judson,  21  N.  Y.  238.  [See  also  §§  879, 
890;  Seeley  V.  Reed,  25  Fed.  Rep.  365; 
Marsh  v.  Cook,  32  N.  J.  Eq.  262; 
Reay  v.  Butler,  69  Cal.  580;  Marriner 
V.  Denuison,  78  Cal.  202.]  Fellowes 
V.  Lord  Gwydyr,  1  Sim.  63,  1  Russ. 
&  M.  83,  is  a  very  instructive 
case.  The  defendant,  as  vendee,  en- 
tered into  a  contract  of  purchase,  as 
he  supposed,  with  one  B,  through 
the  active  instrumentality  of  A,  who 
falsely  represented  himself  as  an  agent 
for  B.  It  turned  out  that  A  was  the 
real  party  in  interest,  and  he  sought 
to  enforce  the  contract.  Tlie  misrep- 
resentation was  set  up  as  a  defense. 
There  was  nothing  proved  from  which 
it  could  be  inferred  that  tlie  defendant 
would  not  have  made  the  same  con- 
tract, on  the  same  terms,  with  A 
himself;  nor  was  it  shown  that  he  had 
sustained  any  loss,  damage,  or  incon- 
venience from  the  false  statements. 
The  court  therefore  held  the  misrepre- 
eentations  to  be  immaterial,  and  to  be 
2  Eq.  Jur.  — 80 


no  defense.  In  Wuesthoffv.  Seymour, 
22  N.  Y.  Eq.  66,  the  vendor,  in  the 
negotiation  which  led  to  a  contract  for 
the  sale  of  land,  falsely  represented 
to  the  vendee  that  a  certain  alley  on 
the  premises  was  only  a  private  right 
of  way  belonging  to  a  few  persons 
only;  in  fact,  it  was  a  public  alley,  a 
public  highway.  This  false  represen- 
tation being  set  up  as  a  defense  in  a 
suit  for  a  specific  performance,  the 
court  held  that  it  was  immatoi'iai;  that 
it  worked  no  material  injury  to  the 
defendant,  since  his  rights  of  property 
were  substantially  the  same  in  either 
case.  With  great  deference  to  the 
juilgment  of  so  able  a  court,  this  de- 
cision cannot,  in  my  opinion,  be 
supported  on  principle.  The  public 
easement  was  certainly  a  far  greater 
encumbrance,  and  more  detrimental 
to  the  pecuniary  value  of  the  premises, 
than  a  private  easement  in  favor  of  a 
few  specified  persons  would  iiave  been. 
One  fact  is  a  test  of  the  difference. 
The  purchaser  might  be  able,  by  ne- 
gotiation with  the  few  persons  en- 
titled, to  extinguish  their  easement, 
but  he  could  not,  by  any  private  pro- 
ceeding or  negotiation,  extinguish  the 
public  easement  of  the  highway. 
Again,  the  private  easement  would  be 
lost  by  non-user  for  a  specified  jieriod; 
if  the  puljlic  easement  could  be  de- 
stroyed at  all  in  tliis  manner,  it  would 
require  a  much  longer  time.  It  should 
be  remembered  that  if  aw//  pecuniary 
loss  results  from  the  misrepresenta- 
tion, the  quaii/um  of  it  is  immaterial. 
■^  Cadman  v.  Horner,  18  Ves.  10; 
Smith  V.  Kay,  7  H.  L.  Cas.  750, 
775. 


§  899  EQUITY   JURISPRUDENCE.  1266 

procured  by  means  of  a  material  fraudulent  misrepresen- 
tation by  one  of  the  parties,  the  other  has  an  election  of 
equitable  remedies.  The  injured  party  may,  at  his  option, 
compel  the  fraudulent  party  to  make  good  his  representa- 
tion —  that  is,  to  carry  it  into  operation  in  the  nature  of  a 
specific  performance  —  when  it  is  of  such  a  nature  that  it 
can  be  thus  performed;  or  he  may  rescind  the  agreement, 
and  procure  the  transaction  to  be  completely  canceled 
and  set  aside.*  Such  a  fraudulent  misrepresentation, 
even  though  it  relates  only  to  a  portion  of  a  contract, 
furnishes  a  complete  defense  to  an  enforcement  of  the 
whole  agreement.  The  fraudulent  party  will  not  be  per- 
mitted, against  the  objection  of  the  other,  to  waive  that 
particular  portion  with  which  the  false  statement  is 
concerned,  and  to  obtain  a  specific  performance  of  the 
remainder.^  A  material  misstatement  of  fact,  made  in- 
nocently, and  therefore  not  fraudulent,  if  it  relates  to  the 
substantial  terms  of  the  agreement,  to  its  very  essence, 
will  also  constitute  a  complete  defense  to  the  specific  exe- 
cution of  the  contract,  although  it  may  not  be  a  sufiQcient 

Rawlins  v.  Wickham,  3  De  Gex  &  auxiliary  relief   may  be  necessary   to 

J.    304,    321,    322;   Clermont  v.   Tas-  render  these  remedies  completely  ef- 

burgh,  1  Jacob  &  W.  112;  Edwards  v.  fective.      Thus   when   a   person    has 

McLeay,  2  Swanst.  287;  Coop.  t.  Eld.  through  fraud  obtained  the  legal  title 

308;  Pulsford  V.  Richards,  17  Beav.  87,  to  land  or  other  property,  equity  con- 

95;  Att'y-Gen.  v.  Ray,  L.  R.  9  Ch.  397;  stantly  treats  him  as  a  trustee  for  the 

Pearson  v.  Morgan,  2  Brown  Ch.  388;  one  equitably  entitled,  and  hence  has 

Evans  v.  Bicknell,  6  Ves.  174;  Savery  sprung   the    doctrine   of    constructive 

V.   King,  5  H.  L.   Cas.   627;  Western  trusts.     The  court  will  also  grant  an 

Bink  V.   Addie,  L.  R.  1  H.  L.  S.  145,  injunction  to  restrain  the  fraudulent 

102;    McFerran  v.  Taylor,    3    Cranch,  party  from  disposing  of  the  property, 

269;  Neblett  v.   Macfarland,   92  U.  S.  or  from   enforcing  an  executory  con- 

101;Gryme3V.  Sanders,  93  U.S.  55,  62;  tract  or  even  a  judgment  obtained  by 

Bacon  V.  Bronson,   7  Johns.   Ch.   194;  fraud,  and  the  like.     [See  §§  221,9)4, 

11  Am.Dec.  449;  Neilson  v.  McDonald,  note,  1340,  1363.] 

G  Johns.  Ch.  '201;  McCall  v.  Davis,  56         ^  "Viscount  Clermont  v.  Tasburgh,  I 

Pa.  St.  431;  Catling  v.  Newell,  9  Ind.  Jacob  &  W.  112,  119,  per  Sir  Thomas 

572;  Johnson  V.  Jones,  13  Smedes&  M.  Phuner,     The  language  of  the  judge 

580.     [See  also,  as  illustration  of  com-  in  this  case  plainly  describes  a  fraudu- 

pelling  the  fraudulent  party  to  make  lent  misrepresentation;  all  his  expres- 

good     his    representations.     Piper  v.  sions  are  utterly  inconsistent  with  aa 

Hoard,  107  N.  Y.  73;   1  Am.  St.  Rep.  innocent    though    untrue    misdescrip- 

785.]     Courts  of  equity  in  administer-  tion  or  other  misstatement.     See  also 

lug    these    two     principal     remedies,  Cadman  v.  Horner,  18  Ves.  10;  Boyn- 

viz.,  either  cancellation  or  compelling  ton  v.  Hazelboom,  14  Allen,   107;  92 

a  party  to  make  good  his  representa-  Am.    Dec.    7H8;   Thompson  v.  Tod,  1 

tion  by    a    specific    performance,    will  Pet.  C.  C.  380. 
also   grant  whatever    additional   and 


1267 


ACTUAL   FRAUD. 


899 


ground  for  any  affirmative  relief.'  On  the  other  hand, 
where  the  misrepresentation,  though  material  and  untrue, 
is.innocent,  made  in  a  bona  fide  belief  of  its. truth,  and 
therefore  not  fraudulent,  and  it  relates  to  or  concerns 
some  portion  only  of  the  contract,  it  is  not  necessarily 
nor  generally  a  complete  defense  to  the  enforcement  of 
the  contract.  Under  such  circumstances,  there  is  no  rule 
of  equity  which  prevents  a  partial  enforcement  of  a  con- 
tract which  is  divisible,  or  the  specific  execution  of  it  with 
compensation  in  respect  of  its  portions,  incidents,  or  fea- 
tures which  does  not  correspond  with  the  description.* 
The  destructive  effect  of  fraud  upon  any  contract,  convey- 
ance, or  other  transaction  is  so  essential  and  far-reaching 
that  no  person,  however  free  from  any  participation  in 
the  fraud,  can  avail  himself  of  what  has  been  obtained  by 
the  fraud  of  another,  unless  he  is  not  only  innocent,  but 
has  given  some  valuable  consideration.'    Although  the  bur- 


'  See  ante,  §  889,  and  cases  cited. 
For  examples,  where  the  vendor's  un- 
true statement  was  as  to  his  title  to 
the  whole  property  contracted  to  be 
sold;  or  where  it  concerned  the  nature 
of  the  entire  estate,  as  representing  it 
to  be  in  fee  when  it  was  leasehold  or 
for  life;  or  where  it  related  to  some 
minor  feature,  but  that  feature  af- 
fected the  whole  subject-matter  alike. 
In  such  cases  a  partial  enforcement 
with  compensation  would  plainly  be 
impossible. 

*  All  the  numerous  instances  of  a 
specific  performance  with  compensa- 
tion or  abatement  from  the  price  on 
account  of  some  partial  failure  of  the 
Bubject-matter  to  agree  with  the  de- 
scription are  illustrations  and  proofs 
of  the  statement  in  the  text.  In 
Powell  V.  Elliott,  L.  R.  10  Ch.  424, 
the  vendors  of  a  large  coal  mine  made 
misrepresentations  as  to  the  net  in- 
come, and  a  specific  execution  with  a 
deduction  from  the  agreed  price  was 
decreed.  In  Whittemore  v.  Whitte- 
more,  L.  R.  8  Eq.  603,  there  was  a 
serious,  but  not  intentional,  misrepre- 
eentation  as  to  the  amount  of  land, 
and  the  agreement  was  enforced 
against  the  vendee  with  a  correspond- 
ing abatement.  In  Levland  v.  lUing- 
Worth,  2  De  Gex,  F,   &  J.  248,  there 


was  a  misrepresentation  by  the  vendors 
as  to  a  water  supply,  and  the  vendee 
was  given  the  option  of  either  being 
discharged  entirely  from  the  contract 
or  of  completing  it  with  compensation. 
Even  where  the  misrepresentation  ia 
intentional,  and  the  remedy  of  rescis- 
sion would  be  granted,  still  the  con- 
tract is  voidable,  and  not  void,  and  in 
accordance  with  the  rule  stated  in  the 
former  part  of  the  above  paragraph, 
the  injured  party  may  waive  his  right 
to  a  complete  defeat,  and  may  insist 
on  a  partial  specific  performance  with 
compensation  for  the  defect,  unless 
the  case  is  such  as  furnishes  no  foun- 
dation for  estimating  the  amount  of 
the  compensation.  See  also  Pratt  v. 
Carroll,  8  Cranch,  471;  Voorhees  v.  De 
Meyer,  2  Barb.  37;  Woodcock  v.  Ben- 
net,  1  Cow.  711;  13  Am.  Dec.  568; 
Masson's  Appeal,  70  Pa.  St.  26,  29; 
Anthony  v.  Leftwich,  3  Rand.  238, 
258;  McCorkle  v.  Brown,  9  Smedes 
&  M.  167;  Gibbs  v.  Champion,  3  Ohio 
335;  fMcMullin's  Adra'r  v.  Sanders,  79 
Va.  356,  365.] 

*  Scholefield  v.  Templer,  4  De  Gex 
&  J.  429,  433,  per  Campbell, 
L.  C;  Topham  v.  Duke  of  Port- 
land, 1  De  Gex,  J.  &  S.  517,  569,  per 
Turner,  L.  J. :  "I  take  it  to  be  clear 
tliat  no  person,  however  innocent  he 


§  900  EQUITY    JURISPRUDENCE.  1268 

den  of  the  fraud  thus  passes  by  transfer  even  to  an  inno- 
cent person,  the  right  to  relief,  it  seems,  does  not  neces- 
sarily pass  in  the  same  manner.  The  general  rule  that  a 
misrepresentation  must  be  relied  upon  by  the  party  receiv- 
ing it,  in  order  that  it  may  be  a  sufficient  ground  for  im- 
peaching or  defeating  a  contract,  extends  to  the  assign- 
ment of  an  agreement  which,  as  between  the  original 
parties,  is  affected  by  a  misrepresentation.  If  a  contract 
between  A  and  B,  voidable  at  the  instance  of  B  on  ac- 
count of  A's  misrepresentation  made  to  him  in  procuring 
it,  is  assigned  by  B  to  a  third  person,  C,  who  is  in  no  such 
relations  with  the  original  parties  that  he  is  affected  by 
the  fraud,  and  to  whom  no  false  statements  are  made  in 
obtaining  the  transfer,  the  agreement  thus  assigned,  if 
otherwise  binding  upon  him,  would  be  valid  against  C;  at 
least  its  enforcement  against  him  would  not  be  hindered 
by  A's  original  misrepresentations,  since  he  had  not  acted 
upon  their  faith  and  credit.^ 

§  900.  Second.  Fraudulent  Concealments. — A  failure 
to  disclose  some  material  fact  affecting  the  subject-matter, 
however  unintentional  and  blameless,  may  be  and  often 
is  a  sufficient  ground  to  defeat  the  specific  performance 
of  a  contract,  since  that  particular  relief  is  only  granted 
when  it  is  just  and  equitable  to  both  parties.  Such  a  fail- 
ure to  disclose  would  not  be  fraudulent;  the  term  '*  con- 
cealment" does  not  strictly  apply  to  it;  and  it  is  only  of 
fraudulent  concealments  we  are  now  to  speak,  as  one  of 
the  two  main  divisions  of  actual  fraud.  Fraudulent  con- 
may  himself  be,  can,  where  there  is  no  and  can  be  taken  advantage  of  only  by 
valuable  consideration,  derive  a  title  the  person  defrauded,  his  representa- 
under the  fraud  of  another":  Hugue-  tives  and  privies;  the  right  to  a 
nin  V.  Baseley,  14  Ves.  273;  Russell  v.  remedy  is  personal:  Harris  v.  Kemble, 
Jackson,  10  Hare,  204,  212;  Bowen  v.  5  Bligh,  N.  S.,  730,  751.  The  prop- 
Evans,  2  H.  L.  Cas.  259;  Goddard  v.  osition  of  the  text  assumes  that  the 
Carlisle,  9  Price,  169;  Vane  v.  Vane,  contract  alone  is  assigned.  If  a  cause 
L.  R.  8  Ch.  383.  [See  also  §  918.]  of  action  on  account  of  the  fraud  has 
This  is  the  converse  of  the  rule  that  a  accrued  in  B's  favor,  and  that  is  ex- 
hona  fide  purchaser  for  a  valuable  con-  pressly  assigned  to  C  with  the  con- 
sideration may  acquire  a  title  free  from  tract,  —  which  is  permissible  under 
an  equity  arising  out  of  a  prior  fraud,     modern    legislation   in   many   of    the 

1  Smith  v.  Clarke,  12  Ves.  477,484.  states,  —  the  result  would  be  dififer- 
Fraud  only  renders  contracts  voidable,     ent. 


1269 


ACTUAL    FRAUD. 


§901 


cealment  implies  knowledge  and  intention.  Although 
there  are  some  species  of  fraudulent  misrepresentations, 
as  has  been  shown,  without  these  qualities,  it  is  hardly 
possible  to  conceive  of  a  fraudulent  concealment  without 
a  knowledge  of  the  fact  suppressed  possessed  by  the  party, 
and  an  intention  not  to  disclose  such  fact. 

§  901.  General  Doctrine  —  Duty  to  Disclose.  —  The 
general  doctrine  with  respect  to  concealment  as  a  form  of 
actual  fraud,  and  as  distinguished  from  those  analogous 
violations  of  fiduciary  duty  which  do  not  constitute  actual 
fraud,  but  may  be  included  within  the  term  "  constructive 
fraud,"  may  be  stated  as  follows:  If  either  party  to  a  trans- 
action conceals  some  fact  which  is  material,  which  is 
within  his  own  knowledge,  and  luhich  it  is  his  duty  to  dis- 
close, he  is  guilty  of  actual  fraud. ^     It  is  very  difficult  to 


1  Gibson  v.  D'Este.  2  Younge  &  C. 
Ch.  542;  Wilde  v.  Gibson,  1  H.  L.  Cas, 
605;  Edwards  v.  McLeay,  2  Swanst. 
287;  Coop.  308;  Fox  v.  Mackreth,  2 
Brown  Ch.  400,  420;  Phillips  v.  Horn- 
fray,  L.  R.  6  Ch.  770;  Baskcomb  v. 
Beckwith.  L.  R.  8  Eq.  100;  Denny  v. 
Hancock,  L.  R.  6  Ch.  1;  Haywood  v. 
Cope,  25  Beav.  140;  Lucas  v.  James,  7 
Hare,  410;  Drysdale  v.  Mace,  5  De  Gex, 
M.  &  G.  103;  2  Smale  &  G.  225;  Dol- 
man V.  Nokes,  22  Beav.  402;  Bowles 
V.  Stewart,  1  Schoales  &  L.  209,  224; 
Roddy  V.  Williams,  3  Jones  &  L.  1; 
Gordon  v.  Gordon,  3  Swanst.  400; 
Leonard  v.  Leonard,  2  Ball  &  B.  171; 
Broderick  v.  Broderick,  1  P.  Wms. 
240;  Rolt  V.  White,  3  De  Gex,  J.  &  S. 
360;  Mackay  v.  Douglas,  L.  R.  14  Eq. 
106;  Dicconson  v.  Talbot,  L.  R.  6  Ch. 
32;  Vane  v.  Vane,  L.  R.  8  Ch.  383; 
Stanley  v.  Stanley,  L.  R.  7  Ch.  Div. 
589;  People's  Bank  v.  Bogart,  81  N.  Y. 
101;  37  Am.  Rep.  481 ;  Brown  v.  Mont- 
gomery, 20  N.  Y.  287;  75  Am.  Dec. 
404;  Livingston  v.  Peru  Iron  Co.,  2 
Paige.  390;  Bench  v.  Sheldon,  14  Barb. 
66;  Nichols  v.  Pinner,  18  N.  Y.  295; 

23  N.  Y.  264;  Hennequin  v.  Naylor, 

24  N.  Y.  139;  Hall  v.  Naylor,  18  N.  Y. 
588;  75  Am.  Dec.  269;  Allen  v.  Ad- 
dington,  7  Wend.  9,  20;  Bank  of  Re- 
public V.  Baxter,  31  Vt.  101;  Paddock 
V.  Strobridge,  29  Vt.  470;  Roseman  v. 
Canovan,  43  Cal.  110,  117;  Drake  v. 
Collins,  5  How.  (Miss.)  253;   Bowman 


v.  Bates,  2  Bibb,  47;  4  Am.  Dec.  677; 
Rawdon  v.  Blatchford,  1  Sand.  344; 
Holmes's  Appeal,  77  Pa.  St.  50;  Swimm 
V.  Bush,  23  Mich.  99;  Snelson  v.  Frank- 
lin, 6  Munf.  210;  McNiel  v.  Baird,  6 
Munf.  316;  Emmons  v.  Moore,  85  IlL 
304;  Dameron  v.  Jamison,  4  Mo.  App. 
299;  Connelly  v.  Fisher,  3  Tenn.  Ch. 
382;  Young  v.  Hughes,  32  N.  J.  Eq. 
372;  Howard  v.  Gould,  28  Vt.  523;  67 
Am.  Dec.  728;  Fitzsimmous  v.  Joslin, 
21  Vt.  129;  52  Am.  Dec.  46;  Hanson 
Edgerly,  29  N.  H.  343;  Schiffer  v. 
Dietz,  83  N.  Y.  300;  McMichael  v. 
Kilmer,  76  N.  Y.  36,  44;  Dambmann 
V.  Schulting,  75  N.  Y.  55,  61;  Hadley 
v.  Clinton  etc.  Co.,  13  Ohio  St.  502; 
82  Am.  Dec.  454;  Goninan  v.  Stephen- 
son, 24  Wis.  75;  Hastings  v.  O'Don- 
nell.  40  Cal.  148;  [Stewart  v.  Wyoming 
C.  R.  Co.,  128  U.  S.  383;  People's 
Bank  v.  Bogart,  81  N.  Y.  108;  37  Am. 
Rep.  481;  Wood  v.  Amory,  105  N.  Y. 
281;  Whitman  v.  Bowden,  27  S.  C.  53; 
Griel  v.  Lomax,  89  Ala.  420;  Horton 
v.  Handviel,  41  N.  J.  Eq.  57.]  The 
general  doctrinewas  very  clearly  stated 
by  Earl,  J.,  in  Dambmann  y.  Schult- 
ing, 75  N.  Y.  55,  61 :  "  The  general  rule 
is,  that  a  party  engaged  in  a  business 
transaction  with  another  can  commit 
a  legal  fraud  only  by  fraudulent  mis- 
representations of  facts,  or  by  such 
conduct  or  such  artifice  for  a  fraudu- 
lent purpose  as  will  mislead  the  other 
party  or  throw  him  ofif  from  his  guard. 


§  901  EQUITY   JURISPRUDENCE.  1270 

lay  down  any  general  formula  whicli  shall  be  more  definite 
than  this,  and  at  the  same  time  accurate.  The  difficulty 
consists  in  stating  a  general  rule,  in  harmony  with  decis- 
ions of  authority,  as  to  the  duty  of  either  party  to  disclose 
facts  which  are  within  his  knowledge.  It  is  certain  that 
every  concealment  or  failure  to  disclose  material  facts 
known  to  one  party  is  not  fraud  in  equity  or  at  law, 
whatever  quality  it  may  have  before  the  tribunal  of  the 
individual  conscience.  It  has  never  been  contended,  in 
our  system  of  jurisprudence,  that  a  vendor  in  a  contract 
of  sale  is  bound  to  disclose  all  facts  which,  if  known  by 
the  buyer,  would  prevent  or  tend  to  prevent  him  from 
making  the  purchase.  Much  less  has  it  ever  been  main- 
tained that  the  buyer  is  bound  to  discover  all  facts  known 
to  himself  which  would  enhance  the  value  of  the  article 
sold  or  affect  the  conduct  of  the  vendor.  Even  where  the 
buyer  purchases  on  credit,  his  mere  failure  to  disclose  his 
indebtedness,  or  his  embarrassed  financial  condition,  is 
not  necessarily  a  fraudulent  concealment.  The  same  is 
generally  true  of  all  other  species  of  contracts  and  trans- 
actions, except  of  those  species  of  agreements  or  engage- 
ments which  are  in  their  very  essential  nature  intrinsically 
fiduciary,  involving  a  condition  of  absolute  good  faith. 
While  the  decisions  admit  these  propositions,  they  are 
agreed,  on  the  other  hand,  that  it  is  only  silence  which  is 
permitted.  If  in  addition  to  the  party's  silence  there  is 
any  statement,  even  any  word  or  act  on  his  own  part, 

and  thus  cause  him  to  omit  inquiry  or  table  obligation  to  give  full  informa- 
examinatioa  which  he  would  other-  tion  to  the  other  party,  —  information 
wise  make.  A  party  buying  or  sell-  which  the  other  party  has  a  right,  not 
ing  property,  or  executing  instru-  merely  in  foro  conscienlice,  but  juris  et 
ments,  must,  by  inquiry  or  examina-  dejure,  to  have, — then  the  withhold- 
tion,  gain  all  the  knowledge  he  desires,  ing  such  information  purposely  may 
He  cannot  proceed  blindly,  omitting  be  a  fraud."  All  of  the  foregoing 
all  inquiry  and  examination,  and  then  cases  show  implicitly,  and  many  of 
complain  that  the  other  party  did  not  them  "hold  expressly,  the  converse  of 
volunteer  all  the  information  he  had.  the  rule  given  in  the  text,  namely, 
Such  is  the  general  rule.  But  there  that  in  all  transactions,  where  there  is 
are  exceptions  to  this  rule.  Where  no  legal  or  equitable  duty  to  make  a 
there  is  such  a  relation  of  trust  and  disclosure,  the  failure  to  disclose  mate- 
confidence  between  the  parties  that  rial  facts  known  to  one  party  alone  is 
the  one  is  under  some  legal  or  equi-  not  a  fraudulent  concealment  by  him. 


1271 


ACTUAL    FRAUD. 


§902 


which  tends  aflirmatively  to  a  suppression  of  the  trutli, 
to  a  covering  up  or  disguising  the  truth,  or  to  a  with- 
drawal or  distraction  of  the  other  party's  attention  or  ob- 
servation from  the  real  facts,  then  the  line  is  overstepped, 
and  the  concealment  becomes  fraudulent.  The  maxim 
is,  Aliud  est  celare,  aliud  tacere} 

§  902.  When  Duty  to  Disclose  Exists.  —  Concealment 
becomes  fraudulent  only  when  it  is  the  duty  of  the 
party  having  knowledge  of  the  facts  to  discover  them 
to  the  other;  and  this_ brings  back  the  question,  "When 
does  such  duty  rest  upon  either  party  to  any  trans- 
action? All  the  instances  in  which  the  duty  exists, 
and  in  which  a  concealment  is  therefore  fraudulent, 
may  be  reduced  to  tliree  distinct  classes.  These  three 
classes    are,  in   general,  clearly    distinct    and    separate, 

where  the  sheep  were;  went  to  the 
plaintiff,  and  witliout  disclosing  the 
fact  of  liis  discovery  or  intimating  it 
in  any  way,  asked  tl»e  plaintiff  if  he 
had  found  the  flock;  plaintiff  answered 
that  he  had  not;  defendant  then  re- 
marked that  he  "supposed  plaintifiF 
never  would  find  them,"  and  there- 
fore offered  to  give  plaintiff  ten  dol- 
lars for  them;  plaintiff  assented,  and 
gave  the  defendant  a  bill  of  sale. 
On  discovering  these  facts,  plaintiff 
brought  the  suit  to  recover  back  the 
sheep  and  rescind  the  sale,  and  the 
suit  was  sustained.  The  court  said 
that  the  defendant  might  have  kept 
silence,  but  the  remark  which  he  vol- 
unteered was  plainly  designed  to  mis- 
lead the  plaintiff,  and  was  a  fraudulent 
concealment  and  misrepresentation. 
These  cases  were  actions  at  law,  but 
they  illustrate  the  doctrine  in  equity 
as  well  as  at  law,  [See  also  Newell  v. 
Randall,  32  Minn.  171;  50  Am.  Rep. 
562.  But  it  does  not  follow  that  be- 
cause information  on  some  material 
points  is  offered,  or  is  given  on  re- 
quest, by  a  purchaser  from  a  court  of 
chancery,  tiiat  it  must  therefore  be 
given  on  all  others  as  to  which  it  is 
neither  offered  or  requested,  and  con- 
cerning which  there  is  no  implied  rep- 
resentation in  what  is  actually  stated: 
Coaks  V.  Boswell,  11  App.  Cas.  (H.  L.) 
232,  reversing  27  Ch.  Div.  424,  and 
restoring  23  Ch.  Div.  302.] 


■  In  Turner  v.  Harvey,  Jacob,  169, 
ITS,  Lord  Eldon,  after  stating  the 
purchaser's  right  in  general  to  keep 
silence,  added:  "A  very  little  is  suf- 
ficient to  affect  the  application  of  that 
principle.  If  a  word  —  a  single  word 
—  be  dropped  which  tends  to  mislead 
the  vendor,  that  principle  will  not  be 
allowed  to  operate."  See  also  Davies 
v.  Cooper,  5  Mylne  &  C.  270;  Nickley 
V.  Thomas,  22  Barb.  652;  Bench  v. 
Sheldon,  14  Barb.  66;  Roseman  v. 
Canovan,  43  Cal.  110;  Dambmann  v. 
Schulting,  75  N.  Y.  55,  61. 

Although  a  party  may  keep  absolute 
silence  and  violate  no  rule  of  law  or 
equity,  yet  if  he  volunteers  to  speak 
and  to  convey  information  which  may 
influence  the  conduct  of  the  other 
party,  he  is  bound  to  discover  the 
whole  truth.  A  partial  statement 
then  becomes  a  fraudulent  conceal- 
ment, and  even  amounts  to  a  false  and 
fraudulent  misrepresentation.  As  il- 
lustrations: In  Nickley  v.  Thomas, 
22  Barb.  652,  defendant  sold  a  horse 
to  the  plaintiff,  knowing  that  it  was 
balky  by  habit  and  had  repeatedly 
balked.  He  told  the  plaintiff  that 
the  horse  "  balked  ori'-e,  and  was 
whipped  up  and  went."  This  was  held 
to  be  a  fraudulent  concealment.  In 
Bench  v.  Sheldon,  14  Barb.  66,  plain- 
tiff had  lost  a  flock  of  sheep,  and  had 
searched  for  them  several  days  with- 
out   success.      Defendant    discovered 


§  902  EQUITY   JURISPRUDENCE.  1272 

although  their  boundaries  may  sometimes  overlap,  or  a 
case  may  fall  within  two  of  them:  1.  The  first  class  in- 
cludes all  those  instances  in  which,  wholly  indepeudent 
of  the  form,  nature,  or  object  of  the  contract  or  other 
transaction,  there  is  a  previous,  existing,  definite  fidu- 
ciary relation  between  the  parties,  so  that  the  obligation 
of  perfect  good  faith  and  of  complete  disclosure  always 
arises  from  the  existing  relations  of  trust  and  confidence, 
and  is  necessarily  impressed  upon  any  transaction  which 
takes  place  between  such  persons.  Familiar  examples 
are  contracts  and  other  transactions  between  a  principal 
and  agent,  a  client  and  attorney,  a  beneficiary  and  trus- 
tee, a  ward  and  guardian,  and  the  like.  2.  The  second 
class  embraces  those  instances  in  which  there  is  no  exist- 
ing special  fiduciary  relation  between  the  parties,  and  the 
transaction  is  not  in  its  essential  nature  fiduciary,  but  it 
appears  that  either  one  or  each  of  the  parties,  in  enter- 
ing into  the  contract  or  other  transaction,  expressly  re- 
poses a  trust  and  confidence  in  the  other;  or  else  from 
the  circumstances  of  the  case  the  nature  of  their  deal- 
ings, or  their  position  tow^ards  each  other,  such  a  trust 
and  confidence  in  the  particular  case  is  necessarily  im- 
plied. The  nature  of  the  transaction  is  not  the  test  in 
this  class.  Each  case  must  depend  upon  its  own  circum- 
stances. The  trust  and  confidence,  and  the  consequent 
duty  to  disclose,  may  expressly  appear  by  the  very 
language  of  the  parties,  or  they  may  be  necessarily  im- 
plied from  their  acts  and  other  circumstances.^     3.  The 

*  Cases  illustrating  fiduciary  relation  bot,  L.  R.  6  Ch.  32;  Vane  v.  Vane,  L. 

and  duty  to  disclose  from  the  particu-  R.  8  Ch.  383;   Stanley  v.  Stanley,  L. 

lar  circumstances  of   the  transaction:  R.  7  Ch.  Div.  589;  Hanson  v.  Edgerly, 

Bowles  V.    Stewart,   1  Schoales  &  L.  29  N.  H.  343;  Fitzsimmons  v.  Joslin, 

209,  224;  Roddy  v.  Williams,  3  Jones  21  Vt.  129;  52  Am.  Dec.  46;  Howard 

&L.  1;  Gordon  v.  Gordon,  3  Swanst.  v.  Gould,  28  Vt.  523;    67   Am.  Dec. 

400;  Leonard  v.  Leonard,  2  Ball  &  B.  728;    Paddock   v.   Strobridge,   29  Vt. 

171;    Broderick   v.    Broderick.    1    P.  470;  Bank  of   Republic  v.  Baxter,  31 

Wms.  239;  Rolt  v.  White,  3  De  Gex,  Vt.    101;    Brown  v.    Montgomery,  20 

J.  &  S.  3G0,  365,  per  Lord  Westbury;  N.  Y.  287;  75  Am.  Dec.  404;  Schiflfer 

Mangles  v.  Dixon,  1  Macn.  &  G.  437;  v.  Dietz,  83  N.  Y.  300;  Hadley  v.  Clin- 

3  H.  L.  Cas.  702;  Maekay  v.  Douglas,  ton  etc.  Co.,  13  Ohio  St.  502;  82  Am. 

L.  R.  14  Eq.  106;  Dicconsou  v.  Tal-  Dec.  454;  [St.  Louis  &  S.  F.  R'y  Co.  t. 


1273  ACTUAL  FRAUD.  §  903 

third  class  includes  tliose  instances  where  there  is  no 
existing  fiduciary  relation  between  the  parties,  and  no 
special  confidence  reposed  is  expressed  by  their  words  or 
implied  from  their  acts,  but  the  very  contract  or  other 
transaction  itself,  in  its  essential  nature,  is  intrinsically 
fiduciary,  and  necessarily  calls  for  perfect  good  faith  and 
full  disclosure,  without  regard  to  any  particular  intention 
of  the  parties.  The  contract  of  insurance  is  a  familiar 
example.  It  will  be  found,  I  think,  that  all  cases  of 
fraudulent  concealment  may  be  referred  to  one  or  the 
other  of  these  classes. 

§  903.  Concealments  by  a  Vendee.  —  As  instances  of 
concealment  are  most  frequent  in  contracts  of  sale,  it 
will  be  proper  to  apply  the  foregoing  general  doctrine  to 
the  vendee  and  the  vendor.  The  decisions  recognize  a 
marked  difference  between  the  two,  with  reference  to 
their  duty  to  disclose.  The  contract  of  sale  is  not  intrin- 
sically fiduciary,  and  does  not  fall  within  the  third  of  the 
foregoing  classes.  The  conclusion  is  clearly  established, 
that  under  ordinary  circumstances,  there  being  no  pre- 
viously existing  fiduciary  relation  between  the  parties, 
and  no  confidence  being  expressly  reposed  by  the  vendor 
in  the  very  contract,  no  duty  rests  upon  the  vendee  to 
disclose  facts  which  he  may  happen  to  know  advantageous 
to  the  vendor,  —  facts  concerning  the  thing  to  be  sold 

Johnston,  133  U.  S.  566;  Keith  v.  Kel-  Co.  v.  Gurney,  L.  R.  4  Ch.  701;  In  re 
lam,  35  Fed.  Rep.  243;  Keen  v.  James,  Lush's  Trusts,  L.  R.  4  Ch.  591;  Sharps 
39  N.  J.  Eq.  527;  51  Am.  Rep.  29.]  v.  Foye,  L.  R.  4  Ch.  35;  In  re  Coal 
Cases  illustrating  duty  to  disclose  etc.  Co.,  L.  R.  1  Ch.  Div.  182;  In  re 
on  account  of  jjre-existing  fiduciary  Hereford  etc.  Co.,  L.  R.  2  Ch.  Div.  621; 
relations:  McLure  v.  Ripley,  2  Macn.  Craig  v.  Phillips,  L.  R.  3  Ch.  Div.  722; 
&  G.  274;  Loader  v.  Clarke,  2  Macn.  Morgan  v.  Elford,  L.  R.  4  Ch.  352; 
&  G.  382;  Atterljury  v.  Wallis,  8  De  New  Sombrero  etc.  Co.  v.  Erlanger, 
Gex,  M.  &  G.  454;  Evans  v.  Carring-  L.  R.  5  Ch.  Div.  73;  Bagnall  v.  Carl- 
ton, 2  De  Gex,  F.  &  J.  481;  Tate  v.  ton,  L.  R.  6  Ch.  Div.  371;  Davies  v. 
Williamson,  L.  R.  1  Eq.  528;  2  Ch.  London  etc.  Co.,  L.  R.  8Ch.  Div.  469; 
55;  Gen.  Exch.  Bank  v.  Horner,  L.  R.  Lovesy  v.  Smith,  L.  R.  15  Ch.  Div.  655, 
9  Eq.  480;  Peek  v.  Gurney,  L.  R.  13  Young  v.  Hughes,  32  N.  J.  Eq.  372; 
Eq.  79;  In  re  Madrid  Bank,  L.  R.  2  Eq.  [Noyes  v.  Landon,  59  Vt.  569;  Potter's 
216;  In  re  Overend  etc.  Co.,  L.  R.  3  Appeal,  56  Conn,  1;  7  Am.  St.  Rep. 
Eq.  576;  Heymann  v.  European  etc.  272;  Hegenmyer  v.  Marks,  37  Minn. 
Co.,  L.  R.  7  Eq.  154;  In  re  Coal  etc,  6;  5  Am.  St.  Rep.  808;  Whitmaa  v. 
Co.,  L.  R.  20  Eq.   114;   Overend  etc.  Bowden,  27  S.  C.  53.] 


§  903  EQUITY    JURISPRUDENCE.  1274 

which  would  enhance  its  value,  or  tend  to  cause  the  ven- 
dor to  demand  a  higher  price,  and  the  like;  so  that  a  fail- 
ure to  disclose  will  not  be  a  fraudulent  concealment.'  The 
reason  is  evident.  The  law  assumes  that  the  owner  has 
better  opportunities  than  any  one  else  to  know  all  the 
material  facts  concerning  his  own  property,  and  is  thus 
able  under  all  ordinary  circumstances  to  protect  his  own 
interests.  The  duty  to  disclose  can  rest  upon  the  vendee 
only  when  the  case  belongs  either  to  the  first  or  the  sec- 
ond of  the  above-mentioned  classes.  If,  therefore,  there 
is  a  confidence  reposed  by  the  vendor  in  the  vendee,  by 
reason  of  some  prior  existing  fiduciary  relation  between 
them,  the  vendee's  failure  to  disclose  a  material  fact  would 
undoubtedly  be  a  fraudulent  concealment.  Also,  if,  dur- 
ing the  negotiation  and  conclusion  of  the  sale,  confidence 
is^ expressly  reposed  in  the  vendee,  or  if  from  the  circum- 
stances of  the  contract  and  the  acts  of  the  parties  such 
confidence  is  necessarily  implied,  the  vendee's  silence 
might  be  a  fraudulent  concealment.     In  instances  of  the 

^  In  the  leading  cases  of  Fox  v.  Mack-  or  information,  but  it  is  also  necessary 

reth,  2  Cox,  320,  2  Brown  Ch.  400,  420,  to  show  some  obligation  binding  the  party 

Lord  Thurlow  thus  stated   this   doc-  to  make  such  a  disclosure."  To  the  same 

trine:  "  Suppose  A,  knowing  of  a  mine  general  effect,  see  Dolman  v.   Nokes, 

on  the  estate  of  B,  and  knowing  at  the  22  Beav.  402;  Dicconson  v.  Talbot,  L. 

same  time  that  B  was  ignorant  of  it,  R.  6  Oh.  32. 

should  treat  and  contract  with  B  for  Livingston  v.  Peru  Iron  Co.,  2  Paige, 
the  purchase  of  that  estate  at  only  half  390;  Harris  v.  Tyson,  24  Pa.  Sb.  347; 
its  real  value,  by  reason  of  not  disclos-  64  Am.  Dec.  661;  Drake  v.  Collins,  5 
ing  to  B  the  fact  of  the  existence  of  How.  (Miss.)  253;  Williams  v.  Spurr, 
the  mine;  can  a  court  of  equity  set  24  Mich.  335;  Law  v.  Grant,  37  Wis. 
aside  this  bargain?  No.  But  why  is  it  548;  see,  however,  per  co«<>-a.  Bowman 
impossible?  Not  because  the  one  party  v.  Bates,  2  Bibb,  47;  4  Am.  Dec.  677; 
is  not  aware  of  the  unreasonable  ad-  Williams  v.  Beazley,  3  J.  J.  Marsh, 
vantage  taken  by  the  other  of  this  578.  In  Bowman  v.  Bates,  2  Bibb,  47,  4 
knowledge;  but  because  there  is  no  Am.  Dec.  677,  a  person  discovered  aval- 
contract  existing  between  them  by  uable  salt  spring  on  another's  land,  and 
which  one  party  is  bound  to  disclose  to  bought  the  tract  from  him  at  an  ordi- 
the  other  the  circumstances  which  nary  price,  without  disclosing  his  dis- 
have  come  within  his  knowledge;  for  covery.  The  sale  was,  for  that  reason, 
if  it  were  otherwise,  such  a  principle  set  aside.  One  cannot  help  admiring 
must  extend  to  every  case  in  which  the  stern  morality  of  this  decision,  even 
the  buyer  of  an  estate  happened  to  if  it  be  not  sustained  by  the  current  of 
have  a  clearer  discernment  of  its  real  authority.  See  also,  as  illustrating 
value  than  the  seller.  It  is  therefore  the  general  rule,  Laidlaw  v.  Organ,  2 
not  only  necessary  that  great  advan-  Wheat.  178,  195;  Goninan  v.  Stephen- 
tage  should  be  taken  in  such  a  con-  son,  24  Wis.  75;  Cleland  v.  Fish.  43 
tract,  and  that  such  an  advantage  111.  282;  Wright  v.  Brown,  67  N.  Y.  1; 
should  arise  from  superiority  of  skill  Anonymous,  67  N.  Y.  598. 


1275  ACTUAL  FRAUD.  §  904 

latter  kind,  a  much  stronger  and  clearer  case  of  confidence 
and  consequent  duty  to  disclose  is  necessary  against  the 
vendee  than  would  be  required  under  analogous  circum- 
stances against  the  vendor.^ 

§  904.  Concealments  by  a  Vendor.  —  A  broader  duty 
certainly  rests  upon  the  vendor;  a  duty  rests  on  him  to 
disclose  material  facts  under  far  more  circumstances  than 
is  true  of  the  purchaser.  This  duty,  however,  is  not  uni- 
versal. In  ordinary  contracts  of  sale,  where  no  previous 
fiduciary  relation  exists,  and  where  no  confidence,  ex- 
pressed or  implied,  growing  out  of  or  connected  with  the 
very  transaction  itself,  is  reposed  on  the  vendor,  and  the 
parties  are  dealing  with  each  other  at  arms-length,  and 
the  purchaser  is  presumed  to  have  as  many  reasonable 
opportunities  for  ascertaining  all  the  facts  as  any  other 
person  in  his  place  would  have  had,  then  the  general  doc- 
trine already  stated  applies:  no  duty  to  disclose  material 
facts  known  to  himself  rests  upon  the  vendor;  his-  failure 
to  disclose  is  not  a  fraudulent  concealment.'     Of  course, 

1  Tate  V.  Williamson,  L.  R.   2  Ch.  Emmons  v.  Moore,  85  III.  304;  Cleland 

55,  1  Eq.  528,   is  a  very  instructive  v.  Fish,  43  111.  282;  Young  v.  Hughes, 

case  of  fraudulent  concealment  by  a  32  N.  J.  Eq.  372;  Connelly  v.  Fisher, 

vendee  by  reason  of  an  existing  fidu-  3  Tenn.  Ch.  382;  Dameron  v.  Jamison, 

ciary  relation.      While  a  vendee's  si-  4  Mo.  App.  299. 

leuce,  in  the  absence  of   any  existing         '  Haywood  v.  Cope,  25  Beav.   140 

fiduciary  relations,  will  not  ordinarily  Wilde  v.  Gibson,   1    H.  L.    Cas.    605 

be   a  fraudulent   concealment   unless  Gibson  v.  D'Este,  2  Younge  &  C.  Ch 

the  fact  of  confidence  reposed  by  the  542;  People's  Bank  v.  Bogart,  81  N.  Y 

vendor  is  clearly  made  out,  yet  such  101;  37  Am.  Dec.  481;  Smith  v.  Coun 

confidence  may    be    more   easily    in-  tryman,    30   N.    Y.    655;    Hanson   v 

ferred,  and  the  duty  to  disclose  may  Edgerly,  29  N.  H.  343;  Fisher  v.  Bud 

more  readily  arise,  when  the  material  long,  10  R.  I.  525;  Kintzing  v.  McEl 

facts  concealed  are  wrongful  acts  with  rath,  5  Pa.  St.  467;  Hadley  v.  Clinton 

respect  to  the  subject-matter,   know-  etc.  Co.,  13  Ohio  St.  502;  Frenzel  v. 

ingly   done    by    the   vendee   himself.  Miller,  37  Ind.  1;  Williams  v.   Spurr, 

Phillips  V.  Homfray.  L.  R.  6  Ch.  770,  24  Mich.  335;  Mitchell  v.  McDougall, 

is  an  illustration.     The  owner  of  a  col-  62  111.  498;  Law  v.  Grant,  37  Wis.  548; 

liery  contracted  to  purchase  an  adjoin-  Laidlaw    v.    Organ,    2   Wheat.     178; 

ing  mine  from  the  proprietor  thereof,  Hastings  v.    O'Donnell,  40   Cal.    148; 

The  vendee  concealed  the  fact  that  he  [People's  Bank's  Appeal,  93  Pa.  St.  107; 

had  already   got   out   a   considerable  39  Am.  Rep.  728;  Marriner  v.  Denni- 

quantity   of    coal   from   the   vendor's  son,  78  Cal.  202.] 
•  mine  without  the  latter's  knowledge.         In  Haywood  v.  Cope,  25  Beav.  140, 

This  concealment  was  held  to  be  fraud-  it  was   held   that   the  vendor's   mere 

ulent  and  to  defeat  the  contract,  al-  failure  to  disclose  acts  as  having  been 

though   it   did  not  appear  there   had  done  by  himself,  when  the  buyer  must 

been  any  under-valuation  of  the  mine  necessarily  have  known  that  they  were 

on  account  of  the  coal  taken.     See  also  done  by  somebody,  is  not  only  not  a 


§  904  EQUITY    JURISPRUDENCE.  1276 

any  affirmative  act  or  language  tending  to  conceal  or  with- 
draw the  buyer's  attention  from  the  real  facts  will  turn 
the  scale  and  render  the  vendor's  conduct  fraudulent,  as 
has  already  been  shown.  If,  on  the  other  hand,  the  case 
belongs  to  the  first  class  mentioned  in  a  former  paragraph, 
the  duty  of  disclosure  becomes  manifest  and  stringent. 
Whenever  the  vendor  occupies  an  established  fiduciary 
relation  towards  the  buyer,  independent  of  the  contract, 
a  full  disclosure  is  demanded;  any  suppression  or  silence 
as  to  material  facts,  which  would  in  any  degree  tend  to 
prevent  the  sale,  is  clearly  a  fraudulent  concealment;  the 
utmost  good  faith  and  openness  is  required  of  vendors 
occupying  such  relations.^  Equity  "and  the  law  go  farther 
than  this.  Not  only  where  the  vendor  thus  occupies  a 
fiduciary  position  towards  the  purchaser,  independently 
of  the  sale,  but  also  w^hen,  in  the  very  contract  of  sale 
itself,  or  in  the  negotiations  preliminary  to  it,  the  pur- 
chaser expressly  reposes  a  trust  and  confidence  in  the  ven- 
dor, and  when,  from  circumstances  of  that  very  transac- 
tion, or  from  the  acts  or  relations  of  the  parties  in 
connection  with  it,  such  a  trust  and  confidence  reposed 
by  the  purchaser  is  necessarily  implied  in  the  contract  of 
sale,  it  is  the  duty  of  the  vendor  to  make  a  like  disclosure, 
and  his  failure  to  do  so  is  a  fraudulent  concealment.* 

fraudulent  concealment,  but  is  even  client,  trustee  and  beneficiary,  and 
not  a  sufficient  ground  for  defeating  a  the  like,  are  discussed  in  subsequent 
suit  for  a  specific  performance  brouglit  sections;  cases  illustrating  the  rule 
by  the  vendor.  Plaintifif  had  worked  alluded  to  in  the  text  will  be  found  in 
coal  under  his  land,  and  liad  aban-  that  connection.  See  also  cases  cited 
doned  it  as  unprofitable.  Twenty  years  an(e,  under  §  902,  on  fiduciary  relations, 
after,  defendant  cleaned  out  the  pit,  *  It  is  impossible  to  formulate  a 
examined  the  coal  in  the  shaft  with  rule  applicable  to  the  situation  in- 
other  persons,  and  then  entered  into  tended  to  be  described  more  definite 
a  contract  for  a  lease.  The  mine  than  this.  When  it  appears  that  the 
turned  out  to  be  worthless.  Sir  John  purchaser  has  in  express  terms  reposed 
Romilly,  M.  R.,  held  that  defendant  a  confidence  in  the  vendor,  there  can 
had  no  ground  of  defense  because  be  no  doubt  or  difficulty.  The  difii- 
plaintiff  did  not  communicate  the  fact  culty  arises  where  such  confidence 
that  he  had  worked  and  abandoned  must  be  implied  or  inferred.  With 
the  mine,  since  the  defendant,  from  respect  to  this  situation  of  the  parties, 
his  own  personal  examination,  must  the  decisions,  it  must  be  confessed,  are 
have  known  that  it  had  been  worked  not  harmonious;  many  of  them  seem 
and  abandoned  by  some  one.  to  be  separated  by  a  very  shadowy 
'  These  cases  of  dealings  between  line.  The  truth  probably  is,  that  the 
agent    and    principal,   attorney    and  apparent  coufiict  among  the  deciaiona 


1277  ACTUAL  FRAUD.  §  005 

§  905.  Nondisclosure  of  Facts  a  Defense  to  the  Spe- 
cific Enforcement  of  Contracts  in  Equity.  —  Although  the 
discussion  relates  to  fraudulent  concealments,  such  as 
necessarily  imply  knowledge  and  an  intent  not  to  com- 
municate the  fact,  it  is  proper  to  notice  one  other  rule 
affecting  the  relations  between  the  vendor  and  purchaser 
in  equity.  A  fraudulent  concealment,  defeating  a  con- 
tract of  sale  at  law,  and  furnishing  ground  for  its  cancel- 
lation in  equity,  is,  of  course,  a  complete  defense  to  its 
specific  performance.  In  addition  to  these  concealments 
properly  so  called,  the  suppression  of  a  material  fact,  or 
the  failure  to  communicate  a  material  fact  by  the  vendor, 
without  any  purpose  of  deceiving  or  misleading  the  other 
party,  and  even  without  having  himself  any  knowledge 
of  the  fact,  while  not  affecting  the  validity  of  the  agree- 
ment at  law,  and  not  being  sufficient  ground  for  its  cancel- 
lation in  equity,  because  not  fraudulent,  may  still  render 
the  agreement  so  unfair,  unequal,  or  hard,  that  a  court  of 
equity,  in  accordance  with  its  settled  principles  in  admin- 
is  due  more  to  a  difference  in  the  effect  Vt.  129;  52  Am.  Dec.  46;  Hanson  v. 
of  evidence,  and  in  the  conclusions  of  Edgerly,  29  N.  H.  343. 
fact,  than  to  any  difference  in  the  rules  Brown  v.  Montgomery,  20  N.  Y. 
of  law  recognized  and  acted  upon  by  2S7,  is  a  very  illustrative  case  of  con- 
the  courts.  Where  the  confidence  re-  fidence  implied  from  the  circumstances 
posed  must  be  implied  or  inferred  from  of  the  particular  sale.  It  doubtless 
the  circumstances  of  the  transaction,  stands  on  the  border-line,  but  has  not 
each  case  must  turn  upon  its  own  par-  been  overruled,  nor  even  questioned  so 
ticular  facts:  Gibson  v.  D'Este,  2  as  to  shake  its  authority.  The  vendor 
Younge  &  C.  Ch.  542;  Wilde  v.  Gib-  sold  a  check  of  a  third  party.  At  the 
son,  1  H.  L.  Cas.  605;  Edwards  v.  Mc-  time  of  the  sale  he  knew  that  other 
Leay,  2  Swanst.  287;  Coop.  308;  checks  of  the  same  maker  had  been 
Dolman  v.  Nokes,  22  Beav.  402;  Hay-  dishonored  on  that  very  day  and  the 
wood  V.  Cope,  25  Beav.  140;  Brown  v.  day  before,  but  did  not  communicate 
Montgomery,  20  N.  Y.  287;  People's  this  fact  to  the  buyer.  The  check 
Bank  v.  Bogart,  81  N.  Y.  101;  37  Am.  turned  out  worthless,  as  the  maker 
Rep.  481 ;  Rawdon  v.  Blatchford,  1  had  become  insolvent.  Held  to  be 
Sand.  Ch.  344;  Paddock  v.  Strobridge,  fraudulent  concealment.  The  able 
29  Vt.  470,  477;  Holmes's  Appeal,  77  opinion  of  Denio,  J.,  holds  that,  under 
Pa.  St.  50;  Snelson  v.  Franklin,  6  the  circumstances,  from  the  nature  of 
Munf.  210;  McNeil  v.  Baird,  6  Munf.  the  transfer  and  of  the  check  itself,  a 
316;  Halls  v.  Thompson,  1  Smedes  &  M.  confidence  reposed  by  the  buyer  in  the 
443;  Roseman  v.  Canovan,  43  Cal.  110;  vendor  was  implied;  the  character  of 
Schiffer  v.  Dietz,  83  N.  Y.  .300;  a  check  as  a  mercantile  instrument, 
Howell  V.  Biddlecom,  62  Barb.  131;  representing,  as  it  does,  that  so  much 
Clark  V.  Bamer,  2  Lans.  67;  Bank  of  money  then  lies  on  deposit  awaiting 
Republic  v.  Baxter,  31  Vt.  101;  presentation,  created  a  fiduciary  duty 
Howard  v.  Gould,  28  Vt.  523;  67  Am.  on  the  vendor's  part;  the  vendor  was 
Dec.   728;  Fitzsimmons  v.  Joslin,  21     therefore  bound  to  disclose. 


§  906  EQUITY    JUKISPKUDEKCE.  1278 

isteriiig  the  remedy  of  specific  performance,  will  refuse  to 
enforce  the  contract  against  the  party  who  was  misled. 
The  two  contracting  parties  do  not  stand  upon  an  equal- 
ity; either  one  had  a  knowledge  of  important  facts  of  which 
the  other  was  ignorant,  or  else  there  was  a  mistake  by  one 
or  perhaps  by  both.  Such  misdescription,  consisting  of 
omitting  material  particulars,  however  free  of  wrongful 
intent  they  may  be,  have  often  been  held  a  sufficient  de- 
fense to  suits  for  specific  enforcement.' 

§  906.  Concealments  by  Buyers  on  Credit.  —  The  par- 
ticular case  of  the  buyer  on  credit  who  conceals  his  bad 
financial  condition  requires  a  brief  additional  mention, 
because  it  is  the  most  common  species  of  fraud,  and  be- 
cause it  involves  one  or  two  special  rules.  As  to  what 
constitutes  a  false  representation  by  such  a  buyer,  noth- 
ing need  be  added,  except  that,  in  this  instance  especially, 
the  statement  of  the  buyer  must  be  something  more  than 
the  mere  expression  of  an  opinion  as  to  his  pecuniary 
ability.  As  to  what  constitutes  a  fraudulent  concealment 
under  these  circumstances,  there  has  been  some  uncer- 
tainty and  even  conflict  of  decision  in  determining  what 
matters  such  buyer  is  bound  to  disclose,  so  that  his  failure 
to  do  so  would  be  a  fraud.  The  following  rules  may  be 
regarded  as  settled  by  the  decided  weight  of  authority; 
they  are  certainly  sustained  by  courts  of  the  greatest 
ability  and  influence:  1.  The  purchaser  when  buying  on 
credit  is  not  bound  to  disclose  the  facts  of  his  financial 
condition.  If  he  makes  no  actual  misrepresentation,  if  he 
is  not  asked  any  questions,  and  does  not  give  thereto  any 
untrue,  evasive,  or  partial  answers,  his  mere  silence  as  to 
his  general  bad  pecuniary  condition,  his  indebtedness,  or 
even  his  insolvency,  will  not  constitute  a  fraudulent  con- 
cealment.    2.  If,  however,  the  former  good  financial  con- 

»  Shirley  v.  Stratton,  1  Brown  Ch.  526;  Drysdale  v.  Mace,  5  De  Gex,  M. 

440;  Deans  v.  Rastron,   1  Anstr.   64;  &    G.    103;    Baskcomb   v.    Beckwith, 

EUard  v.  Lord  Llandaff,  1  Ball  &  B.  L.  R.  8  Eq.   100;   Lucas  v.  James,  7 

241;  Hesse  v.  Briant,  6  De  Gex,  M.  &  Hare,  410;  Denny  v.  Hancock,  L.  R. 

G.    623;    Maddeford   v.    Austwick,    1  6  Ch.   1;    [Byars   v.    Stubbs,  85   Ala. 

Siin.  89:   Bouuett  v.  Sadler,  14  Ves.  256  (concealment  by  vendee).] 


1279  ACTUAL  FRAUD.  §  907 

dition  of  the  buyer  lias  been  known  to  the  vendor  through 
prior  dealings  or  otherwise,  and  any  sudden  or  complete 
change  has  happened  to  the  buyer,  such  as  his  sudden 
loss  of  property  by  fire  or  other  accident,  or  his  sudden 
insolvency  or  embarrassment  by  the  failure  of  others,  or  a 
general  assignment  which  he  has  made  of  all  his  property, 
and  the  like,  he  is  bound  to  disclose  such  facts  to  the  ven- 
dor previously  to  the  completion  of  the  sale;  his  mere 
silence  with  respect  to  such  changes  in  his  condition, 
even  when  no  questions  are  asked  of  him,  is  a  fraudulent 
concealment.  3.  Finally,  if  at  the  time  he  purchases  the 
goods  on  Credit,  and  fails  to  disclose  his  general  in- 
solvency, embarrassed  condition,  or  indebtedness,  the 
buyer  forms  or  has  in  his  mind  the  intention  or  design 
of  not  paying  for  them,  this  is  a  fraud  on  his  part.  In 
other  words,  a  purchase  on  credit  with  a  preconceived 
design  on  the  buyer's  part,  formed  at  or  before  the  pur- 
chase, not  to  pay  for  the  thing  bought  constitutes  a  spe- 
cies of  fraudulent  concealment.' 

§  907.  Contracts  and  Transactions  Essentially  Fidu- 
ciary.—  Wherever  a  contract  is  in  its  essential  nature  in- 
trinsically fiduciary,  the  utmost  good  faith  and  the  fullest 
disclosure  of  material  facts  are  required  from  the  parties, 
without  any  reference  to  their  prior  or  collateral  relations, 
or  to  the  circumstances  surrounding  the  particular  tran- 
saction. Any  concealment  of  a  material  fact  known  to  a 
party  would  necessarily  be  fraudulent.  The  most  familiar 
and  illustrative  example  of  such  contracts  is  that  of  in- 

^Cary  v.  Hotailing,  1  Hill,  311;  37  Nat.  Bank,  127  N.  Y.  329;  Brower 
Am.  Dec.  323;  Bigelow  v.  Heaton,  6  v.  Goodyer,  88  Ind.  572;  Kitsou  v. 
Hill,  43;  Mitchell  V.  Worden,  20  Barb.  Farwell,  132  111.  327;  Oswego  Starch 
253;  Nichols  v.  Pinner,  18  N.  Y.  295;  Factory  v.  Lendrum,  57  Iowa,  573;  42 
23  N.  Y.  2(54  (in  this  case  the  subject  Am.  Rep.  53  (intention  nod  to  pay); 
was  fully  examined,  and  the  tliree  also  Houghtalmg  v.  Hills,  59  Iowa, 
rules  given  iu  the  text  were  laid  down);  28!);  Jafi'rey  v.  Brown,  29  Fed.  Rep, 
Hennequin  v.  Naylor,  24  N.  Y.  139;  470;  Taylor  v.  Mississippi  Mills,  47 
Kingv.  Phillips,  8  Bosw.  603;  Bell  v.  Ark.  247.]  Hatliorne  v.  Hodges,  28 
Ellis,  33  Cal.  620,  626,  expressly  over-  N.  Y.  486,  illustrates  the  kind  of  in- 
ruling  and  repudiating  the  contrary  direct  evidence  admissible  to  show  the 
Tiew  maintained  in  Seligman  v.  Kalk.-  buyer's  fraudulent  design, 
man,  8  Cal.  207;  [Hotchkiu  v.  Third 


§  908  EQUITY    JURISPRUDENCE.  12S0 

su ranee.'  The  contract  of  suretyship,  in  the  relations 
between  the  surety  and  the  other  parties,  and  especially 
the  creditor,  is  also  fiduciary,  although  not  in  the  same 
degree  as  that  of  insurance.  It  demands  good  faith 
towards  the  surety,  and  while  the  creditor  is  not  abso- 
lutely bound  voluntarily  to  disclose  every  fact  which 
might  affect  the  contract,  very  slight  incidents  and  col- 
lateral circumstances  will  render  his  concealment  of 
material  facts  fraudulent.' 

§  908.  Liability  of  Principals  for  the  Frauds  of  their 
Agents.  —  The  general  question  as  to  the  authority,  ex- 
press or  implied,  of  agents  to  bind  their  principals,  and  to 
render  those  principals  liable  for  any  kind  of  remedy, 
legal  or  equitable,  by  means  of  fraudulent  representations 
or  concealments,  and  the  more  special  questions  as  to 
the  implied  authority  held  by  directors,  trustees,  man- 
agers, officers,  employees,  and  the  like,  inherent  in  their 
official  or  representative  position,  to  bind  their  corpora- 
tions, stockholders,  beneficiaries,  co-directors,  associates, 
or  employers  by  their  fraudulent  representations  or  con- 
cealments, and  to  render  the  latter  classes  of  persons  liable, 
on  account  of  the  fraud,  for  any  species  of  remedy,  equita- 
ble or  legal,  do  not  come  within  the  scope  of  this  book;  they 
belong  to  the  law  of  agency.    I  shall  attempt  no  discussion 

'  The    subject   of    insurance    is   so  examined     in     the     following    cases: 

broad,  the  questions  arising  under  the  Wythes  v.  Labouchere,  3   De  G-ex  & 

general  duty  of  the  assured  to  make  J.  593;  Owen  v.  Homan,  4  H.  L.  Cas. 

disclosure  are  so  numerous,  that  I  can  997;  3  Macn.  &  G.  378;  Hamilton  v. 

only  refer  to  the  treatises  upon  the  Watson,  12  Clark  &  F.  109;  Pidcock 

law  of   insurance  in  which   they  are  v.  Bishop,  3  Barn.  &  C.  605;  North  Br. 

discussed.      See  also    1  Smith   Lead.  Ins.    Co.  v.  Lloyd,  10  Ex.  523;  Stone 

Cas.  843,  notes  to  Carter  v.  Boehm;  v.    Compton,    5   Bing.    N.    C.    142;  6 

and  2  Am.  Lead.  Cas.  926,    notes   to  Scott,    846;    Maitland   v.    Irving,    15 

Locke  V.  Am.  Ins.  Co.  Sim.  437;  Squire  v.  Whitton.  1  H.  L. 

*  There  are  some  dicta  and  even  de-  Cas.    333;     Railton    v.    Mathews,    10 

cisions  that  the  contract  of  suretyship  Clark  &  F.  934;  Carew's  Case,  7  De 

is  in  all  respects  identical  with  that  of  flex,  M.  &   G.  43;  Etting  v.  Bank  of 

insurance  in  relation  to  the  obligation  U.  S.,  11  Wheat.  59;  Howe  Machine 

of    full    disclosure.      These    dicta  and  Co.  v.  Farrington,  82  N.  Y.  121;  Sooy 

decisions    have    been   overruled,    and  v.  State,  39  N.  J.  L.  135;  Atlas  Bank 

the  doctrine  as  now  settled  in  England  v.  Brownell,  9  R.  I.  168;  11  Am.  Rep. 

and    the   United    States    regards    the  231;    Franklin    Bank    v.    Cooper,    36 

contract    of    suretyship    as    partially  Me.    179,    195;   Evans  v,   Keeland,  9 

fiduciary.     The  whole  subject  is  fully  Ala.  42. 


1281  ACTUAL  FRAUD.  §  909 

of  them,  and  for  their  treatment  the  reader  is  referred  to 
works  professedly  on  the  law  of  agency.  It  is  proper  to  say, 
however,  that  there  seems  to  be  a  marked  difference  be- 
tween the  conclusions  upon  these  latter  questions  reached 
by  the  more  recent  English  decisions  and  those  main- 
tained by  the  American  cases.  The  tendency  of  the  Eng- 
lish courts  has  been  very  strong  to  take  a  very  strict  and 
narrow  view  of  the  powers  and  liabilities  of  directors, 
officers,  trustees,  and  the  corporations,  stockholders,  co- 
directors,  and  other  beneficiaries  whom  they  represent. 
On  the  other  hand,  the  general  tendency  of  the  American 
decisions  is  to  enlarge  the  implied  authority  of  such  offi- 
cials, and  to  extend  the  liability  created  by  their  frauds 
and  resting  upon  corporations,  stockholders,  and  co-direc- 
tors. The  question  as  to  the  extent  of  liability  incurred 
by  corporations,  stockholders,  co-directors,  co-trustees, 
and  the  like,  for  the  frauds  and  breaches  of  duty  of  officers, 
directors,  and  trustees,  will  be  treated  of  in  a  subsequent 
section  which  deals  with  the  particular  subject  of  fidu- 
ciary relations.  At  present  I  shall  simply  state  the  gen- 
eral rules  which  define  the  liability  of  principals  for  the 
fraudulent  representations  and  concealments  of  their 
agents,  when  such  fraudulent  acts  are  within  the  scope  of 
the  authority,  express  or  implied,  possessed  by  the  agent, 
without  any  attempt  to  discuss  the  nature,  extent,  and 
limits  of  the  authority  itself. 

§  909.  The  Same.  —  In  the  first  place,  it  is  very  clear 
that  when  an  agent,  in  doing  the  business  of  his  princi- 
pal, and  acting  within  the  scope  of  the  authority  conferred 
upon  him,  makes  fraudulent  representations  or  conceal- 
ments with  the  knowledge  or  consent  of  his  principal, 
expressed  or  implied,  so  that  the  act  of  the  agent  is  vir- 
tually that  of  his  principal,  then  the  principal  is  liable  in 
the  same  manner,  to  the  same  extent,  and  for  the  same 
remedies  as  though  the  fraud  were  committed  by  him- 
self personally;  he  may  even  be  liable  in  an  action  at  law 
for  deceit.     The  doctrine  is  carried  much  farther.  When 

2  Eq.  Jur.  —  81 


§  909  EQUITY   JURISPRUDENCE.  1282 

the  agent  acts  beyond  and  even  in  direct  opposition  to  his 
express  authority,  but  within  the  scope  of  his  implied  au- 
thority,—  that  is,  within  the  apparent  authority  contained 
in  and  conferred  by  the  terms  of  his  commission,  or  the 
nature  of  his  official  functions  or  of  his  employment,  or 
appearing  from  a  prior  course  of  dealing  with  or  on  be- 
half of  his  principal,  or  from  any  other  mode  of  his  being 
held  out  to  the  world  as  appearing  to  possess  the  author- 
ity, and  the  principal  is  personally  innocent  of  any  fraud, 
—  the  principal  cannot  acquire  and  retain  any  benefit 
obtained  under  such  circumstances  from  the  fraud,  rep- 
resentations, or  concealments.  If  the  principal,  upon 
learning  of  his  agent's  fraud,  should  expressly  ratify  and 
adopt  the  transaction,  he  would  make  the  fraud  his  own. 
An  express  ratification,  however,  is  not  necessary.  If  the 
principal  receives  and  retains  the  proceeds  of  the  agent's 
fraud,  —  the  property,  money,  and  the  like  obtained 
through  an  executed  transaction, — or  claims  the  benefit 
of  or  attempts  to  enforce  an  executory  obligation  thus 
procured,  he  renders  himself  liable  for  the  fraudulent 
acts  of  his  agent.  The  defrauded  party  is  entitled  to  such 
remedies,  legal  or  equitable,  as  are  appropriate  to  the  na- 
ture of  the  transaction.  The  only  mode  in  which  the 
principal,  under  these  circumstances,  can  escape  liability, 
is  by  repudiating  the  acts  of  his  agent,  and  refusing  to 
accept  or  retain  any  benefit  of  the  transaction,  immedi- 
ately upon  his  discovery  of  the  fraud.  Many  American 
decisions  go  much  farther  than  this.  They  hold  that 
where  an  agent  has  thus  committed  a  fraud  within  the 
scope  of  his  apparent  authorit}',  though  in  direct  opposition 
to  his  express  instructions,  the  principal  is  bound  by  the 
act,  even  though  he  is  personally  innocent,  and  has  de- 
rived no  benefit  whatever  from  the  fraudulent  transaction 
of  his  agent.^ 

'  The  following  cases  furnish  illus-  American  decisions:  Gibson  v.  D'Este, 

trations    of  the  conclusions  stated  in  2  Younge  &  C.  542;  1   H.  L.  Cas.  005; 

the  text,   and  also  of    the  differences  Conybeai-e  v.  New  Brunswick  etc.  Co., 

between  the  tendencies  of  Eajilibh  and  1    De   Gcx,    F.    &    J.    678;    9   il.  L. 


12:: 


ACTUAL    FRAUD. 


§910 


§  910.  Jurisdiction  of  Equity  in  Cases  of  Fraud. — 
It  is  impossible,  especially  in  the  United  States,  to  for- 
mulate any  universal  rules  concerning  the  extent  or  the 
exercise  of  the  equitable  jurisdiction  in  matters  of  fraud, 
since  the  decisions  of  different  courts  and  in  different 
states  are  directly  at  variance  with   respect  to  its  exist- 

Cas.  711,  726,  per  Lord  Westbury; 
730,  per  Lord  Cranworth;  Bristow  v. 
Whitmore,  9  H.  L.  Oas.  418;  Gibson's 
Case,  2  De  Gex  &  J.  275;  Nicol's  Case, 
.3  De  Gex  &  J.  3S7,  437;  Udell  v,  Ath- 
erton,  7  Hurl.  &  N.  172;  Fuller  v. 
Wilson,  3  Q.  B.  58;  Cornfoot  v.  Fowke, 
6  Mees.  &  W.  358;  Moens  v.  Hey- 
worth,  10  Mees.  &  W.  147;  Bondfoot 
V.  Montefiore,  L.  R.  2  Q.  B.  511; 
Mackay  v.  Commercial   Bauk,  L.  R. 

5  P.  C.  394;  Burnes  v.  Pennell,  2  H. 
L.  Cas.  497 ;  Ranger  v.  Great  Western 
R'y,  5  H.  L.  Cas.  72;  National  Exch. 
Co.  V.  Drew,  2  Macq.  103,  125;  Meux'3 
Ex'rs'  Case,  2  De  Gex,  M.  &  G. 
522;  Cakes  v.  Turquand,  L.  R.  2  H.  L. 
.3-25;  Sutton  v.  Wilders,  L.  R.  12  Eq. 
373;  Earl  of  Dundonaldv.  Masterman, 
L.  R.  7  Eq.  504;  Scholefield  v.  Tem- 
plar,  Johns.  155;  Hartopp  v.  Hartopp, 
21  Beav.  259;  Western  Bank  v.  Addie, 
L.  R.  1  H.  L.  S.  145;  Veazie  v.  Williams, 
8  How.  134;  Mason  v.  Crosby,  1  Wood. 

6  M.  .342;  F'tzsimmons  v.  Joslin,  21 
Vt.  129;  52  Am.  Dec.  46;  Concord 
Bank  v.  Gregg,  14  N.  H.  331;  Cod- 
dington  v.  Goddard,  16  Gray,  436; 
Litchtield  Bank  v.  Peck,  29  Conn. 
384;  Van  Wyck  v,  Watters,  81  N.  Y, 
352;  Fishkill  Savings  Ins.  v.  National 
Bank  of  Fishkill,  80  N.  Y.  162;  36  Am. 
Rep.  595;  Bennett  v.  Judson.  21  N. 
Y.  238;  Elwell  v.  Chamberlain,  31 
N.  Y.  611;  Condit  v.  Baldwin,  21  N. 
Y.  219;  78  Am.  Dec.  137;  Bell  v.  Day, 
32  N.  Y.  165;  Smith  v.  Tracy,  36  N. 
Y.  79;  Estevez  v.  Purdy,  66  N.  Y. 
446;  Durst  v.  Burton.  47  N.  Y.   167; 

7  Am.  Rep.  428;  AUerton  v.  AUerton, 
50  N.  Y.  670;  Titus  v.  Great  West  T. 
Co.,  61  N.  Y.  2.37;  Davis  v.  Bemis,  40 
N.  Y.  453,  note;  Indianopolis  etc.  R. 
R.  V.  Tyng,  63  N.  Y.  653;  Hathaway  v. 
Johnson,  55  N.  Y.  93;  14  Am.  Rep. 
186;  Durst  v.  Burton,  2  Lans.  137; 
Graves  v.  Spier,  58  Barb.  349;  Young 
V.  Hughes,  .32  N.  J.  Eq.  372;  Mun- 
dorti'  V.  Wickersham,  63  Pa.  St.  87; 
3  Am.  Rep.  531;  Custar  v.  Titusville 
etc.   Co.,  63  Pa.  St.  381;  Cros^mau  v. 


Penrose  Bdg.  Co.,  26  Pa,  St.  69; 
Crump  V.  United  States  Mining  Co., 
7  Gratt.  .352:  56  Am.  Dec.  116;  River 
V.  Plankroad  Co.,  30  Ala.  92;  Bowers 
V.  Johnson.  10Smedes&  M.  169;  Law- 
rence V.  Hand,  23  Miss.  103;  Hester 
V.  Memphis  etc.  K.  R.,  32  Miss.  378; 
Mitchell  V.  Mims,  8  Tex.  6;  Hender- 
son  V.  Railroad  Co.,  17  Tex.  560;  Mor- 
ton V.  Scull,  23  Ark.  289;  East  Tenn. 
R.  R.  V.  Gammon,  5  Sneed,  567,  Neg- 
ley  V.  Lindsay,  67  Pa.  St.  217;  5  Am. 
Rep.  427;  Mendenhall  v.  Tread  way, 
44  Ind.  131;  Boland  v.  Whitman,  33 
Ind.  64;  Shawmut  etc.  Co.  v.  Stevens, 
9  Allen,  332;  Fogg  v.  Griffin,  2  Allen, 
1;  [Mullens  v.  Miller,  22  Ch.  Div.  194; 
Clark  V.  Reeder,  40  Fed.  Rep.  513; 
Lindmeier  v.  Monahan,  64  Iowa,  24; 
Riser  v.  Walton,  78  Cal.  490.]  For 
instances  in  which  the  fraud  of  persons 
not  in  a  relation  of  agency  is  not  ground 
for  relief,  see  Root  v.  Bancroft,  8 
Gray,  619;  Lepper  v.  Nuttman,  35 
Ind.  384;  Wright  v.  Flinn,  33  Iowa, 
159;  Cummings  v,  Thompson,  18 
Minn.  246;  Fisher  v.  Boody,  1  Curt. 
206.  In  the  following  series  of  re- 
markable cases,  principals  were  held 
liable  for  fraud  of  their  agents,  done 
simply  within  the  apparent  scope  of 
their  authority,  although  the  princi- 
pal had  received  no  benefit  whatever 
from  the  transaction,  and  in  many  of 
the  cases  the  principal  was  a  corpora- 
tion, and  its  agent  an  officer  thereof: 
North  River  Bank  v.  Ayniar,  3  Hill, 
262;  Farmers' and  Mechanics' Bank  v. 
Butchers'  etc.  Bank,  16  N.  Y.  125;  69 
Am.  Dec.  678;  14  N.  Y.  623;  Griswold 
V.  Haven,  25  N.  Y.  595;  82  Am.  Dec. 
380;  Exchange  Bank  v.  Monteath,  26 
N.  Y.  505;  N.  Y.  &  N.  H.  R.  R.  v. 
Schuyler,  34  N.  Y.  30;  Cutting  v. 
Marlor,  78  N.  Y.  454;  Armour  v. 
Michigan  Central  R.  R.,  65  N.  Y.  Ill, 
121-124;  22  Am.  Rep.  603;  but  see, 
per  contra,  Mechanics'  Bank  v.  N.  Y. 
&  N.  H.  R.  R.,  13  N.  Y.  599,  which 
must  be  regarded  as  entirely  overruled 
by  the  auboequeut  cases. 


§  910  EQUITY   JURISPRUDENCE,  1284 

ence  and  extent,  and  since  its  exercise  must  depend,  to  a 
great  extent,  upon  the  circumstances  of  particular  cases, 
and  even  upon  the  temperaments  and  opinions  of  indi- 
vidual judges.  The  jurisdiction,  when  it  exists,  may  be 
exercised  by  granting  reliefs  which  are  peculiarly  equi- 
table, or  reliefs  which  are  wholly  pecuniary,  and  there- 
fore legal.  In  conferring  these  reliefs  which  are  purely 
equitable,  and  therefore  exclusive,  the  power  of  equity 
knows  no  limit.  The  court  can  always  shaj)e  its  remedy 
so  as  to  meet  the  demands  of  justice  in  every  case,  how- 
ever peculiar.  The  most  important  of  these  equitable 
final  reliefs,  to  one  or  the  other  of  which  all  special  in- 
stances and  forms  may  be  reduced,  are  these:  Rescission 
or  cancellation,  as  applied  to  contracts,  conveyances, 
judgments,  and  all  fraudulent  transactions,  with  one 
marked  exception;  reformation  of  written  instruments 
improperly  drawn  through  fraud;  and  specific  enforce- 
ment by  which  the  fraudulent  part}'^  is  compelled  to  per- 
form the  very  specific  obligation  which  rests  upon  him, 
and  the  defrauded  party  obtains  the  enjoyment  of  the 
very  right  of  which  he  was  deprived  through  the  fraud. 
This  latter  class  of  remedies  may  assume  an  unlimited 
variety  of  forms,  as  the  circumstances  may  require.  It 
includes,  among  others,  the  compelling  the  fraudulent 
party  to  make  good  his  representations;  the  treating  him 
as  a  trustee  with  respect  to  the  property  which  he  has 
acquired  by  his  fraud;  the  enforcing  the  performance  of 
their  specific  duties  by  trustees,  directors,  and  officers  of 
corporations,  and  all  others  who  stand  in  a  position  of 
trust;  the  compelling  a  written  security  to  stand  good  for 
what  is  actually  due  upon  it,  and  the  like.  These  final 
remedies  may  be  accompanied  and  aided  by  auxiliary 
reliefs,  such  as  injunction  or  a  receiver.  The  purely 
pecuniary  relief  which  courts  of  equity  may  administer, 
as  well  as  courts  of  law,  in  matters  of  fraud,  are  an 
accounting  in  all  its  various  forms  and  conditions, 
and  simple  recoveries,  without  an  accounting,  of  specific 


1285  ACTUAL  FRAUD.  §  911 

amounts  of  money  which  have  been  fraudulently  obtained, 
or  which  are  equitably  and  perhaps  legally  due  on  ac- 
count of  fraud.  In  administering  all  these  remedies, 
pecuniary  as  well  as  equitable,  the  fundamental  theory 
upon  which  equity  acts  is  that  of  restoration, — of  restor- 
ing the  defrauded  party  primarily,  and  the  fraudulent 
party  as  a  necessary  incident,  to  the  positions  which  they 
occupied  before  the  fraud  was  committed.  Assuming 
that  the  transaction  ought  not  to  have  taken  place,  the 
court  proceeds  as  though  it  had  not  taken  place,  and  re- 
turns the  parties  to  that  situation.  Even  in  such  cases, 
the  court  applies  the  maxim.  He  who  seeks  equity  must 
•do  equity,  and  will  thus  secure  to  the  wrong-doer,  in 
awarding  its  relief,  whatever  is  justly  and  equitably  his 
due.^  All  these  forms  of  exclusively  equitable  relief,  and 
the  remedy  of  accounting,  wdll  be  examined  in  subsequent 
chapters.  At  present  I  purpose  to  state,  as  far  as  is  pos- 
sible, the  general  rules  concerning  the  existence,  extent, 
and  exercise  of  the  jurisdiction,  and  to  add  some  exam- 
ples illustrating  the  instances  in  which  the  jurisdiction 
is  and  is  not  exercised. 

§  911.  Fundamental  Principles  of  the  Jurisdiction.  — 
It  may  be  an  aid  iu  the  present  inquiry  to  recall  the 
three  fundamental  principles  concerning  the  equitable 
jurisdiction  which  were  laid  down  and  explained  in  the 
former  volume:  1.  Where  the  primary  right  or  interest 
of  the  plaintiff  is  equitable  only,  the  jurisdiction  is  neces- 
sarily exclusive,  and  will  always  be  exercised  without  re- 

^  The  remedies  of  cancellation,  ref-  son  v.  McDonald,  6  Johns.  Ch.  201. 
ormation,  and  enforcing  liJuciary  The  equitable  theory  of  restoring  the 
duties  are  so  familiar  that  they  re-  parties  to  their  original  position: 
quire  no  citation  of  examples.  For  Savery  v.  King,  5  H.  L.  Cas.  627; 
examples  of  compelling  the  fraudulent  Bellamy  v.  Sabine,  2  Phill.  Ch.  425; 
party  to  make  good  his  representa-  Neblett  v.  Macfarland,  92  U.  S.  101; 
tions,  see  cases  cited  ante,  under  §  899.  Grymes  v.  Sanders,  93  U.  S.  5.5;  John- 
Examples  of  treating  a  fraudulent  son  v.  Jones,  13  Smedes  &  M.  580; 
party  as  a  trustee:  Gresleyv.  Mousley,  Gatling  v.  Newell,  9  Ind.  572;  [Lee 
4  De  Gex  &  J.  7S;  Stump  v.  Gaby,  2  v.  V.  O.  Co.,  126  N.  Y.  579;  Smith  v. 
De  Gex,  M.  &  G.  623;  and  see  post,  Brittenham,  109  111.  540;  Potter  v. 
eection  on  constructive  trusts.  Ex-  Taggart,  59  Wis.  1;  and  see  Brown  v. 
ample  of  ordering  a  security  to  stand  Norman,  65  Miss.  369;  7  Am.  St.  Rep. 
for  wliat  was  really  due  on  it:  Neil-  663. J 


§  912  EQUITY    JURISPRUDENCE.  1286 

gard  to  the  nature  of  the  relief;  otherwise  the  party  would 
he  without  remedy,  since  courts  of  law  could  not  take 
cognizance  of  the  case.  2.  Where  the  primary  right  is 
legal,  and  the  remedy  sought  is  purely  equitable,  the 
jurisdiction  is  also  exclusive,  and  always  exists,  but  will 
not  generally  be  exercised  if  the  legal  remedy  which  the 
party  might  obtain  is  adequate,  complete,  and  certain. 
3.  Where  the  primary  right  is  legal,  and  the  remedy  is 
also  legal,  a  recovery  of  money  simply,  or  of  the  posses- 
sion of  chattels,  the  jurisdiction  is  concurrent,  and  only 
exists  when  the  remedy  which  the  party  might  obtain  at 
law  is  not  adequate.'  The  great  majority  of  cases  arising 
from  fraud  undoubtedly  fall  under  the  second  or  third  of 
these  principles.  It  should  be  observed  that  in  the  origi- 
nal condition  of  the  jurisdiction,  and  in  those  courts  of 
this  country  which  preserve  the  original  methods  of 
equity,  the  jurisdiction  might  be  extended  over  many 
instances  otherwise  belonging  to  the  third  class,  by  rea- 
son of  the  auxiliary  relief  of  a  discovery.* 

§  912.  The  English  Doctrine.  —  The  doctrine  is  fully 
settled  by  an  unbroken  line  of  decisions  extending  to  the 
present  day,  that,  with  one  remarkable  exception,  the  ju- 
risdiction of  equity  exists  in  and  may  be  extended  over 
every  case  of  fraud,  whether  the  primary  rights  of  the 
parties  are  legal  or  equitable,  and  whether  the  remedies 
sought  are  equitable  or  simple  pecuniary  recoveries,  and 
even  though  courts  of  law  have  a  concurrent  jurisdiction 
of  the  case  and  can  administer  the  same  kind  of  relief. 
The  English  judges  have  virtually  said  that  in  every  case 
of  fraud  the  remedy  at  law,  either  from  the  nature  of  the 
legal  relief  itself  or  from  the  methods  of  legal  procedure, 
is  inadequate.  The  only  question,  therefore,  presented 
to  an  English  court  is,  not  whether  the  equitable  juris- 
diction exists,  but  whether  it  should   be  exercised.'     As 

*  [See  ante,  §  178.]  question,  for  the  long  line  of  chancel- 
'  [See  ante,  %i  224-226,  234.]  lors  and  other  equity  judges  may  ba 

*  It  will   be  proper  to  present  the     supposed  to  know,  at  least,  the  juris- 
views  of   the  English    courts   on  this     diDtion  of  their  own  tribunal.     I  eo- 


1287 


ACTUAL   FRAUD. 


§912 


the  ablest  judges  have  often  said,  one  of  the  occasions  for 
the  existence  of  a  separate  court  of  chancery  was  its  power 


lect  recent  cases,  and  those  in  which 
the  recovery  was  pecuniary,  and  in 
which  there  was  confessedly  a  concur- 
rent jurisdiction  at  law.  Hill  v.  Lane, 
L.  R.  11  Eq.  215,  was  a  suit  brought 
simply  to  recover  back  the  money 
which  plaintiff  had  paid  for  certain 
shares  of  stock  purchased  from  de- 
fendants in  reliance  upon'  their  false 
and  fraudulent  representations.  The 
bill  was  demurred  to.  Vice-Chancellor 
Stuart  said  (p.  220):  "  In  support  of  the 
demurrer  it  was  argued  that  the  proper 
remedy  for  the  plaintiff,  if  he  had  any, 
was  to  proceed  by  action  at  law.  It 
has  often  been  decided  that  this  court 

will  grant  ri-lief  in  such  cases 

It  is  so  well  settled  that  this  court 
will  entertain  jurisdiction  in  such 
cases,  that  it  would  be  a  misfortune, 
indeed,  to  the  public  if  there  were  any 
sufficient  ground  for  considering  tbat 
the  jurisdiction  is  doulitful. "  He 
cites  the  opinions  of  Lord  Eldon,  Sir 
William  Orant,  Sir  John  Leach,  and 
other  eminent  judges,  and  adds: 
"So  long  ago  as  tlie  case  of  Colt  v. 
Woollaston,  2  P.  Wms.  154,  156,  the 
master  of  rolls  said:  'It  is  no  objec- 
tion that  the  parties  have  their  remedy 
at  law,  and  may  bring  an  action  for 
moneys  had  and  received  for  the  plain- 
tiff's own  use,  for  in  cases  of  fraud  the 
court  of  equity  has  concurrent  juris- 
diction with  the  common  law,  matter 
of  fraud  being  the  great  subject  of  re- 
lief here.'"  The  vice-cliancellor  also 
held  that  the  decision  in  Ogilvie  v. 
Currie,  37  L.  J.  Ch.  541,  per  Lord 
Cairns,  was  not  in  opposition  to  his 
own  conclusion,  and  if  a  dictum  in 
that  case  appeared  to  be  opposed,  it 
was  in  direct  conflict  with  an  unbrok  en 
current  of  autiiority.  In  Ramshire  v. 
Bolton,  L.  R.  8  Eq.  294,  the  bill  al- 
leged that  at  the  defendant's  request 
he  advanced  to  a  third  person,  who 
was  the  drawer,  one  half  of  the  amount 
of  a  bill  of  exchange  drawn  for  five 
hundred  pounds;  that  the  advance 
was  made  upon  defendant's  promise 
to  advance  the  other  half,  and  his 
representations  that  the  drawer  and 
acceptor  were  both  men  of  large  prop- 
erty; that  defendant's  representations 
were  intentionally  false  and  fraudu- 
lent; that  he  knew  the  parties  to  the 


bill  were  utterly  insolvent,  and  that  it 
was   worthless;  that  he  made  no  ad- 
vance himself;    but   the  whole  was  a 
scheme  to  obtain  money  for  himself. 
The  relief   demanded  was  repayment 
of  the  money  from  the  defendant  per- 
sonally.    The   bill   was   deumrred   to 
on  the   ground  that  the   remedy  waa 
wholly  at  law.     Vice-Chancellor    Ma- 
lins  said   (p.  299):    "No  one  can  say 
that  the   bill  does  not  allege  a  case 
entitling  the  plaintiff  to  recover  the 
money  at   law;   but  the   question  is, 
whether   the   remedy   is   not   in   this 
court  as  well  as  at  law."     The  vice- 
chancellor,  having  said  that  the  facts 
brought  the  case  within  the  principle 
of  Pasley  v.   Freeman,   3    Term  Rep. 
51,    and    having    cited    instances    in 
which  equity  had  taken  jurisdiction  of 
similar   cases,  he   proceeded:    "Lord 
Eldon,  in  Evans  v.  Bicknell,  6    Ves. 
174,    182,    declared  that  tlie   case   of 
Pasley  v.  Freeman,  3  Term  Rep.  51, 
and  all  others  of  that  class,  were  more 
fit  for  a  court  of  equity  than  a  court 
of    law,    and  was  clearly   of   opinion 
that  at  least  there  is  concurrent  juris- 
diction, and  he  says:   *It  has  occurred 
to  me  that  that  case,  upon  the  princi- 
ples of  many  decisions  of  this  court, 
might  have  been  maintained  here;  for 
it  is  a  very  old  head  of  equity  that  if 
a  representation  is    made  to    another 
person  going  to  deal  in  a  matter  of  in- 
terest upon  the  faith  of  that  represen- 
tation,   the    former   shall    make    that 
representation  good  if  he  knows  it  to 
be  false.'     Can  anything  be  more  con- 
clusive?"    In  St.  Aubyn  v.  Smart,  L. 
R.  5  Eq.  183,  the  defendant  and  one 
BuUer  had  been  partners  as  attorneys 
at  law.      Plaintiff  employed  the  firm 
to  obtain  a  sum  of  money  due  to  him, 
being  part  of    a  fund  in   charge  of  a 
court.      BuUer  attended  to  the  busi- 
ness, obtained  the  money  in  his  own 
name,   and    absconded    with    it.     The 
suit  is  broiight  to  make  the  defendant 
liable  for  this  fraud  of  his  copartner. 
The  Ijill  did  not  pray  for  an  account- 
ing, but  simply  to  recover  the  sum  of 
money.     Demurrer  on  ground  of  want 
of   jurisdiction.     The   vice-chancellor 
said  (p.    ISS):    "Upon  a  careful  con- 
sideration of  the  authorities,  I  am  per- 
fectly satisfied  that  even  if  there  ba 


§912 


EQUITY    JUKISPRUDENCE. 


1288 


to  deal  with  all  cases  of  fraud;  its  original  grant  of  juris- 
diction covered  fraud  in  all  its  forms  and  phases.     The 


a  remedy  at  law,  there  is  also  one  in 
equity.  The  jurisdiction  was  clearly 
stated  by  Sir  James  Wigram  in  Blair 
V.  Bromley,  5  Hare,  556,  2  Phill.  Ch. 
361,  confirmed  by  Lord  Lyndhurst  on 
appeal,  who,  in  the  course  of  his  judg- 
ment, said  that  in  all  the  cases  to 
which  he  had  referred  the  effect  of  a 
misrepresentation  raised  an  equity  to 
restore  the  parties  as  nearly  as  possi- 
ble to  the  same  situation  in  which  they 
would  have  stood  but  for  tho  misrep- 
resentation, and  for  which  damages  in 
an  action  at  law  might  be  a  very  inade- 
quate remedy;  and  that  the  fact  that 
an  action  at  law  would  lie  was  no  ob- 
jection to  such  equity."  This  decision 
was  affirmed  by  the  court  of  appeal, 
consisting  of  Page  Wood  (Lord  Hath- 
erley)  and  Selwyn,  LL.  JJ.,  on  the 
ground  of  the  general  jurisdiction  of 
equity  in  matters  of  fraud:  St.  Aubyn 
V.  Smart,  L.  R.  3  Ch.  646,  650.  The 
celebrated  case  of  Slim  v.  Croucher,  1 
De  Gex,  F.  &  J.  518,  is  a  most  instruct- 
ive and  convincing  authority.  Plain- 
tiff was  applied  to  for  a  loan  upon  the 
security  of  a  lease,  and  was  told  by 
the  borrower  that  he  was  entitled  to  a 
renewal  of  the  lease  for  ninety-eight 
years  from  his  lessor.  Plaintiff  re- 
quired a  written  statement  from  the 
lessor  of  that  fact.  The  lessor  fur- 
nished such  a  statement,  and  on  the 
faith  of  it  plaintiff  made  the  loan.  It 
turned  out  that  the  lessor  had  already 
executed  the  renewal  lease  to  the  bor- 
rower, who  had  assigned  it  to  a  third 
person  for  value;  at  the  time  he  made 
his  statement  the  lessor  had  forgotten 
the  fact.  Plaintiff  sues  the  lessor  to  re- 
cover the  sum  advanced,  with  interest. 
The  court  of  appeal  (Lord  Chancellor 
Campbell  and  Lords  Justices  Turner 
and  Knight  Bruce)  held  that  the  de- 
fendant's misrepresentation  was  fraud 
in  equity,  though  not  an  intentional 
moral  wrong;  that  he  was  liable;  and 
that  equity  had  jurisdiction.  Lord 
Campbell  said  (p.  52.3):  "The  defense 
set  up  in  the  suit  is,  that  there  was  a 
remedy  at  law,  and  tliat  that  is  the 
only  remedy  competent  to  the  plain- 
tiff. Now,  that  there  was  a  remedy  at 
law  I  think  is  quite  clear;  there  is  no 
doubt    in   my   mind    that    an   action 


would  lie,  and  that  it  would  be  for  a 
jury  to  assess  the  damages.  I  am  of 
opinion,  however,  tliat  this  belongs  to 
a  class  of  cases  over  which  courts  of 
law  and  courts  of  equity  have  a  com- 
mon jurisdiction,  and  in  which  the 
procedure  of  both  jurisdictions  is 
adapted  for  doing  justice.  I  do  not 
regret  that  there  is  such  a  class  of 
cases,  nor  should  I  be  sorry  to  see  it 
extended.  But  being  of  opinion  that 
this  is  a  case  in  which  a  court  of  equity 
has  jurisdiction  as  well  as  a  court  of 
law,  I  think  that  it  is  a  much  better 
case  for  a  court  of  equity  than  for  a 
court  of  law,  because  a  court  of  law 
could  only  have  left  it  to  a  jury  to 
assess  the  damages;  whereas  here,  by 
the  superior  powers  of  the  court  of 
equity,  justice  can  be  done  between 
the  parties  in  the  most  minute  detail." 
Knight  Bruce,  L.  J.,  said  (p.  527): 
"On  the  merits  of  this  case  there  can 
be  no  possibility  of  question.  [It  has 
been  overruled  on  the  merits  by  Derry 
V.  Peek,  14  App.  Cas.  (H.  L.)  337,  but 
its  authority  on  the  question  of  juris- 
diction is  left  untouched:  Low  v.  Bou- 
verie  (1891),  3  Ch.  82.]  The  only  point 
reasonably  arguable  was,  in  which  of 
the  courts  redress  should  be  sought, 
and  it  has  been  said  that  redress 
should  be  sought  in  a  court  of  law. 
It  is  true  that  according  to  modern 
practice  a  court  of  law  would  afford 
redress  in  the  case  by  means  of  an  ac- 
tion, with  the  assistance  of  a  jury;  but 
the  courts  of  law  in  this  country  exer- 
cise jurisdiction  in  these  cases  by 
means  of  a  gradual  extension  of  their 
powers,  and  we  know  that  that  does 
not  deprive  the  courts  of  equity  of 
their  ancient  and  undoubted  jurisdic- 
tion which  they  exercised  before  courts 
of  law  enlarged  their  limits.  The  ob- 
servation is  familiar  —  and  some  of  us 
have  heard  it  used  by  Lord  Eldon  — 
that  the  jurisdiction  not  only  belongs 
to  this  court,  but  belonged  to  it  origi- 
nally  I  do   not   mean   to  say 

that  in  all  cases  the  court  will  exer- 
cise the  jurisdiction.  It  is  in  the 
power  of  the  court  to  say  that  it  will 
not  do  so  in  particular  cases,  but  I 
am  perfectly  satisfied  that  this  is  a 
case  in  which  the  jurisdiction  ought 


1289  ACTUAL   FRAUD.  §  912 

law  courts,  on  tlie  other  hand,  originally  had  very  little,  if 
any,  jurisdiction  in  such  matters.  In  the  early  forms  of 
action  to  enforce  covenants,  debts,  and  other  obligations  ex 
contractu,  fraud  was  not  admitted  as  a  defense,  and  there 
was  no  form  of  action  appropriate  for  the  recovery  of 
damages  on  account  of  fraud.  The  jurisdiction  of  the 
law  courts  in  such  cases  was  of  later  origin,  and  was  of 
gradual  growth.  It  was  not  until  the  invention  of  the 
actions  of  assumpsit,  case,  and  trover,  in  which  equitable 
principles  could  be  largely  admitted,  that  the  jurisdiction 
at  law  in  matters  of  fraud  became  fully  developed.  The 
full  jurisdiction  of  equity  having  thus  been  established 
from  the  earliest  time,  it  should  not,  in  accordance  with 
familiar  principles,  be  at  all  affected  by  a  subsequent 
growth  of  a  similar  common-law  jurisdiction.  To  say 
that  the  full  jurisdiction  of  equity  has  been  any  way  ab- 
ridged, impaired,  or  altered,  because  the  law  courts  have 
gradually  assumed  and  finally  acquired  a  like  jurisdiction, 
even  though  competent  in  many  cases  to  administer  ade- 
quate relief,  is  to  violate  one  of  the  most  fundamental 
principles  regulating  the  general  equitable  jurisdiction. 
The  sum  of  the  English  doctrine,  therefore,  is,  that,  al- 
though the  jurisdiction  always  exists,  whether  it  will  be 

to  be  exercised."  These  observations  diction."  These  words  contain  the 
are  very  weighty,  and  correctly  state  very  essence  of  the  true  theory  con- 
tlie  relative  position  of  the  two  juris-  cerning  the  function  of  decided  cases 
dictions  in  equity  and  at  law  over  to  operate  as  examples  of  all  legal 
matters  of  fraud.  Some  of  the  Amer-  principles  and  doctrines,  rather  than 
ican  decisions  seem  to  speak  as  though  as  being  their  sources  or  fountains, 
the  jurisdiction  at  law  in  cases  of  They  deserve  to  be  emblazoned  on  the 
fraud  had  existed  from  the  beginning,  walls  of  every  court-room  in  the  coun- 
full  and  complete;  while  that  in  equity  try,  so  that  they  might  be  under  the 
was  a  subsequent  creation,  including  constant  observation  of  all  judges 
only  those  matters  which,  it  was  found,  who  are  applying  precedents  in  the 
could  not  be  easily  determined  at  law.  work  of  constructing  and  developing 
Turner,  L.  J.,  said  (p.  528):  "If  we  tlie  law.  See  also  Colt  v.  Woollas- 
were  to  grant  any  relief  upon  this  ap-  ton,  2  P.  Wms.  154;  Evans  v.  Bick- 
peal,  we  should  be  very  much  narrow-  nell,  6  Ves.  174;  Burrowes  v.  Lock,  10 
ing  an  old  jurisdiction  of  this  court,  Ves.  470;  Green  v.  Barrett,  1  Sim.  45; 
by  confining  it  to  cases  in  which  the  Blair  v.  Bromley,  5  Hare,  542,  556;  2 
jurisdiction  has  been  exercised.  We  Phill.  Ch.  354,  361;  Ingram  v.  Thorp,  7 
should,  I  think,  be  taking  the  cases  Hare,  67;  Cridland  v.  Lord  De  Man- 
as the  measure  of  the  jurimlicuon,  in-  ley,  1  De  Gex  &  S.  459;  Atkinson  v. 
stead  of  as  the  examples  of  that  Juris-  Mackreth,  L.  K.  2  Eq.  570. 


§913 


EQUITY    JURISPRUDENCE. 


1290 


exercised  depends  upon  the  circumstances  of  individual 
cases.' 

§  913.  Exception  —  Fraudulent  Wills.  —The  marked 
exception  to  the  jurisdiction  referred  to  in  the  foregoing 
paragraph  is  that  of  canceling  wills  obtained  by  means 
of  fraud.  In  a  few  very  early  decisions,  the  court  of 
chancery  seems  to  have  asserted  such  a  jurisdiction.  For 
more  than  a  century,  however,  and  through  a  long  series 
of  cases,  the  judges  have  either  refused  to  exercise  the 

the  remedy  at  law);  Skilbeck  v.  Hil- 
ton, L.  R.  2  Eq.  587  (setting  aside  a 
release);  Hoare  v.  Bremridge,  L.  R.  14 
Eq.  522;  8  Ch.  22  (cancellation  of  aa 
insurance  policy;  the  jurisdictioa  cer- 
tain, altliough  the  remedy  at  law  might 
be  better);  London  etc.  Co.  v.  Sey- 
mour, L.  R.  17  Eq.  85  (ditto);  Flower 
V.  Lloyd,  L.  R.  10  Ch.  Div.  327  (setting 
aside  a  judgment);  Lemprifere  v. 
Lange,  L.  R.  12  Ch.  Div.  675  (setting 
aside  a  fraudulent  lease  against  an  in- 
fant lessee  guilty  of  the  fraud).  Recov- 
erinq  real  estate  to  ivhich  the  plaintiff  was 
entitled,  and  which  he  had  been  prevented 
hy  fraud  from  possessing  and  enjoyinq: 
Vane  v.  Vane,  L.  R.  8  Ch.  383  (lapse 
of  time  no  bar  where  fraud  was  con- 
cealed from  tlie  plaintiflF,  —  a  remark- 
able case);  Chetham  v.  Hoare,  L.  R.  9 
Eq.  571  (lapse  of  time  no  bar  where  the 
fraud  has  been  concealed);  Howard  v. 
Earl  of  Shrewsbury,  L.  R.  2  Ch.  760. 
Specific  enforcement  of  false  representa- 
tions; compelling  the  defendant  to  make 
them  good:  Hutton  v.  Rossiter,  7  De 
Gex,  M.  &  G.  9,  18,  19  (against  an 
executor  who  had  represented  that  the 
assets  of  the  estate  were  sufficient,  and 
that  a  certain  claim  would  be  paid). 
Enforcing  a  constructive  trust  against  a 
party  who  has  fraudulently  obtained 
the  title  to  land:  Rolfe  v.  Gregory,  4  De 
Gex,  J.  &  S.  576  (delay  excused  by 
concealed  fraud).  See  also,  on  the 
subject  of  jurisdiction  in  general. 
Garth  v.  Cotton,  3  Atk.  751 ;  Man  v. 
Ward,  2  Atk.  228;  Trenchard  v.  Wan- 
ley,  2  P.  Wins.  167;  Huguenin  v. 
Baseley,  14  Ves.  273;  Browne  v.  Sav- 
age. 4  Drew.  635;  Stent  v.  Bailis,  2 
P.  Wms.  220;  Chesterfield  v.  Janssen, 
2  Ves.  Sr.  125;  Barker  v.  Ray,  2 
Russ.  63;  Taff  Vale  etc.  R'y  v.  Nixon, 
1  H.  L,  Cas.  109,  221. 


'  I  add  several  cases,  most  of  them 
recent,  merely  as  examples  of  the 
exercise  of  the  jurisdictioa  when  some 
remedy  might  also  have  been  obtained 
at  law.  The  discussion  of  the  pe- 
culiarly equitable  remedies,  such  aa 
cancellation,  specific  enforcement, 
reformation,  injunction,  etc.,  is  post- 
poned. Pecuniary  recoveries;  jurisdic- 
tion not  exercised:  Newham  v.  May, 
13  Price,  749,  751  (suit  on  a  fraudulent 
warranty);  Leather  v.  Simpson,  L.  R. 
11  Eq.  398  (to  recover  back  money 
paid  for  a  forged  bill);  Ship  v.  Cross- 
kill,  L.  R.  10  Eq.  73  (to  recover  back 
money  paid  for  shares);  Ochsenbeinv. 
Papelier,  L.  R.  8  Ch.  695  (court  re- 
fused to  enjoin  an  action  at  law  on  an 
insurance  policy  on  the  ground  that 
the  question  of  fraud  involved  could  be 
better  tried  at  law).  Pecuniary  re- 
cmieries:  jurisdiction  exercised:  See  cases 
in  the  last  note,  and  also  Wilson  v. 
Short,  6  Hare,  366  (suit  by  a  principal 
against  his  agent);  Barker  v.  Birch,  1 
De  Gex  &  S.  376;  Coomer  v.  Bromley, 

5  De  Gex  &  S.  532;  Mcintosh  v.  Great 
West.  R'y,  2  Macn.  &  G.  74  (discov- 
ery and  relief  on  a  contract,  although 
there  was  a  remedy  at  law).  Cancella- 
tion or  rescission  of  contracts,  sales,  etc. : 
Jennings  v.  Broughton,  5  De  Gex,  M. 

6  G.  126  (cancellation  of  a  contract  of 
purchase);  Reynell  v.  Spyre,  1  De  Gex 
M.  &  G.  660  (setting  aside  an  agree- 
ment); Rawlins  v.  Wickham,  3  De 
Gex  &  J.  304  (setting  aside  a  contract 
of  partnership  and  indemnifying  plain- 
tifif  against  the  debts  of  the  firm); 
Bartlett  v.  Salmon,  6  De  Gex,  M.  & 
G.  33  (setting  aside  a  contract); 
Walsham  v.  Stainton,  1  De  Gex,  J.  & 
S.  678  (setting  aside  a  sale  and  recov- 
ering the  value);  Traill  v.  Baring,  4 
De  Gex,  J.  &  S.  318  (canceling  a 
policy  of   insurance,  notwithstanding 


1291 


ACTUAL    FPwVUD. 


§013 


jurisdiction,  or  denied  its  existence;  and  it  has  finally 
been  settled  by  the  tribunal  of  last  resort,  that,  under  their 
general  jurisdiction,  courts  of  equity  have  no  power  to 
entertain  suits  for  the  purpose  of  setting  aside  or  cancel- 
ing a  will  on  the  ground  that  it  was  procured  by  fraud. 
The  same  rule  has  been  generally  adopted  in  the  United 
States.  Under  the  common  system,  the  validity  of  wills 
of  real  estate  could  only  be  tested  in  an  action  at  law; 
that  of  wills  of  personal  estate  was  established  by  the  decree 
of  the  ecclesiastical  court  in  the  proceedings  for  probate. 
Under  the  statutory  system  generally  prevailing  in  this 
countrj',  both  wills  of  real  estate  and  wills  of  personal 
estate  are  admitted  to  probate;  in  some  of  the  states  the 
decree  of  the  probate  court  is  conclusive  with  respect  to 
both  kinds;  in  other  states  it  is  conclusive  only  with  re- 
spect to  those  of  personal  property.* 


^  The  early  cases  which  admit  the 
jurisdiction  are  Herbert  v.  Lowns,  1 
Ch.  Rep,  12;  Maundy  v.  Maundy,  1 
Ch.  Rep.  66:  Welby  v.  Thornagh, 
Free.  Ch.  123;  Goss  v.  Tracey,  1  P. 
Wma.  287;  Lucas  v.  Burgess,  Reg.  Lib, 
1573,  A,  fol,  7;  Corp'n  of  Feversham 
V.  Parr,  Reg.  Lib.  1573,  A,  fol.  208; 
and  see  Monro's  Acta  Cancellaiise,  398. 
The  following  cases  directly  or  im- 
pliedly deny  the  jurisdiction:  Allen  v. 
McPherson,  1  H.  L.  Cas.  191;  1  Phdl. 
Ch.  133;  5  Beav,  469;  Jones  v.  Greg- 
ory, 2  De  Gex,  J.  &  S.  S3;  Wright  v. 
Wilkin,  4  De  Gex  &  J.  141 ;  Andrews  v. 
Powys,  2  Brown  Pari.  C.  504;  Kerrick 
V.  Bransby,  7  Brown  Pari.  C.  437;  Ben- 
net  V,  Vade,  2  Atk.  3-'4;  Webb  v.  Clav- 
erden,  2  Atk.  424;  Jones  v.  Jones,  3 
Mer.  161;  Armitage  v.  Wadsworth,  1 
Madd.  189;  Roberts  v,  Wynn,  1  Ch, 
Rep,  125;  Archer  v.  Mosse,  2  Vern.  8; 
Thynn  v.  Thynn,  1  Vern.  286;  Nelson 
V.  Oldfield,  2  Vern.  76:  Plume  v. 
Beale,  1  P.  Wms.  3SS;  Barnesly  v. 
Powel,  1  Ves.  Sr.  284,  287;  Sheffield 
Duchess  of  Buckingham,  1  Atk.  628; 
Ex  parte  Fearon,  5  Ves.  663,  647; 
Price  V.  Dewhurst,  4  Myhie  &  C.  76, 
80;  Gingell  v.  Home,  9  Sim.  530,  548; 
In  re  Broderick's  Will,  21  Wall.  503; 
Jones  V.  Boiler,  9  Wall.  364;  Gaines 
V,  Chew,  2  How.  619.  645;  Tarver 
V.    Tarver,    9    Pet,    174;    Gould    v. 


Gould,  3  Story,  516,  537;  Adams  v. 
Adams,  22  Vt.  50;  Waters  v.  Stif  1;- 
ney,  12  Allen,  1;  90  Am.  Dec.  122; 
Colton  V.  Ross,  2  Paige,  396;  22  Am. 
Dec.  648;  Trexler  v.  Miller,  6  Ired. 
Eq.  248;  Blue  v.  Patterson,  1  Dev.  & 
B.  Eq.  457;  McDewall  v.  Peyton,  2 
Desaus.  Eq.  313;  Watson  v.  Both  well, 
11  Ala.  650;  Hauiberlm  v.  Terry,  7 
How.  (Miss.)  143;  Cowdenv,  Cowden, 
2  How.  (Miss.)  806;  Ewell  v.  Tidwell, 
20  Ark.  136;  Archer  v.  Meadows,  33 
Wis,  161);  California  v.  McGlyun,  20 
Cal.  233,  266;  Booth  v.  Kitchen,  7 
Hun,  255;  Van  Alst  v.  Hunter,  5 
Johns,  Ch.  148;  Muir  v.  Trustees,  3 
Barb.  Ch.  477;  Hunter's  Will,  6  Ohio, 
499;  Hunt  v,  Hamilton,  9  Dana,  90; 
Burrow  v.  Ragland,  6  Humph.  481, 
While  it  plainly  appears  from  these 
cases  that  there  is  no  jurisdiction  to 
set  aside  a  probate  on  the  ground  of 
fraud  in  obtaining  the  will,  there 
would  not  seem  to  be  any  such  objec- 
tion, on  principle,  to  the  granting  of 
appropriate  relief  against  the  probate 
itself  on  account  of  fraud  in  the  pro- 
ceedings independently  of  the  will. 
Such  relief  would  seem  to  be  exactly 
analogous  to  that  granted  against  any 
fraudulent  decree  or  judgment.  With 
respect  to  jurisdiction  of  a  court  of 
probate,  see  the  two  following  remark- 
able  cases:    Roderigaa   v.    East   Kiv. 


§  914  EQUITY  JURISPRUDENCE.  1292 

§  914.  The  American  Doctrine.  —  In  a  few  of  the  earlier 
decisions  the  English  rule  was  adopted  to  its  full  extent.' 
This  cannot,  however,  be  regarded  as  the  present  Ameri- 
can doctrine.  As  was  shown  in  the  former  volume,  in 
several  of  the  states  only  a  partial  and  very  narrow  equi- 
table jurisdiction  was  for  a  long  time  conferred,  and  this 
was  strictly  limited  by  the  courts  to  the  very  matters 
specified  by  the  statutes.  In  other  states,  the  equitable 
jurisdiction  was  defined  by  statute  as  embracing  only 
those  cases  for  which  there  was  no  adequate  remedy  at 
law.  Influenced  partly  by  the  tendency  of  this  legisla- 
tion, and  partly  by  the  supposed  constitutional  guaranties 
of  the  jury  trial,  which  were  construed  to  forbid  the  in- 
terposition of  equity  in  controversies  which  could  be  de- 
termined by  law,  the  equity  courts  of  the  United  States 
and  of  the  several  states  have  practically  abandoned  a 
large  part  of  the  jurisdiction  in  matters  of  fraud  which  is 
confessedly  held  by  the  English  court  of  chancery.  The 
doctrine  is  settled  that  the  exclusive  jurisdiction  to  grant 
purely  equitable  remedies,  such  as  cancellation,  will  not 
be  exercised,  and  the  concurrent  jurisdiction  to  grant 
pecuniary  recoveries  does  not  exist,  in  any  case  where 
the  legal  remedy,  either  affirmative  or  defensive,  which  the 
defrauded  party  might  obtain,  would  be  adequate,  certain, 
and  complete.^     The  language  on  this  subject  often  used 

Sav.  Inst.,  63  N.  Y.  460;  20  Am.  Rep.  eral   doctrine  in   the  former  volume. 

555;  Roderigas  v.  East  Riv.  Sav,  Inst.,  See,  with  respect  to  the  jurisdiction  of 

76  N.  Y.  .316;   32  Am.  Rep.  309.     As  the  United  States  courts,  atite,  §§  295, 

to  jurisdiction  in  case  of  a  lost  or  de-  296,  297,  and  cases  cited;  with  respect 

etroyed  will,   see   Gaines  v.  Chew,  2  to  the  jurisdiction  in  New  Hampshire, 

How.  619,  645;  Bailey  v.  Stiles,  2  N.  J.  §  303;  in  Massachusetts,  §§  313,  318; 

Eq.  2-20;  Allison  v.  Allison,  7  Dana,  90;  in  Maine,  §§  .323,  327.     See  also  Earl 

Buchanan  v.  Matlock,  8  Humph.  390;  of   Oxford's   Case,  2   Lead.   Cas.    Eq. 

47    Am.     Dec.    622;    Morningstar   v.  1550-1553,    note  by  American  editor. 

Selby,  15  Ohio,  345;  45  Am.  Dec.  579;  The   following  are  a  few  of   the  vast 

Slade  V.  Street,  27  Ga.   17;  [Dower  v.  number  of  cases  in  which  the  jurisdic- 

Seeds,  28  W.  Va.   113;   57  Am.    Rep.  tion  in    matter  of  fraud  is  discussed, 

646  (the  jurisdiction  asserted,  after  an  and  its  limitations  and  exceptions  are 

extended   review  of   the   cases).     See  stated:  Grand  Chute  v.  Winegar,   15 

«os<,  note  to  §  1154.]  Wall.   .373;   Insurance  Co.  v.    Bailey, 

>  For  example,  by  Cliancellor  Kent  13  Wall.  616;  Jones  v.  Bolles,  9  Wall, 

in  Bacon  V.  Bronsou,  7  Johns.  Ch.  201;  364;  Bank  of  Bellows  Falls  v.  Rutland, 

11  Am.  Dec.  449.  etc.  R.  R.,  28  Vt.  470;  Crane  v.  Bun- 

'  I  have  already  discussed  this  gen-  nell,  10  Paige,  333;  Russell  v.  Clark's 


1293 


ACTUAL   FRAUD. 


§914 


by  judges  represents  nearly  the  entire  jurisdiction  of 
equity  in  matters  of  fraud,  whatever  be  the  remedies 
granted,  as  concurrent  with  that  at  the  law,  and  as  not 
existing  where  adequate  legal  relief  can  be  given.     The 


Ex'rs,  7  Cranch,  69,  89;  Hardwick  v. 
Forbes's  Adm'r,  1  Bibb.  212;  Waters 
V.  Mattingly,  1  Bibb,  244;  4  Am.  Dec. 
6.31;  Blackwell  v.  Oldham,  4  Dana, 
195;  Warner  v.  Daniels,  1  Wood.  &  M. 
90,  112;  Ferson  v.  Sanger,  Daveis,  252, 
259;  Bassett  v.  Brown,  100  Mass.  355; 
Suter  V.  Matthews,  115  Mass.  253; 
Hubbellv.  Currier,  10  Allen,  333;  Mil- 
ler V.  Scammon,  52  N.  H.  609;  Wood- 
man V.  Freeman,  25  Me.  531;  Piscata- 
qua  Ins.  Co.  v.  Hill,  60  Me.  178,  183; 
Clark  V.  Robinson,  58  Me.  133,  137; 
Williams  v.  Mitchell,  30  Ala.  299; 
Learned  v.  Holmes,  49  Miss.  290; 
Boardman  v.  Jackson,  119  Mass.  161; 
[Buzard  v.  Houston,  119  U.  S.  347; 
Paton  V.  Majors,  46  Fed.  Rep.  210; 
Tillison  v.  Ewing,  87  Ala.  350;  Green 
V.  Spaulding,  76  Va.  411;  Taylor  v. 
Taylor,  74  Me.  582;  Merrill  v.  Mc- 
Laughlin, 75  Me.  64;  Fitzmaurice  v. 
Mosier,  116  Ind.  365;  9  Am.  St.  Rep. 
854,  and  note.]  In  the  two  following 
recent  cases  the  doctrine  was  clearly 
stated  in  both  of  its  aspects:  Girard 
Ins.  Co.  V.  Guerard,  3  Woods, 
427.  Held,  that  a  suit  in  equity  to 
recover  on  a  bond  which  had  been 
delivered  up  and  canceled  through 
the  fraud  of  a  person  not  a  party  to 
the  suit,  but  which  was  still  in  force, 
will  not  be  sustained,  where  no  dis- 
covery is  sought,  and  where  a  sub- 
stantial copy  is  furnished.  Woods, 
J.,  said  (p.  431):  "It  is  not  wicre fraud 
which  confers  jurisdiction  on  a  court 
of  equity.  A  party  may  be  guilty  of 
a  fraud  in  the  warranty  of  personal 
property  sold,  but  nevertheless  the 
remedy  is  at  law  on  the  warranty. 
So  if  the  maker  of  a  bond,  by  fraudu- 
lent artifice,  or  even  theft,  gets  pos- 
session of  the  bond  from  the  obligee, 
still  if  the  obligee  has  a  duplicate  of 
the  bond,  he  cannot  proceed  in  equity 
to  recover  upon  the  bond.  A  court  of 
equity  has  jurisdiction  to  relieve  from 
the  consequences  of  fraud,  as  where  a 
bond  or  note  is  procured,  or  deed  of 
conveyance  obtained,  on  false  and 
fraudulent  pretenses.  So  where  a 
bond  or  deed  is  delivered  up  on  fraudu- 
lent representations  and  is  canceled  or 


destroyed."  I  would  remark  that  if 
this  reasoning  is  correct,  it  seems  to 
strike  at  the  root  of  the  jurisdiction 
to  entertain  suits  on  lost  instruments 
of  indebtedness.  Wampler  v.  Wam- 
pler,  30  Gratt.  454:  Held,  that  a 
deed  of  conveyance  obtained  by  fraud 
may  be  set  aside.  Christian,  J.,  said 
(p.  459):  "  Courts  of  equity  have  an 
original,  independent,  and  inherent 
jurisdiction  to  relieve  against  every 
species  of  fraud.  Every  transfer  or 
conveyance  of  property,  by  what 
means  soever  it  may  be  done,  is  in 
equity  vitiated  by  fraud.  Deeds,  ob- 
ligations, contracts,  awards,  judg- 
ments, or  decrees  may  be  the  instru- 
ments to  which  parties  resort  to  cover 
fraud,  and  through  which  they  may 
obtain  the  most  unrighteous  advan- 
tages, but  none  of  such  devices  or  in- 
struments will  be  permitted  by  a  court 
of  equity  to  obstruct  the  requirements 
of  justice.  If  a  case  of  fraud  be  estab- 
lished, a  court  of  equity  will  set  aside 
all  transactions  founded  upon  it,  by 
whatever  machinery-  they  may  have 
been  effected,  and  notwithstanding 
any  contrivance  by  which  it  may  have 
been  attempted  to  protect  them. 
These  principles  have  now  become 
axioms  of  equity  jurisprudence."  I 
am  convinced  that  the  practical  sur- 
render by  the  equity  courts  of  this 
country  of  so  large  a  portion  of  their 
original  and  most  certain  jurisdiction 
was  both  unfortunate  and  unneces- 
sary. There  are  multitudes  of  cases, 
even  for  the  recovery  of  money  alone, 
in  which  justice  could  be  administered 
and  the  rights  of  both  litigants  pro- 
tected far  better  by  a  trained  judge 
than  by  leaving  everything  to  the 
rough-and-ready  justice  of  an  or- 
dinary jury.  The  English  courts  have 
perceived  and  admitted  this  truth. 
Doubtless  the  influence  of  able  courts, 
like  those  of  Massachusetts,  Maine, 
and  Pennsylvania,  has  been  very  pow- 
erful in  shaping  the  decisions  of  other 
state  tribunals,  the  narrow  and  purely 
statutory  jurisdiction  of  the  former 
states  not,  perhaps,  having  been  suffi- 
ciently observed. 


§914 


EQUITY   JURISPRUDENCE. 


1294 


inaccuracy  of  this  mode  of  expression  has  been  shown  in 
the  former  volume.^  The  true  doctrine  is,  that  where  the 
estate  or  interest  is  equitable,  the  jurisdiction  exists  and 
will  always  be  exercised;  where  the  estate,  interest,  or 
right  is  legal,  and  the  remedies  are  equitable,  the  ju- 
risdiction always  exists,  but  will  not  always  be  exercised; 
where  the  right  is  legal,  and  the  remedy  is  pecuniary 
and  legal,  the  jurisdiction  is  concurrent  and  only  exists 
where  the  remedy  at  law  is  inadequate.^  I  have  placed 
in  the  foot-note  a  number  of  recent  decisions,  arranged 
in  groups  according  to  the  nature  of  their  reliefs,  merely 
as  examples  and  illustrations  of  the  doctrine  adopted  by 
the  American  courts.'     The  question  whether  equity  has 

procured  in  fraud  of  public  rights  and 
for  grossly  inadequate  consideration); 
Wampler  v.  Wampler,  30  Gratt.  454 
(conveyance  of  land);  Hosleton  v. 
Dickinson,  51  Iowa,  244  (equitable 
defense;  in  an  action  on  a  promissory 
note  given  for  the  price  of  land,  de- 
fendant may  have  the  note  canceled 
to  the  extent  of  the  damage  sustained 
by  him  from  false  representations  in 
the  sale);  Field  v.  Herrick,  5  111. 
App.  54  (a  lease  obtained  by  fraud 
upon  the  lessee);  Tracy  v.  Colby,  55 
Cal.  67  (sale  of  land  made  in  pursuance 
of  a  judicial  order);  Moore  v.  Moore, 
5(j  Cal.  89  (conveyance  procured  by 
undue  influence);  United  States  Ins. 
Co.  V.  Central  Nat.  Bank,  7  111.  App. 
426  (liill  supplementary  to  execution 
setting  aside  conveyance  fraudulent 
against  a  creditor);  Noble  v.  Hines, 
72  Ind.  12;  Bruker  v.  Kelsey,  72 
Ind.  51;  Pfeifer  v.  Snyder,  72  Ind.  78 
(to  set  aside  a  conveyance  of  land 
fraudulent  against  the  plaintifiF  as  a 
judgment  creditor,  the  complaint 
must  aver  that  there  is  not  other 
sufficient  property  subject  to  execu- 
tion to  satisfy  the  demand);  Thomp- 
son V.  Hey  wood,  129  Mass.  401  (where 
land  was  fraudulently  sold  and  con- 
veyed to  the  owner  of  the  equity  of 
redemption  under  a  power  of  sale 
contained  in  a  prior  mortgage,  a  sub- 
sequent mortgagee  is  entitled  to  have 
such  sale  and  conveyance  canceled); 
and  see  Huxley  v.  King,  40  Mich.  73 
(settiTig  aside  title  fraudulently  ac- 
quired  under   a   foieclosure   and    re- 


1  [See  §§  138,  140,  note,  175,  note, 
18S.] 

"  [See  §  178.] 

'  Cancellation  of  conveyances,  cotI' 
tracts,  and  other  "private  inxtriiments. 
The  jurisdiction  exercised:  Derrick  v. 
Lamar  Ins.  Co.,  74  IlL  404  (an  assign- 
ment of  a  policy  fraudulently  pro- 
cured from  the  assured  by  an  officer 
of  the  insurance  company  set  aside); 
Remington  etc.  Co.  v.  O'Dougherty, 
81  N.  Y.  474  (a  forged  deed);  Ham- 
mond V.  Pennock,  61  N.  Y.  145; 
Fisher  v.  Hersey,  78  N.  Y.  387  (a  sale 
of  land  in  pursuance  of  a  decree,  but 
frauduently  made;  sale  set  aside,  and 
a  resale  ordered);  Hackley  v.  Draper, 
60  N.  Y.  88  (sale  of  a  debt  in  pur- 
suance of  an  order  of  court  obtained 
by  fraud);  Bruce  v.  Kell}',  5  Hun, 
229,  232  (conveyance);  Vandercook  v. 
Cohoes  Sav.  Inst.,  5  Hun,  641  (fraud- 
ulent sale  under  a  decree  of  foreclos- 
ure); Smith  V.  Griswold,  6  Or.  440  (a 
court  of  equity  will  cancel  a  bill  of 
sale  of  personal  property  executed 
through  fraud);  Globe  Life  Ins.  Co. 
v.  Reals,  50  How.  i'r.  237  (a  life 
policy);  Glastenbury  v.  McDonald, 
44  Vt.  450  (a  contract);  Willemin  v. 
Dunn,  93  III.  511  (voluntary  convey- 
ance on  account  of  mental  weakness 
an<l  undue  influence);  Fuller  v.  Per- 
cival,  126  Mass.  381  (cancellation  of  a 
firm  note  fraudulently  given  by  a 
partner  of  the  plaintifif  to  a  holder 
with  notice  of  the  fraud);  Emigrant 
Co.  v.  County  of  Wright,  97  U.  S. 
S39  (contract  for  conveyance  of  land 


12D5 


ACTUAL    FRAUD. 


§914 


jurisdiction  of  suits  merely  for  the  recovery  of  money,  or 
whether  the  action  should  be  at  law,  has,  however,  ceased 


demption);  Somerville  v.  Donaldson, 
26  Mum.  75  (conveyance  of  land); 
Postou  V.  Balch,  C9  Mo.  115  (a  sale  of 
personal  property  set  aside  at  suit  of 
the  defrauded  vendor,  and  real  estate 
into  which  the  property  had  been 
converted  by  the  fraudulent  vendee 
subjected  to  a  lien  for  its  value);  Free 
V.  Buckingham,  57  N.  H.  95  (fraudu- 
lent conveyance  of  land);  Ladd  v. 
Rice,  57  N.  H.  374  (fraudulent  con- 
veyance set  aside  and  reconveyance 
ordered);  Willis  v.  Sweet,  49  Wis. 
505  (a  deed  of  laud  delivered  as  an 
escrow,  and  fraudulently  recorded, 
set  aside);  [Fitzmaurice  v.  Mozier, 
ilG  Ind.  365;  9  Am.  St.  Rep.  854,  and 
note  (promissory  note).] 

TJie  same.  Jurisdiction,  when  not  ex- 
ercisecl:  The  rule  is  generally  adopted 
that  a  suit  will  not  be  sustained  to 
caucel  an  executory,  uon-negotiable, 
personal  contract,  —  e.  g.,  a  policy  of 
insurance,  —  when  the  fraud  might 
be  set  up  as  a  defense  to  an  action 
on  the  contract,  and  there  are  no 
special  circumstances  which  would 
prevent  the  defense  from  being 
available,  adequate,  and  complete: 
Globe  etc.  Ins.  Co.  v.  Reals,  79 
N.  Y.  202  (where  the  jurisdiction  of 
equity  will  not  be  exercised  to  cancel 
a  policy  of  insurance  or  other  written 
executory  contract;  it  is  uot  sufficient 
that  a  defense  exists  and  the  evidence 
might  be  lost;  there  must  be  circum- 
stances showing  injury  which  a  court 
of  equity  aloue  can  prevent);  Huff  v. 
Ripley,  58  Ga.  11  (will  not  set  aside 
fraudulent  sale  of  personal  property 
when  remedy  at  law  is  adequate); 
Iqs.  Co.  V.  Bailey,  13  Wall.  61(5,  621, 
623  (policy  of  insurance  will  not  be 
canceled  when  the  facts  constitute  a 
complete  defense  at  law);  Rawsou  v. 
Harger.  48  Iowa,  209  (contract  for  sale 
of  an  invention,  if  neither  party  knew 
of  its  want  of  novelty,  and  both  had 
the  same  means  of  information  and 
acted  in  good  faith,  the  contract  will 
not  be  canceled);  Moore  v.  Holt,  3 
Tenn.  Ch.  248  (a  contract  for  the  pur- 
chase of  real  property  will  not  be  can- 
celed at  the  suit  of  one  contractor  on 
account  of  the  fraud  of  his  co-con- 
tractor, when  the  other  parties  were 
iuuocent  of  the  wroug);  Tutlle  v.  Tat- 


tle, 41  Mich.  211  (a  mortgage  on  land, 
conveyed  on  consideration  of  support- 
ing the  grantor,  will  not  be  canceled 
as  fraudulent  against  such  grantor, 
when  he  again  becomes  owner  of  the 
land);  Johnson  v.  Murphy,  60  Ala. 
2SS  (the  breach  of  an  agreement  to 
make  future  advances  if  a  mortgage  is 
executed  for  past  advances  is  not  suf- 
ficient to  have  the  mortgage  canceled 
on  the  ground  of  fraud;  the  remedy  is 
at  law);  Noel  v.  Horton,  50  Iowa,  687 
(deed  of  land  will  not  be  canceled  on 
the  ground  of  false  representations 
concerning  mere  collateral  matters  not 
affecting  the  substance  of  the  con- 
tract); Dunaway  v.  Robertson,  95  III. 
419  (a  person  who  executes  deeds  with 
intent  to  defraud  creditors  and  puis 
them  on  record,  but  does  not  deliver 
them,  can  have  no  relief  against  them 
in  equity);  Compton  v.  Bunker  Hdl 
Bank,  96  111.  301;  36  Am.  Rep.  147  (a 
deed  will  not  be  canceled  when  maiie 
through  the  fraud  of  a  third  person 
not  authorized  to  act  for  the  grantee, 
the  fraud  being  unknown  to  the  lat- 
ter when  the  deed  was  received); 
Briggs  V.  Johnson,  71  Me.  235  (a  deed 
invalid  on  its  face  w"ill  not  be  canceled 
as  a  cloud  on  title);  Lavassar  v.  Wash- 
burne,  50  Wis.  200  (a  deed  of  land  will 
not  be  canceled  unless  the  proof  of 
fraud  is  clear  and  convincing);  [Buzard 
V.  Houston,  119  U.  S.  347.] 

Cancellation  of  judfiments  atid  other 
judicial  proceedings,  and  suits  to  restrahi 
actioTtS  and  judgments  at  laio.  .  7'Ae 
jurisdiction  exercised:  Dederer  v.  Voor- 
hies,  81  N.  Y.  153  (to  set  aside  fraud- 
ulent proceedings  of  commissioners  in 
making  an  assessment  for  a  road); 
Hunt  v.  Hunt,  72  N.  Y.  217;  28  Am. 
Rep,  129  (what  necessary  in  order  to 
set  aside  a  judgment  for  fraud);  Jor- 
dan V.  Volkenniug,  72N,Y.  300  (ditto); 
Ross  V.  Wood,  70  N.  Y.  8  (ditto); 
llarbaugh  v.  Hohn,  52  Ind.  243  (judg- 
ment fraudulently  taken  for  a  larger 
sum  than  was  due);  Harris  v.  Cornell, 
80  111.  54  (a  fraudulent  decree  for  the 
sale  of  land);  Doughty  v.  Doughty,  27 
N.  J.  Eq.  315  (a  judgment  recovered 
in  another  state);  Craft  v.  Tliompsoii, 
51  N.  H.  536  (an  award  obtained  by 
fraud);  Holland  v.  Trolter,  22  Graft. 
13u  (where   party  was  prevented  by 


§914 


EQUITY   JURISPRUDENCE. 


1296 


to  "be  of  any  practical  importance  in  those  states  which 
have  adopted  the  reformed  procedure.     The  codes  provide 


fraud  from  setting  up  a  good  defense 
in  the  action  at  law);  Babcock  v.  Mc- 
Camant,  53  111.  214  (collection  of  a 
fraudulent  judj^ment  restrained;  equity 
jurisdiction  in  fraud  not  lost  because  a 
statute  has  given  a  similar  jurisdiction 
at  law);  Graham  v,  Roberts,  1  Head, 
56,  59  (a  judgment  by  default  fraud- 
ulently obtained  without  service  of 
process);  Sayles  v.  Mann,  4  111.  App. 
516  (a  judgment  fraudulently  obtained 
against  a  married  woman);  District 
etc.  of  Algona  v.  District  etc.  of  Lott'3 
Creek,  54  Iowa,  286  (a  fraudulent 
award);  Huxley  v.  King,  40  Mich.  73 
(a  fraudulent  foreclosure  and  redemp- 
tion thereunder). 

The  same.  Jimsdiction,  when  not  exer- 
dsed:  United  States  v.  Throckmorton, 
98  U.  S.  61  (a  judgment  or  decree  — 
e.  g.,  confirming  a  claim  under  a  Mexi- 
can grant  —  will  not  be  set  aside  by  an 
equity  suit  brought  for  that  purpose, 
on  the  ground  that  it  was  obtained  by 
fraudulent  and  forged  documents  and 
fraudulent  and  perjured  testimony, 
when  the  self-same  questions  and  tlie 
issues  thereon  were  presented,  con- 
sidered, and  determined  by  the  court 
in  the  judgment  itself  which  is  as- 
sailed); Kelly  V.  Christal,  81  N.  Y. 
619  (equity  will  not  set  aside,  or  re- 
strain, or  relieve  against  a  judgment 
at  law  on  the  ground  of  fraud,  when 
all  the  facts  could  have  been  set  up 
and  would  have  been  a  complete  de- 
fense to  the  action  at  law.  The  fol- 
lowing cases  also  are  to  the  same 
effect:  Cairo  etc.  R.  R.  v.  Titus,  27 
N.  J.  Eq.  102;  Barker  v.  Rukeyser,  39 
Wis.  590;  Thomason  v.  Fannin,  54 
Ga.  361;  Grubb  v.  Kolb,  55  Ga.  630; 
Cairo  etc.  R.  R.  v.  Holbrook,  92  111. 
297;Stilwellv.  Carpenter,  2  Abb.  N.  C. 
23S);  Shepard  v.  Akers,  3  Tenn.  Ch. 
215  (equity  will  not  relieve  against  a 
judgment  at  law  on  the  ground  merely 
of  irregularities  at  the  trial,  laches  of 
the  party  himself,  or  negligence,  or 
even  fraud  of  the  party's  own  coun- 
sel); Robinson  v.  Wheeler,  51  N.  H. 
384  (equity  will  not  relieve  against  a 
judgment  at  law  merely  on  the  ground 
of  a  defense  insufficient  at  law,  where 
no  discovery  is  sought). 

Pecuniai-y      recoveries.       Concurrent 
jurkdiciioB,  when  exercised:   Getty  v. 


Devlin,  70  N.  Y.  504  (against  fraudu- 
lent promoters  of  a  fraudulent  cor- 
poration; accounting  and  recovery  of 
money  invested  in  the  stock  of  the 
company);  Erie  R.  R.  v.  Vanderbilt, 
5  Hun,  123  (suit  by  corporation  against 
trustees  for  a  fraudulent  disposition  of 
corporate  propertj');  Marlow  v.  Mar- 
low,  77  111.  633  (payment  decreed  of 
promissory  notes  fraudulently  ob- 
tained by  the  maker  from  the  holder); 
Scott  v.  Scott,  33  Ga.  102,  104; 
Harper  v.  Whitehead,  33  Ga.  138 
(general  rule,  inadequate  remedy  at 
law  is  a  sufficient  ground  for  a  suit  in 
equity);  Ellis  v.  Kelly,  8  Bush,  621, 
031  (money  compelled  to  be  paid  by  a 
fraudulent  judgment  recovered  back 
after  a  discovery  of  the  fraud). 

The  same.  Concurrent  jurisdiction 
for  recovery  of  money,  when  not  exer- 
cised:  Stepliens  v.  Board  of  Educa- 
tion, 79  N.  Y.  183;  35  Am.  Rep.  511 
(where  trusts  moneys  have  been  fraud- 
ulently disposed  of,  but  have  been 
paid  to  a  bona  fde  holder);  Bay  City 
Bridge  Co.  v.  Van  Etten,  36  Mich. 
210  (against  officers  of  a  corporation, 
who  have  ceased  to  be  such,  for  money 
frauduently  appropriated  to  their  own 
use,  when  no  discovery  is  sought); 
Youngblood  v.  Youngblood,  54  Ala. 
486  (money  overpaid  through  fraudu- 
lent representations);  Huff  v.  Ripley, 
58  Ga.  11  (fraudulent  sale  of  personal 
property  where  the  remedy  at  law  is 
complete);  Frue  v.  Loring,  120  Mass. 
507  (money  overpaid  by  fraud,  or 
fraudulent  conversion  of  chattels); 
Ferson  v.  Sanger,  Daveis,  252,  259, 
261  (to  recover  damages  arising  from 
fraud);  Woodman  v.  Saltonstall,  7 
Cush.  181  (where  there  is  an  adequate 
remedy  at  law  in  insolvency  proceed- 
ings, equity  will  not  interfere,  iu 
Massachusetts,  even  though  a  dis- 
covery is  sought);  Bassett  v.  Brown, 
100  Mass.  355  (no  equity  jurisdiction  in 
Massachusetts  of  a  suit  for  repayment 
of  money  or  reconveyance  of  land  on 
the  ground  of  fraud;  the  remedy  is  at 
law);  Suter  v,  Matthews,  115  Mass. 
253  (fraud  not  sufficient  to  give  equity 
jurisdiction  in  Massachusetts  when 
the  law  provides  an  adequate  remedy); 
Girard  Ins.  Co.  v.  Guerard,  3  Woods, 
427  (suit  on  a  bond  which  baa  been 


1297 


ACTUAL   FRAUD. 


914 


that  all  actions,  simply  for  the  recovery  of  money,  with- 
out making  any  exceptions,  must  be  tried  by  a  jury,  and 


delivered  up  and  canceled  through 
fraud  of  a  third  person);  Jevvett  v. 
Bowman,  29  N.  J.  Eq.  174  (a  bill  al- 
leging fraud  canuot  be  turned  into  an 
action  for  an  accounting,  on  failure  to 
prove  the  fraud);  [Buzardv.  Houston, 
119  U.  S.  S47;  Patou  v.  Majors,  46 
Fed.  Rep.  210.] 

Jurisdiction  in  matters  relating  to  or 
connected  with  adminiiif rations:  Fulton 
T.  Whitney,  5  Hun,  16  (the  final  ac- 
counting by  executors  or  trustees  be- 
fore a  surrogate  is  no  bar  to  a  suit 
in  equity  to  enforce  a  trust);  Richard- 
Bon  V.  Brooks,  52  Miss.  US  (there  is 
no  jurisdiction  in  equity  to  correct 
probate  proceedings;  but  the  jurisdic- 
tion of  equity  over  the  acts  of  trustees 
will  not  be  affected  by  the  proceed- 
ings in  a  court  of  probate);  Freeman 
▼.  Reagan,  26  Ark.  373,  378  (equity 
has  jurisdiction  over  an  administration 
when  there  has  been  fraud  or  waste); 
Kellogg  V.  Aldrich,  39  Mich.  576  (no 
jurisdiction  in  equity  of  a  suit  for  the 
distribution  of  an  intestate's  personal 
estate  on  the  ground  of  fraud;  proceed- 
ings must  be  in  a  probate  court);  Cota 
V.  Jones,  8  Pac.  L.  J.  1044,  Sup.  Ct. 
Cal.  (A  and  B  were  two  of  the  heirs 
and  next  of  kin  of  a  deceased  intes- 
tate, whose  estate  was  in  the  course  of 
administration,  and  each  was  entitled 
to  an  undivided  share  of  such  estate. 
By  false  and  fraudulent  representa- 
tions that  the  estate  was  virtually 
insolvent,  and  that  A's  share  was  val- 
ueless, the  defendant,  B,  procured  the 
plaintiff,  A,  to  give  the  defendant  an 
absolute  conveyance  and  assignment 
of  all  A's  share  in  the  estate  for  a 
nominal  consideration.  When  the 
estate  was  subsequently  settled  and 
distributed,  B,  as  the  assignee  of  A, 
received  A's  share  by  the  decree  of 
distribution,  which  share  consisted  of 
lands  and  personal  property,  and  was 
from  eight  thousand  to  ten  thousand 
dollars  in  value.  A  did  not  discover 
the  fraud  until  several  years  after, 
and  upon  such  discovery  immediately 
brought  this  suit.  Held,  that  the 
court  had  jurisdiction  in  equity  to 
give  A  complete  relief  by  declaring  B 
to  be  a  trustee  of  the  property  thus 
fraudulently  acquired,  and  by  com- 
pelling a  conveyance  to  A;  that  the 
2  Eq,  Juk.  — 82 


decree  of  distribution  did  not  affect 
A's  rights  or  prevent  the  relief;  and 
that  the  fraud,  not  having  been  discov- 
ered, the  action  was  not  barred  by  the 
statute  of  limitations  or  b}'  the  lapse 
of  time.     [See  also  §  1 154.] 

Jurisdiction  exercised  by  impr''ssin'j 
a  trust  on  property  acquired  hji  fraud: 
Cota  V.  Jones,  8  Pac.  L.  J.  1044,  Sup. 
Cfc.  Cal;  Bennett  v.  Austin.  81  N  .Y. 
308  (fiduciary  person  buying  in  prop- 
erty and  held  to  be  a  trustej);  Ste- 
phens V.  Board  of  Education,  79  N.  Y. 
183;  35  Am.  Rep.  511  (trust  moneys 
fraudulently  transferred  cannot  be 
reached  in  the  hands  of  a  bona  fide 
holder);  People  v.  Houghtaling,  7  Cal. 
318,  351  (a  fraudulent  grantee  held  to 
be  a  trustee);  Watson  v.  Erb,  33  Ohio 
St.  35  (the  breach  of  a  verbal  agrees 
ment  to  buy  land  and  convey  ic  t.>  the 
plaintiff  is  not  a  fraud  which  author- 
izes a  court  of  equity  to  declare  a  trust 
and  compel  a  conveyance);  McVey  v. 
McQuality,  97  111.  93  (a  fraudulent 
grantee  treated  as  a  trustee  for  the 
equitable  owner). 

Miscellaneous  cases  of  fraud:  Durant 
V.  Davis,  10  Heisk.  522  (borrowing 
money  to  pay  for  land  purchased  with 
the  promise  to  give  the  lender  a  mort- 
gage on  the  land,  which  promise  is 
violated,  is  not  a  fraud  giving  rise  to 
a  trust,  nor  does  the  lender  become 
subrogated  to  the  vendor's  lien  on  the 
land);  Struve  v.  Childs,  63  Ala.  473 
(an  injunction  granted  to  restrain  the 
sale  of  land  under  a  power  in  a  mort- 
gage, when  the  mortgagee  colludes 
with  third  persons  to  obtain  a  wrong- 
ful lien  on  the  land  under  the  sale); 
Leupold  V.  Krause,  95  111.  440  (home- 
stead; neither  fraud  nor  even  the 
commission  of  a  crime  will  work  a 
forfeiture  of  homestead  rights);  Dicl;- 
enson  v.  Seaver,  44  Mich.  624  (a  right 
to  complain  of  fraud  and  to  sue  for 
relief  is  not  assignable);  Grubb's  Ap- 
peal, 90  Pa.  St.  228  (the  proper  con- 
struction of  a  deed  is  not  a  ground 
for  equity  jurisdiction;  that  is,  a  suit 
for  the  construction  of  a  deed  cannot 
be  maintained;  a  deed  will  not  be  re- 
formed when  there  is  no  allegation  of 
fraud,  mistake,  or  accident);  William- 
son V.  Carskadden,  36  Ohio  St.  664  (in 
an  action   on  a  mortgage   regular  in 


§  915  EQUITY   JURISPRUDENCE.  1298 

the  same  general  rules  of  pleading  are  prescribed  for  all 
kinds  of  suits.  It  follows,  therefore,  that  there  would  be 
no  real  distinction  in  the  form,  pleadings,  procedure, 
mode  of  trial,  judgment,  and  execution,  in  those  states, 
whether  the  action  is  regarded  as  equitable  or  legal. 

§  915.  Incidents  of  the  Jurisdiction  and  Relief. — There 
are  certain  incidents  which  are  requisite  to  the  exercise 
of  the  jurisdiction,  and  to  the  granting  of  any  relief,  and 
which  result  partly  from  the  equitable  conception  of 
fraud  itself  in  its  efifects  upon  the  rights  and  liabilities  of 
the  two  parties,  and  partly  from  the  theory  concerning 
remedies  and  their  administration.  These  incidental 
requisites  are  referable,  therefore,  to  the  two  following 
general  principles:  1.  Fraud  does  not  render  contracts 
and  other  transactions  absolutely  void,  but  merely  void- 
able, so  that  they  may  be  either  confirmed  or  repudiated 
by  the  party  who  had  suffered  the  wrong.*  2.  If  he 
elects  to  repudiate,  and  to  seek  for  a  remedy,  then 
equity  proceeds  upon  the  theory  that  the  fraudulent 
transaction  is  a  nullity;    and  it   administers   relief  by 

form,  it  may  be  shown  in  defense  that  but  he  executes  them  under  the  fraud- 

the  delivery,  as  to  several  of  the  per-  uleat  representation,  and   conviction 

sons  who  signed  it,  was  unauthorized  produced   thereby,  that  their  charac- 

and   fraudulent).     The   foregoing  ex-  ter  is  different  from  what  it  really  is; 

amples  which   are  purposely  selected  for  example,  a  person  executes  a  deed 

from  the  most  recent   decisions  will  under  the   fraudulent   representation 

be   suflScient,  it  is  hoped,  to  put  the  and  conviction  that  he  is  executing  a 

reader  on  the  track  of  the  authorities  receipt;  he   intends  to  execute  a  re- 

which  deal  with  the  subject  of  equita-  ceipt,  but  really  executes  a  deed.     In 

ble  jurisdiction  over  matters  of  fraud,  the   latter  class  of  cases,  the   instru- 

'  Oakes  v.  Turquand,  L.  R.  2  H.  L.  ment   is   so   far  void,  it  is  said,  that 

325,    346;    Lindsley    v.    Ferguson,  49  even  a  bona  fide  purchaser  can  acquire 

N.  Y.  623j  625;   Negley  v.   Lindsay,  no  rights  under  it;  and  the  remedial 

67  Pa.  St.  217,  228;  5  Am.  Rep.  427;  rights  of  the  defrauded  party  are  not 

Pearsoll    v.    Chapin,    44    Pa.    St.    9;  prejudiced  by  his  delay  in  enforcing 

Wood  v.  Goff,  7  Bush,  59,  63.    Some  of  them:     Tayler  v.   Great    Indian   etc. 

these  cases  draw  an  important  distinc-  R'y,  4   De  Gex  &   J.    559,  573,  574; 

tion  between  fraudulent  instruments  Donaldson  v.  Gillot,  L.  R.  3  Eq.  274; 

which  a  party  intends  to  execute  in  Ogilvie  v.  Jeaffreson,  2  Giff.  353;  Liv- 

the  form   and   character   which   they  ingston  v.  Hubbs,  2  Johns.  Oh.   512; 

purport  to  have,  —  that  is,  he  intends  County  of  Schuylkill  v.  Copley,  67  Pa. 

to  execute  a  deed  as  a  deed,  an  assign-  St.  386;  5  Am.  Rep.  441;  McHugh  v. 

ment  as  an  assignment,  — but  this  his  County  of  Schuylkill,  67  Pa.  St.  391, 

intention   is  procured   by  fraud,  and  396;   5   Am.  Rep.  445.     [See   §  918.] 

those  instruments  which  he  does  not  See  also  a  series  of  cases  on  fraudu- 

intend   to   execute   in   the   form   and  lent  promissory  notes  involving  this 

character  which  they  purport  to  have  distinction.. 


1299  ACTUAL   FRAUD.  §  916 

putting  the  parties  back  into  their  original  position,  as 
though  the  transaction  had  not  taken  place,  and  by  doing 
equity  to  the  defendant  as  well  as  to  the  plaintiff.  The  con- 
sequences of  these  two  principles,  which  have  been  alluded 
to,  and  which  remain  to  be  considered,  are  as  follows:  — 
§  916.  The  Same.  Plaintiff  Particeps  Doll  —  Ratifica- 
tion.—  If  the  plaintiff  is  himself  a  part}''  to  the  fraud, 
particeps  doli,  to  such  an  extent  that  he  is  in  pari  delicto 
with  the  defendant,  he  can  obtain  no  relief;  equity  does 
not,  in  general,  relieve  a  person  from  the  consequences 
of  his  own  actual  fraud.^  The  mere  fact,  however,  that 
the  plaintiff  was  a  party  to  the  wrong  in  any  degree,  and 
is  not  therefore  completely  innocent,  will  not  necessarily 
deprive  him  of  relief,  defensive  or  even  affirmative.  If 
he  is  not  in  pari  delicto,  and  is  comparatively  the  more 
innocent  of  the  two,  he  may  obtain  relief  by  doing  full 
equity  to  those  parties,  if  any,  who  have  sustained  injury 
by  his  partial  wrong.'  While  the  party  entitled  to  relief 
may  either  avoid  the  transaction  or  confirm  it,  he  cannot 
do  both;  if  he  adopts  a  part,  he  adopts  all;  he  must  reject 
it  entirely  if  he  desires  to  obtain  relief.'  Any  material 
act  done  by  him,  with  knowledge  of  the  facts  constituting 
the  fraud,  or  under  such  circumstances  that  knowledge 
must  be  imputed,  which  assumes  that  the  transaction  is 
valid,  will  be  a  ratification."* 

*  See  ante,  vol.  1,  §  401,  and  cases  other  party  ia  aa  good  a  condition  aa 
cited;  Dunaway  v,  Robertson,  95  111.  before  the  exchange:  Smith  v.  Brit- 
419;  Roman  v.  Mali,  42  Md.  513.  tenham,  98  111.  188. 

*  See  ante,  vol.  1,  §  40.3,  and  cases  *  See  ante,  §  897;  [also  post,  §  964.] 
cited;  Solinger  v.  Earle,  82  N.  Y.  393;  In  the  same  suit  a  party  cannot  claim 
Erie  R.  R.  v.  Vanderbilt,  5  Hun,  123;  under  and  against  the  fraudulent  trans- 
Poston  V.  Balch,  69  Mo.  115.  A  per-  action.  If  his  suit  is  brought  to  enforce 
eon  who  comes  within  this  rule  must  rights  arising  from  the  transaction  as 
restore  those  who  have  sustained  in-  standing,  he  cannot  ask  to  have  it  re- 
jury  by  him,  as  a  condition  to  his  ob-  scinded,  and  the  like:  See  Coleman 
taiuing  any  relief:  See  Kisterbock's  v.  Columbia  Oil  Co.,  51  Pa.  St.  74,  77; 
Appeal,  51  Pa.  St.  483;  and  see  Briggs  [Acer  v.  Hotchkiss,  97  N.  Y.  395; 
V.  Rice,  130  Mass.  50.       ^  Merrill  v.  Wilson,  66  Mich.  232.]     If, 

^  Great  Luxembourg  R'y  V.  Magnay,  however,  the   injured   party   lias   ob- 

25  Beav.  586,  594;  Potter  v.  Titcomb,  tained  the  relief  in  an  equity  suit  that 

22  Me.  300;  Farmers'  Bank  v.  Groves,  a  fraudulent  conveyance  be  canceled, 

12  How.  51;  [Dennis  V.  Jones,  44  N.  J.  and  the  property  reconveyed,  this  is 

Eq.513].    To  entitle  a  party  to  rescind  not,  it  seems,  any  bar  to  an  action  at 

an  agreement  for  the  exchange  of  land  law  for   damages:   Bruce  v.  Kelly,  5 

for  goods,  he  must  be  able  to  put  the  Hun,  229,  232. 


§  917  EQUITY   JURISPRUDENCB.  1300 

§  917.  Promptness — Delay  through  Ignorance  of  the 
Fraud. — The  most  important  practical  consequence  of 
the  two  principles  above  mentioned  is  the  requisite  of 
promptness.  The  injured  party  must  assert  his  remedial 
rights  with  diligence  and  without  delay,  upon  becoming 
aware  of  the  fraud.  After  he  has  obtained  knowledge 
of  the  fraud,  or  has  been  informed  of  facts  and  circum- 
stances from  which  such  knowledge  would  be  imputed  to 
him,  a  delay  in  instituting  judicial  proceedings  for  relief, 
although  for  a  less  period  than  that  prescribed  by  tlie 
statute  of  limitations,  may  be,  and  generally  will  be,  re- 
garded as  an  acquiescence,  and  this  may  be,  and  generally 
will  be,  a  bar  to  any  equitable  remedy.*  To  this  rule 
there  is  one  limitation:  it  applies  only  when  the  fraud  is 
known  or  ought  to  have  been  known.  No  lapse  of  time, 
no  delay  in  bringing  a  suit,  however  long,  will  defeat  the 
remedy,  provided  the  injured  party  was,  during  all  this 
interval,  ignorant  of  the  fraud.  The  duty  to  commence 
proceedings  can  arise  only  upon  his  discovery  of  the 
fraud;  and  the  possible  effect  of  his  laches  will  begin  to 
operate  only  from  that  time.* 

^See  ante,  §§  817,  819,  820,  [897];  40  Fed.  Rep.  661;  Strong  v.  Strong, 
Briggs  V.  Rice,  130  Mass.  50;  Hatha-  102  N.  Y.  73;  Calhoun  v.  Millard,  121 
•way  V.  Noble,  55  N.  H.  508;  Lyme  v.  N.  Y.  77;  Allen  v.  Allen,  47  Mich.  74; 
Allen,  51  N.  H.  242;  Vi'^illoughby  v.  Haldane  v.  Sweet,  55  Mich.  196;  Bur- 
Moulton,  47  N.  H.  205,  208;  Weeks  dett  v.  May,  100  Mo.  18;  Brewer  v. 
V.  Robie,  42  N,  H.  316;  Badger  v.  Keeler,  42  Ark.  289;  Dierka  v.  Mar- 
Badger,  2  Wall.  87,  94;  Allore  v.  tin,  16  Neb.  120;  Burkle  v.  Levy,  70 
Jewell,  94  U.  S.  506,  512;  Sullivan  v.  Cal.  250;  Bailey  v.  Fox,  78  Cal.  3Si> 
Portland  R.  R.  94  U.  S.  806,  811;  (four  months).]  Courts  of  equity  have 
Maxwell^  v.  Kennedy,  8  H  ow.  210;  also  been  in  the  habit  of  applying  tha 
Campau  v.  Van  Dyke,  15  Mich.  371;  statute  of  limitations  as  a  bar,  by 
Wilbur  V.  Flood,  16  Mich.  40;  Wea-  analogy,  in  all  ordinary  cases,  even 
ver  V.  Carpenter,  42  Iowa,  343;  Akerly  though  equitable  suits  were  not  ex- 
V.  Vilas,  21  Wis.  88;  Jones  v.  Smith,  pressly  included  within  the  statutory 
33  Miss.  215;  Shaver  v.  Radley,  4  provisions:  See  Kane  v.  Bloodgood,  7 
Johns.  Ch.  310;  Philips  v.  Belden,  2  Johns.  Ch.  90;  11  Am.  Dec.  417;  Lan- 
Edw.  Ch.  1;  Ward  v.  Van  Bokkelen,  sing  v.  Starr,  2  Johns.  Ch.  150. 
1  Paige,  100;  Bank  of  U.  S.  v.  Bid-  *  Modern  statutes  of  limitation  usn- 
dle,  2  Pars.  Cas.  31;  McDowell  v.  Gold-  ally  provide  that  the  statutory  period 
smith,  2  Md.  Ch,  370;  Anderson  v.  shall  begin  to  run  only  from  the  dis- 
Burwell,  6  Gratt.  405;  Field  v.  VVil-  covery  of  the  fraud  by  the  injured 
Bon,  6  B.  Mon.  479:  [Coddington  v.  party;  but  even  in  the  absence  of 
R.  R.  Co.,  103  U,  S.  409;  Manner  v,  such  an  express  provision  the  courts 
Moulton,  138  U.  S.  486;  Norris  v.  have  put  this  construction  upon  the 
Haggin,  136  U,  S.  386;  Cummins  v.  statute:  Vane  v.  Vane,  L,  R.  8  Ch. 
Lods,  2  Fed,  Rep,  661;  Terbell  v,  Lee,  383,  398;  Rolfe  v.  Gregory,  4  De  Gex, 


1301 


ACTUAL   FRAUD. 


§918 


§  918.  Persons  against  Whom  Relief  is  Granted.  — 
The  remedy  which  equity  gives  to  the  defrauded  person 
is  most  extensive.  It  reaches  all  those  who  were  actually 
concerned  in  the  fraud,  all  who  directly  and  knowingly 
participated  in  its  fruits,  and  all  those  who  derive  title 
from  them  voluntarily  or  with  notice.  "A  court  of 
equity  will  wrest  property  fraudulently  acquired,  not 
only  from  the  perpetrator  of  the  fraud,  but,  to  use  Lord 
Cottenham's  language,  from  his  children  and  his  chil- 
dren's children,  or,  as  elsewhere  said,  from  any  persons 
amongst  whom  he  may  have  parceled  out  the  fruits  of 
his  fraud." ^  There  is  one  limitation:  if  the  property 
w^hich  was  acquired  by  the  fraud  has  come  by  transfer 


J.  &  S.  576,  579;  Chetham  v.  Hoare, 
L.  R.  9  Eq.  571;  AUfrey  v.  Allfrey, 
1  Macn.  &  G.  87,  99;  Charter  v.  Tre- 
velyan,  11  Clark  &  F.  714;  Blair  v. 
Bromley,  5  Hare,  542,  559;  Sherwood 
V.  Sutton,  5  Mason,  143;  Doggett  v. 
Emerson,  3  Story,  700;  Michoud  v. 
Girod,  4  How.  503,  561;  Cota  v.  Jones, 
8  Pac.  L.  J.  1044;  Dodge  v.  Essex 
Ins.  Co.,  12  Gray,  65;  Phalenv.  Chirk, 
19  Conn.  421;  50  Am.  Dec.  253;  Stocks 
V.  Van  Leonard,  8  Ga.  511;  Martin  v. 
Martin,  35  Ala.  560;  Smith  v.  Fly,  24 
Tex.  345;  76  Am.  Dec.  109;  Gihsou  v. 
Fifer,  21  Tex.  260;  Relf  v.  Eberly,  23 
Iowa,  467;  Cock  v.  Van  Etten,  12 
Minn.  522;  [Kirby  v.  L.  S.  etc.  R.  R. 
Co.,  120  U.  S.  137;  Kilbourn  v.  Sun- 
derland.  130  U.  S.  519;  Jones  y.  Van 
Doren,  130  U.  S.  684;  Brown  v.  Nor- 
man,  65  Miss.  369;  7  Am.  St.  Rep. 
663;  Brown  V.  Brown,  61  Tex.  45;  also 
§§  965,  881,  897,  418,  419.]  It  has  some- 
times been  said  that  actual  concealment 
is  necessary,  and  that  the  mere  fact  of 
non-discovery  is  not  enough.  This 
cannot  mean  that  the  defrauded  party 
must  necessarily  have  used  some  affirm- 
ative means  to  discover  the  fraud, 
for  he  might  not  have  the  slightest 
suspicion  of  its  existence;  nor  that 
the  fraudulent  party  must  necessarily 
have  used  some  affirmative  means  to 
cover  up  his  acts;  nor  that  any  special 
duty,  such  as  a  trust  or  fiduciary  rela- 
tion, must  rest  upon  the  fraudulent 
party,  dififerent  from  that  which  rests 
upon  all  such  wrong-doers  to  speak 
the  truth.     It  can  only  muan  that  the 


defrauded  party's  ignorance  must  not 
be  negligent;  that  he  remains  ignorant 
without  any  fault  of  his  own;  that  he 
has  not  discovered  the  fraud,  and 
could  not  by  reasonable  diligence  dis- 
cover it.  If  the  statement  means 
anything  more  than  this,  it  is  in  direct 
conflict  with  the  ablest  authorities, 
and  with  the  very  principle  upon 
which  the  rule  itself  is  based.  In 
Rolfe  V,  Gregory,  4  De  Gex,  J.  &  S. 
576,  Lord  Westbury  said:  "As  the 
remedy  is  given  on  the  ground  of 
fraud,  it  is  governed  by  this  impor- 
tant principle,  that  the  right  of  the 
party  defrauded  is  not  affected  by  the 
lapse  of  time,  or,  generally  speaking, 
by  anything  done  or  omitted  to  be 
done,  80  long  as  he  remains,  without  any 
fault  of  his  own,  in  ignorance  of  the 
fraud  that  has  been  committed."  In 
Vane  v.  Vane,  L.  R.  8  Ch.  383,  James, 
L.  J.,  said  that  the  statute  will  not 
begin  to  run  "until  the  fraud  is  first 
discovered,  or  might  with  reasonable 
diligence  have  been  discovered."  See 
also  Meader  v.  Norton,  11  Wall.  442; 
Township  of  Boomer  v.  French,  40 
Iowa,  601;  Humphreys  v.  Mattoon, 
43  Iowa,  556;  Reed  v.  Minell,  30  Ala. 
61;  Wilson  v.  Ivy,  32  Miss.  233;  Buck- 
ner  v.  Calcote,  28  Miss.  4.32;  Hudson 
V.  Wheeler,  34  Tex.  356;  Munson  v. 
Hallowell,  26  Tex.  475;  84  Am.  Deo. 
582;  Peck  v.  Bullard,  2  Humph.  41. 

1  Vane  v.  Vane,  L.  R.  8  Ch.  383, 
397,  per  James,  L.  J.;  Huguenin  v. 
Baseley,  14  Ves.  273;  Bridgeman  v. 
Green,  Wilm.  58;  [and  see  ante,  §  899.] 


§  918  EQUITY   JURISPRUDENCE.  1302 

into  the  hands  of  a  bona  fide  purchaser  for  a  valuable  con- 
sideration and  without  notice,  even  though  his  immediate 
grantor  or  assignor  was  the  fraudulent  party  himself,  the 
hands  of  the  court  are  stayed,  and  the  remedy  of  the  de- 
frauded party,  with  respect  to  the  property  itself,  is  gone; 
his  only  relief  must  be  personal  against  those  who  com- 
mitted the  fraud.'  To  this  limitation  there  is,  however, 
an  exception,  where  the  general  rule  giving  relief  ap- 
plies even  as  against  a  bona  fide  purchaser.  Where  an 
owner  has  been  apparently  deprived  of  his  title  by  a 
fraudulent  conveyance  or  assignment  which  is  void,  as 
where  he  was  procured  to  execute  it  by  the  fraudulent 
representation  and  under  the  conviction  that  it  was  an 
entirely  different  instrument,  or  where  it  was  fraudu- 
lently executed  in  his  name  without  any  authority  ex- 
press or  implied,  or  where,  after  being  executed  by  him 
for  one  purpose,  it  was  fraudulently  altered  without  his 
knowledge  or  authority,  so  as  to  include  the  property,  or 
where  it  was  a  forgery,  and  he  has  done  no  collateral  act 
with  reference  to  it  which  might  amount  to  an  equitable 
estoppel  by  conduct,  and  the  property,  by  means  of  such 
transfer,  comes  into  the  hands  of  a  purchaser  for  value 
and  without  notice,  the  original  defrauded  owner  is  not 
barred  of  his  remedy.''     Equity  will  relieve  by  canceling 

'  See  ante,  §  777;  Stephens  v.  Board  Ogilvie  v.  Jeaffreson,  2  GiflF.  353;  Swan 

of  Education,  79  N.  Y.   183;  35  Am.  v.  North  British  etc.  Co.,   7  Hurl.  & 

Rep.    511   (trust   money  fraudulently  N.  603.     See  also,  for  limitations,  Case 

obtained,  and  then  paid  to  a  bona  fide  v.  James,  3  De  Gex,  F.  &  J.  256,  2G4; 

holder,  cannot  be  reached  by  the  equi-  Hunter  v.  Walters,  L.  R.  11  Eq.  292; 

table  owner.     A  distinction  exists  be-  In  re  Barned's  Banking  Co.,  L.  R.  3 

tween    money    and    other    property.  Ch.  105;  Hawkins  v.  Maltby,  L.  R.  3 

The  money  was  here  paid  to  the  holder  Ch.  1S8;  4  Eq.  572;  Cottam  v.  Eastern 

in  satisfaction  of  an  antecedent  debt.  Cos.  R'y,  1  Johns.  &  H.  243;  Spaight 

If  other  kinds  of   property  had  thus  v.  Cowne,  1  Hem.  &  M.  359;  Dowle  v. 

been  transferred,  the  transferee  would  Saunders,  2  Hem.  &  M.  242,«  250;  Liv- 

not  have  been  a  purchaser  for  a  valu-  ingston  v.  Hiibbs.  2  Johns.  Ch.  512; 

able  consideration,   according   to   the  County  of   Schuylkill    v.    Copley,   67 

rule  as  settled  in  New  York);  Dunklin  Pa.  St.  386;  5  Am.  Rep.  441;  McHugh 

V.    Wilson,    64    Ala.    162   (land    sold  v.  County  of   Schuylkill,   67  Pa.    St. 

under  a  fraudulent  decree).  391,  396;  5  Am.  Rep.  445.     The  doc- 

*  Tayler  v.  Great  Indian  etc.  R'y,  4  trine  of  the  text,  and  the  cases  which 

De  Gex  &  J.  559,   574;  Donaldson  v.  support  it,  are  undoubtedly  in  contlict 

Gillot,   L.  R.  3  Eq.  274;   Bank  of  Ire-  with  some  of  the  American  decisions 

land  V.  Evans's  Charities,  5  H.  L,  Cas.  concerning  transfers  of  stock  and  other 

389;   Vorley   v.    Cooke,    1   Giff.    230;  things  in  action  cited  in  the  previous 


1303  ACTUAL  FRAUD.  §  919 

the  fraudulent  apparent  transfer,  and  by  compelling  a 
reconveyance  or  reassignment,  even  as  against  the  holder 
"who  is  innocent  of  wrong;  the  doctrines  of  equitable  es- 
toppel and  of  bona  fide  purchase  do  not  apply  under  these 
circumstances.  Such  is  the  doctrine  announced  by  de- 
cisions of  the  highest  authority. 

§  919.  Particular  Instances  of  Jurisdiction.  —  I  shall 
conclude  this  discussion  of  actual  fraud  by  enumerating 
some  well-settled  instances  of  the  jurisdiction  which  de- 
serve a  special  mention.  In  several  of  them  the  fraud 
affects  third  persons  rather  than  the  immediate  party  to 
the  transaction;  but  in  all  a  fraudulent  intention,  or  what 
equity  regards  as  tantamount  to  such  an  intention,  is  a 
necessary  element,  and  they  may  all,  therefore,  be  prop- 
erly grouped  under  the  head  of  actual  fraud.'  Judgments: 
When  a  judgment  or  decree  of  any  court,  whether  in- 
ferior or  superior,  has  been  obtained  by  fraud,  the  fraud 
is  regarded  as  perpetrated  upon  the  court  as  well  as  upon 
the  injured  party.  The  judgment  is  a  mere  nullity,  and  it 
may  be  attacked  and  defeated  on  account  of  the  fraud,  in 
any  collateral  proceeding  brought  upon  it-  or  to  enforce 
it,  at  least  in  the  same  court  in  which  it  was  rendered.^ 

section  on  priorities;  but  they  accord  to  a  boTia  fide  purchaser,  such  person 

completely  with  the  author's  views  as  acts  with  implied  authority,  and  the 

expressed  in  that  section  and  in  the  owner's  rights  as  against  the  purchaser 

one  on  bona  fide  ■purchase.     The  con-  are  cut  off.     But  when  the  facts  de- 

clusions  in  the  text  above  are  inten-  tailed  in  the  text  exist,  when  there  is 

tionally  stated  with  caution  and  care-  no  authority  express  or  implied,  aud 

ful   limitations,    and   they  cannot   be  no  conduct  working  an  estoppel,  there 

extended  beyond  the  limits  thus  laid  is  no  ground  of  principle  for  preferring 

down.      If    the   person   who   fraudu-  the  equity  of  a  subsequent  claimant, 

lently  executes  the  transfer  has  any  however  innocent,    over   that   of   the 

implied  authority,  even  though  he  acts  original  owner,  who  is  equally  inuo- 

in  direct  opposition  to  his  private  in-  cent,  and  whose  title  is  prior  in  time. 

Btructions,  or  if  the  original  and  de-  ^  [For  further   instances,    see    -post, 

frauded    owner    has    done    any   acts  §  1377.] 

which  will  operate  as  an  equitable  es-  *  Kerr    on    Fraud,    Am.    ed.    29.3; 

toppel,   then   the   conclusions   of   the  Duchess  of  Kingston's  Case,  2  Smith's 

text  cannot  apply;  the  equity  of  the  Lead.   Cas.,  7th  Am.  ed.,  609;   Lord 

purchaser  in  good  faith  will  be  supe-  Bandon  v.  Becher,  3  Clark  &  F.  479, 

rior.     Some  of  the  cases  cited  above  510;  Shedden  v.  Patrick,  1  Macq.  535; 

hold   that  when  tlie  owner   has  exe-  The  Queen  v.  Saddlers'  Co.,  10  H.  L. 

cuted  and  delivered  an  assignment  in  Cas.  431;  Biownsword  v.  Edwards,  2 

blank,  and  the  person  to  whom  it  is  Ves.  Sr.  243,  246;  Harrison  v.  Mayor 

delivered    fraudulently    fills    up    the  etc.,  4  De  Gex,  M.  &  G.  137;  Perry  v. 

blanks,  and  thus  conveys  the  property  Meadowcroft,  10  Beav.  122;  Webster 


§919 


EQUITY    JURISPRUDENCE, 


1304 


When  a  judgment  fraudulently  recovered  in  one  court  is 
sued  upon  in  another  court,  whether  the  fraud  can  there 
be  set  up  to  defeat  its  enforcement  has  been  questioned.* 
There  can  be  no  doubt,  however,  that  under  these  cir- 
cumstances, wherever  the  reformed  procedure  prevails, 
tlie  fraud  may  be  set  up  by  way  of  equitable  defense,  espe- 
cially if  the  affirmative  relief  of  cancellation  is  sought.* 
Although  the  fraud  may  thus  be  set  up  by  way  of  defense, 
the  equitable  jurisdiction  to  cancel  and  set  aside  or  to  re- 
strain judgments  and  decrees  of  any  court  which  have 
been  obtained  by  a  fraud  practiced  upon  the  court  and 
the  losing  party,  is  well  settled  and  familiar.'  Awards: 
The  jurisdiction  to  set  aside  and  cancel  awards  was  set- 
tled at  a  very  early  day,  and  it  still  exists,  except  so  far 
as  it  has  been  regulated  or  takeil  away  by  statute.*    Fraud- 


V.  Reid,  11  How.  437;  Clark  v. 
Douglass,  62  Pa.  St.  408;  Campbell  v. 
Sloan,  62  Pa.  St.  481;  Wilson  v.  Watts, 
9  Md.  356;  Hall  v.  Hall,  1  Gill,  383, 
391 ;  Carpentier  v.  Hart,  6  Cal.  406. 

'  Kerr  on  Fraud,  284. 

»  Dobson  V.  Pearce,  12  N.  Y.  156, 
166,  168;  and  see  post,  section  on  equi- 
table defenses. 

*  A  judgment  will  not,  however,  be 
set  aside  on  the  ground  of  fraud,  when 
the  very  same  fraud  alleged,  and  the 
same  questions  concerning  it,  were 
presented  by  the  issues,  litigated,  and 
decided  by  the  courts  in  the  judgment 
which  is  attaked:  United  States  v. 
Throckmorton,  98  U.  S.  61.  On  the 
general  subject,  see  Dederer  v.  Voor- 
liies,  81  N.  Y.  153;  Hunt  v.  Hunt,  72 
N.  Y.  217;  28  Am.  Rep.  129;  Jordan 
V.  Volkenning,  72  N.  Y.  300;  Ross  v. 
Wood,  70  N.  Y.  8;  Harbaugh  v. 
Hohn,  r2  Ind.  243;  Harris  v.  Cornell, 
80  111.  54;  Doughty  v.  Doughty,  27 
N.  J.  Eq.  315;  Holland  v.  Trotter,  22 
Gratt.  136;  Babcock  v.  McCamant, 
53  111.  214;  Graham  v.  Roberts,  1 
Head,  56,  59;  Sayles  v.  Mann,  4  111. 
App.  516;  Huxley  v.  Rice,  40  Mich. 
73:  Griffin  v.  Sketoe,  30  Ga.  300; 
Byers  v.  Surget,  19  How.  303;  [Hogg 
V.  Link,  90  Ind.  346;  also  §§  914,  note, 
1364,  221.]  Conversely,  equity  has 
jurisdiction  to  aid,  by  whatever  relief 
may  be  appropriate,  in  the  enforcement 
of  a  valid  juilgment  of  another  court, 


when  its  enforcement  is  hindered  or 
prevented  by  fraud;  as,  for  example, 
where  the  judgment  debtor,  pending 
the  suit,  transfers  or  withdraws  hia 
property  with  the  intent  of  rendering 
the  expected  judgment  nugatory: 
Blenkinsopp  v.  Blenkinsopp,  1  De  Gex, 
M.  &  G.  495,  500;  12  Beav.  568,  586. 
*  Kerr  on  Fraud,  288;  Brown  v. 
Brown,  1  Vern.  156;  Earl  v.  Stocker, 
2    Vera.     251;     Burton     v.     Knight, 

2  Vern.  514;  Smith  v.  Whitmore,  2 
De  Gex,  J.  &  S.  297;  Haigh  v.  Haigh, 

3  DeGex,  F.  &  J.  157;  Craft  v.  Thomp- 
son, 51  N.  H.  536;  District  of  Algona 
V.  District  etc.,  54  Iowa,  286;  Emer- 
son V.  Udall,  13  Vt.  477;  37  Am.  Dec. 
604;  [Hartford  Fire  Ins.  Co.  v.  Bon- 
ner  Mercantile  Co.,  44  Fed.  Rep. 
151.]  As  to  what  acts  or  omissions 
will  constitute  fraud  in  an  award: 
Lord  Lonsdale  v.  Littledale,  2  Ves.  451 , 
453;  Calcraft  v.  Roebuck,  1  Ves.  221, 
226;  Lingood  v.  Croucher,  2  Atk.  395; 
Ives  V.  Metcalfe,  1  Atk.  63,  64;  Bur- 
ton V.  Knight,  2  Vern.  514;  Haigh  v. 
Haigh,  3  De  Gex,  F.  &  J.  157;  Blen- 
nerhasset  v.  Day,  2  Ball  &  B.  104,  116; 
Gartside  v.  Gartside,  3  Anstr.  735; 
Spettigue  V.  Carpenter,  3  P.  Wms.  361 ; 
Harding  v.  Wickham,  2  Johns.  &  H. 
676;  Harvey  v.  Shelton,  7  Beav.  455; 
Kemp  V.  Rose,  1  Giflf.  258;  Van  Cort- 
landt  V.  Underhill,  2  Johns.  Ch.  339; 
17  Johns.  405;  Kuowlton  v.  Mickles, 
29  Barb.  465;  Rand  v.  Redington,  13 


1305 


ACTUAL   FRAUD. 


§919 


ulent  bequests:  Although  an  entire  will  cannot  be  set 
aside  on  account  of  fraud,*  yet  a  particular  devise  or  be- 
quest may  be  impressed  with  a  trust  in  favor  of  a  third 
])erson  for  whom  the  testator's  beneficial  intentions  have 
been  fraudulently  intercepted  and  prevented  by  the  actual 
devisee  or  legatee;  and  in  the  same  manner  the  land  de- 
scending to  the  heir  may  be  impressed  with  a  trust,  where 
he  has  prevented  the  testator  from  making  an  intended 
devise  by  fraudulently  representing  to  the  testator  that 
his  intention  will  be  carried  into  effect  towards  the  bene- 
ficiary as  fully  as  though  the  devise  were  made.^  Where 
a  probate  is  obtained  by  fraud,  equity  may  declare  the  ex- 
ecutor or  the  other  person  deriving  title  under  it  a  trustee 
for  the  party  defrauded.'  Preventing  acts  for  the  benefit  of 
another:  The  jurisdiction  in  the  case  of  intended  testa- 
mentary gifts  fraudulently  prevented  extends  to  other 
analogous  cases.  "Where  one  person  has  been  prevented 
by  fraud  from  doing  an  intended  act  for  the  benefit  of 


N.  H.  72;  Lee  v.  Patillo.  4  Leigh,  436; 
Emery  v.  Owings,  7  Gill,  488;  48  Am. 
Dec.  580;  Jordan  v.  Hyatt,  3  Barb. 
275;  Peters  v.  Newkirk,  6  Cow.  103; 
Lutz  V.  Linthicum,  8  Pet.  165,  178; 
[Hartupee  v.  Pittsburgh,  131  Pa.  St. 
535;  Pt.  Huron  etc.  R'y  v.  Callanan, 
61  Mich.  22;  Brush  v.  Fisher,  70 
Mich.  469;  14  Am.  St.  Rep.  510; 
Georgia  Pac.  R'y  Co.  v.  Brooke,  66 
Miss.  583.]  The  whole  subject  of  ar- 
bitration and  awards,  and  of  the  pro- 
cedure thereon,  is  very  generally  a 
iiiacter  of  statutory  regulation  in  this 
country. 

'  [§  913.] 

'  McCormick  v.  Grogan,  L.  R.  4 
H.  L.  82,  91,  97,  per  Lord  Westbury; 
Dutton  V.  Pool,  1  Vent.  318;  Thynn 
V.  Thynn,  1  Vern.  296;  Oldham  v. 
Litchfield,  2  Vern.  506;  Freem.  Ch. 
284;  Devenish  v.  Bainea,  Prec.  Ch.  3; 
Chamberlaine  v.  Chamberlaine,  Freem. 
Ch.  34;  Reech  v.  Kennigate,  Amb. 
67;  Barrow  v.  Greenough,  3  Ves.  152; 
Mestaer  v.  Gillespie,  11  Ves.  621,  638; 
Chamberlain  v.  Agar,  2  Ves.  &  B.  259, 
262;  Chester  v.  Urwick,  23  Beav.  407; 
Dimes  v.  Steinberg,  2  Smale  &  G.  75; 
Morgan  v.   Aunis,   3   De   Gex   ii,   S. 


461;  Hinflson  v.  Weatherill,  1  Smale 
&  G.  604;  5  De  Gex,  M.  &  G.  301 
Podmore  v.  Gunning,  7  Sim.  644,  660 
Russell  V.  Jackson,  10  Hare,  204,  213 
Hoge  V.  Hoge;  1  Watts,  163,  213 
Jones  V.  McKee,  3  Pa.  St.  496;  6  Pa, 
St.  425,  428;  Irwin  v.  Irwiu,  34  Pa. 
St.  525;  Church  v.  Ruland,  64  Pa.  St. 
432,  44-2;  Gaither  v.  Gaither,  3  Md. 
Ch.  158;  Howell  v.  Baker,  4  Johns. 
Ch.  118;  Jenkins  v.  Eldridge,  3  Story, 
181.  [See  further,  §  1054,  and  note.] 
If  a  testator  devises  an  estate  to  a  son, 
who  promises  his  father,  in  considera- 
tion of  such  devise,  to  pay  a  certain  sum 
to  another  son,  equity  will  enforce  the 
promise:  Strickland  v.  Aldridge,  9 
Ves.  516,  519;  and  such  an  engage- 
ment may  be  made  by  a  silent  assent 
.to  a  proposal  by  the  testator:  Byrn  v. 
Godfrey,  4  Ves.  6,  10;  Paine  v.  Hall, 
18  Ves.  475. 

»  Barnesly  v.  Powel,  1  Ves.  Sr.  284, 
287;  McCormick  v.  Grogan,  L.  R.  4 
H.  L.  82;  Allen  v.  Macpherson,  1  PhilL 
Ch.  133,  145;  IH.  L.  Cas.  191,  213,  214; 
Kennell  v.  Abbott,  4  Ves.  802;  Charl- 
ton  V.  Coombes,  4  Giff.  38-',  385;  Wil- 
kinson v.  Joughiu,  L.  ll.  2  Eq.  319; 
Podmore  v.  Gunning,  7  Sim.  644,  660. 


§  920  EQUITY   JURISPRUDENCE.  1306 

another,  equity  may  relieve  the  disappointed  party  by  es- 
tablishing his  rights  as  though  the  act  had  been  done, 
and  by  confirming  the  title  which  he  would  thereby  have 
acquired.*  Suppressing  instruments:  Conversely,  when 
instruments  have  been  fraudulently  suppressed  or  de- 
stroyed for  the  purpose  of  hindering  or  defeating  the  rights 
of  others,  equity  has  jurisdiction  to  give  appropriate 
relief  by  establishing  the  estate  or  rights  of  the  defrauded 
party.^ 

§  920.  The  Same.  Appointments  nnder  Powers.  — 
The  jurisdiction  of  equity  in  this  class  of  cases  is  based 
upon  the  principle  that,  in  making  an  appointment  under 
a  power,  the  intention  of  the  donor  should  be  carried  out 
as  far  as  it  has  been  expressed,  —  at  least,  that  his  inten- 
tion should  not  be  directly  violated.  All  mere  powers, 
from  their  very  nature,  give  more  or  less  discretion  to  the 
donee.  "When  he  refuses  to  exercise  that  discretion  by 
failing  to  make  any  appointment  at  all,  equity  does  not, 
as  has  been  shown,  interfere  to  supply  the  omission. 
When  the  donee  is  clothed  with  an  absolute  discretion  with 
respect  to  the  persons  whom  he  may  or  may  not  make 

'  Kerr  on  Frand,  273;  Middleton  v.  v.  Cowper,  2  P.  Wms.  720;  Tucker  v. 
Middleton,  1  Jacob  &  W.  94,  96  (ex-  Phipps,  3  Atk.  359;  Saltern  v.  Mel. 
ecution  of  an  instrument  prevented  huish,  Amb.  247;  Hornby  v.  Match- 
by  duress  and  undue  influence);  Lut-  am,  16  Sim.  325.  When  an  instru- 
trell  V.  Olmius,  cited  II  Ves.  638;  14  ment  has  been  intentionally  destroyed 
Ves.  290;  1  Jacob  &  W.  96  (an  intended  or  suppressed,  everything  will  be  pre- 
recovery  prevented,  and  the  estate  sumed  against  the  party  by  whom  the 
held  as  though  the  recovery  had  been  destruction  or  suppression  has  been 
Buffered);  as  to  preventing  the  execu-  done:  Bowles  v.  Stewart,  1  Schoales 
tion  of  deeds,  see  Buckell  v.  Blenk-  &  L.  209,  222;  Eyton  v.  Eyton,  4 
horn,  5  Hare,  131;  Vane  v.  Fletcher,  Brown  Pari.  C.  149,  153;  Hampden  v. 
1  P.  Wms.  352;  Naiiney  v.  Williams,  Hampden,  3  Brown  Pari.  C.  550. 
22  Beav.  452;  Bulkley  v.  Wilfurd,  2  If  a  person  obtains  a  conveyance  or 
Clark  &  F.  102;  West  v.  Ray,  Kay,  other  instrument  for  one  particular 
385.  avowed  purpose,  and   then   retains  it 

*  Kerr  on  Fraud,  275.    For  example,  and   uses   it  for  an  entirely  different 

if  aa  heir  should  suppress  a  deed  or  purpose,  equity,  regarding  the  conduct 

will,  equity  would  confirm  the  title  of  as  fraud,  may  give  such  relief   as  is 

the  grantee  or  devisee.     Of  course  the  appropriate:  Young  v.  Peachy,  2  Atk. 

proof  must  be  perfectly  clear  and  con-  254,    256;    Wilkinson   v.    Brayfield,   2 

vincing:     Hunt  v.  Matthews,  1  Vern.  Vern.  307;  Goodrick  v.  Brown,  Freem. 

408;  Wardour   v,   Berisford.   1   Vern.  Ch.    180;    Evans  v.  Bicknell,    6   Vea. 

452;  cited  2  P.  Wms.  748,  749;  Finch  174,   191;  Pickett  v.  Loggon,  14  Ves. 

V.  Newnham,  2  Vern.  216;  Dalston  v.  215,  234.     [See  numeroua  cases  cited 

Coataworth,  1  P.  Wms.  731;  Cowper  under  §  1055.] 


1307  ACTUAL  FEAUD.  §  920 

beneficiaries  by  appointment  to  or  among  them,  with  re- 
spect to  the  shares,  the  manner,  and  the  like,  equity  will 
rarely,  if  ever,  interfere  with  any  appointment  which  is 
actually  made,  since  the  court  cannot  say  that  it  violates 
the  donor's  intention.  When,  as  is  generally  the  case, 
the  donee,  although  clothed  with  a  discretion  as  to  whether 
he  will  appoint  at  all,  is  restricted  by  the  terms  of  tho 
instrument  with  respect  to  the  persons  to  or  among  whom 
he  may  make  an  appointment,  or  in  respect  to  other  ma- 
terial matters,  an  appointment  made  with  the  intention 
of  violating,  and  so  made  that  it  does  violate,  this  restric- 
tion, is  regarded  by  equity  as  a  fraud  upon  the  donor, 
and  upon  the  persons  who  would  be  entitled  to  the 
property  in  default  of  any  appointment,  and  will  be  set 
aside  as  nugatory.  There  are  two  important  modes  in 
which  an  appointment  may  be  thus  fraudulent:  1.  Where 
the  donee  is  restricted  to  a  certain  class  of  beneficiaries, 
not  including  himself,  and  he  intentionally  makes  an 
appointment  for  the  purpose  of  his  own  benefit,  and  in 
such  a  manner  as  directly  or  indirectly  to  secure  his  own 
benefit.  An  appointment  to  a  person  of  the  prescribed 
class,  with  an  agreement  on  his  part  that,  in  consideration 
of  the  appointment  being  made  to  him,  he  will  give  or 
secure  to  the  donee  some  part  of  the  property  or  some 
benefit  arising  from  it,  would  be  an  illustration;  but  the 
forms  of  such  fraudulent  appointment  are  various.  In 
this  species  the  donee  is  clearly  guilty  of  actual  fraud, — 
a  moral  wrong.  2.  Where  the  donee  is  restricted  to 
a  certain  class  of  individuals,  and  he  intentionally  makes 
an  appointment  for  the  purpose  of  benefiting,  and  in 
such  a  manner  as  directly  or  indirectly  to  secure  the  ben- 
efit of  a  third  person  not  belonging  to  the  class  specified 
by  the  donor.  An  appointment  to  one  of  the  prescribed 
class,  with  an  accompanying  agreement  on  his  part  to 
share  the  property  with  such  a  third  person,  would  be  an 
illustration.  Such  a  violation  of  the  donor's  intention  is 
treated  by  equity  as  a  fraud  upon  the  power,  although  it 


§  920  EQUITY   JUEISPRUDENCK.  1308 

may  not  involve  any  moral  wrong  in  the  donee.  It  is 
held  that,  in  determining  whether  any  particular  appoint- 
ment is  a  fraud  upon  the  power,  the  motive  with  which 
the  power  was  exercised  and  the  appointment  made  can- 
not be  regarded,  but  the  purpose  may;  in  fact,  the  pur- 
pose is  the  important  element.  Where  the  donee  holds 
a  mere  power  and  makes  a  fraudulent  appointment,  the 
persons  who  would  be  entitled  to  the  property  upon  de- 
fault of  any  appointment  at  all  are  the  parties  to  whom 
equity  gives  relief,  since  the  appointment  is  regarded  as 
a  nullity  and  is  set  aside.  Where  the  power  is  in  trust, 
the  beneficiaries  under  it,  who  are  entitled  to  have  it  ex- 
ecuted in  their  favor,  are  plainly  the  parties  to  whom 
equity  gives  relief  in  case  of  a  complete  failure  to  appoint, 
or  of  an  imperfect  or  fraudulent  appointment.'  Marital 
rights:  The  rule  was  well  settled  in  England  that  if  a 
negotiation  for  a  marriage  had  begun,  the  woman  should, 
while  it  was  pending,  without  the  knowledge  of  or  notice 
to  the  intended  husband,  make  a  voluntary  conveyance 
or  settlement  of  her  own  property,  and  the  marriage 
should  be  completed  by  him  in  ignorance  of  the  transfer, 

•  Kerr  oa  Fraud,  267;  Aleyn  v.  Jackson  v.  Jackson,  7  Clark  &  F.  977» 
Belchier,  1  Eden.  132;  1  Lead.  Cas.  Palmer  v.  Wheeler,  2  Ball  &  B.  18, 
Eq.  573,  578,  598,  and  notes.  Al-  31;  Farmer  v.  Martin,  2  Sim.  502,  511; 
though  this  subject  is  one  of  great  im-  Arnold  v.  Hardwick,  7  Sim.  343;  Reid 
portance  in  England,  it  has  little  more  v.  Reid,  25  Beav.  469,  478;  Wellesley 
than  a  theoretical  existence  in  the  law  v.  Mornington,  2  Kay  &  J.  143;  In  re 
of  most  of  our  states.  It  does  not  Marsdeu's  Trust,  4  Drew.  594,  601; 
seem  necessary,  therefore,  to  enter  Routledge  v.  Dorril,  2  Ves.  357;  Birley 
upon  any  discussion  of  the  special  v.  Birley,  25  Beav.  299.  The  Amen- 
rules  which  have  been  settled,  or  of  can  cases  are  comparatively  very  few. 
the  cases  which  have  arisen.  The  fol-  The  following  recognize  the  general 
lowing  are  some  of  the  recent  decis-  doctrine  that  equity  will  not  control 
ions,  and  for  further  exposition  the  the  exercise  of  a  real  discretion  given 
reader  is  referred  to  treatises  upon  to  the  donee,  but  will  set  aside  a  fraud- 
powers:  Topham  V.  Dukeof  Portland,  ulent  appointment  made  under  color 
1  De  Gex,  J.  &  S.  517;  11  H.  L.  Cas.  of  such  discretion:  Lippincott  v, 
32;  Pryor  v.  Pj-yor,  2  De  Gex,  J.  &  S.  Ridgway,  ION.  J.  Eq.  164;  Budington 
205;  Cooper  v.  Cooper,  L.  R.  8  Eq.  v.  Munson,  33  Conn.  481;  Williams's 
:-;l2;  5  Ch.  203;  In  re  Huish's  Charity,  Appeal,  73  Pa.  St.  249;  Graeff  v.  Da 
h.  R.  10  Eq.  5;  Arnold  v.  Woodhams,  Turk,  44  Pa.  St.  527;  Cloud  v.  Mar- 
L.  R.  16  Eq.  29;  Topham  v.  Duke  of  tin,  2  Dev.  &  B.  274:  Haynesworth  v. 
Portland,  L.  R.  5  Ch.  40;  Roach  v.  Cox,  Harp.  Eq.  117,  119;  Fronty  v. 
Trood,  L.  R.  3  Ch.  Div.  429;  Palmer  Fronty,  1  Bail.  Eq.  517,  529;  Melvin 
V.  Locke,  L.  R.  15  Ch.  Div.  294;  Lane  v.  Melvin,  6  Md.  541;  Jackson  v. 
V.  Page,  Amb.  233;  Lord  Hinchin-  Veeder  11  Johns.  16^,  171. 
broke  v.  Seymour,  1  Brown  Ch.  395; 


1309  ACTUAL  FRAUD.  §  921 

such  conveyance  or  settlement  would  be  a  fraud  upon  the 
husband's  marital  rights  of  property,  and  would  be  set 
aside  by  a  court  of  equity.  The  same  general  doctrine 
has  also  been  adopted  by  several  early  decisions  in  tliis 
country.*  This  doctrine  must  necessarily  be  abrogated 
by  the  modern  legislation  in  most  of  the  states,  which 
destroys  all  right  and  interest  of  the  husband  in  the 
property  of  his  wife.  Trusts:  One  of  the  most  impor- 
tant effects  of  fraud,  and  most  striking  illustrations  of 
the  equity  jurisdiction,  is  found  in  the  theory  of  trusts 
arising  by  operation  of  law.  When  property  subject  to 
a  trust  is  fraudulently  transferred,  or  when  one  person, 
in  fraudulent  violation  of  his  fiduciary  duty,  acquires 
property  which  equitably  belongs  to  another,  or  when  one 
person  by  his  actual  fraud  obtains  the  title  to  property 
in  which  another  is  beneficially  interested,  equity  may 
work  out  and  protect  the  rights  of  the  beneficial  owner 
by  regarding  the  property  as  though  it  were  actually  im- 
pressed with  a  trust  in  the  hands  of  the  one  who  holds 
the  legal  title,  by  treating  such  person  as  though  he  were 
an  actual  trustee,  and  by  enforcing  such  trust  by  means 
of  a  conveyance,  accounting,  payment,  injunction,  and 
other  appropriate  remedies.  There  is  no  other  effect  of 
fraud  more  remarkable,  and  none  which  exhibits  more 
clearly  the  power  of  courts  of  equity  to  deal  with  the  sub- 
stantial realities  under  the  appearance  of  external  forms.* 
§  921.  The  Statute  of  Frauds  not  an  Instrument  of 
Fraud. — It  is  a  most  important  principle,  thoroughly  es- 
tablished in  equity,  and  applying  in  every  transaction 
where  the  statute  is  invoked,  that  the  statute  of  frauds, 
having  been  enacted  for  the  purpose  of  preventing  fraud, 
shall  not  be  made  the  instrument  of  shielding,  protect- 
ing, or  aiding  the  party  who  relies  upon  it  in  the  perpe- 
tratioYi  of  a  fraud,  or  in  the  consummation  of  a  fraudulent 

•  Countess  of  Strathmore  v.  Bowes,     and  American  editors.     [See  further, 
1  Ves.  22;  1  Lead.   Cas.  Eq.  405,  611,     §  1113.] 

618,  and  cases  in  notes  by  the  English        ^  See  post,  the  sections  on  construct- 
ive trusts. 


§  921  EQUITY   JUEISPRUDENCE.  1310 

scheme.'  This  most  righteous  principle  lies  at  the  basis 
of  many  forms  of  equitable  relief,  among  which  are  the 
specific  enforcement  of  verbal  agreements  for  the  sale  of 
land  which  have  been  partly  performed,  the  reformation 
and  enforcement  of  agreements  and  conveyances  imper- 
fect through  fraud  or  mistake,  the  cancellation  of  fraud- 
ulent agreements  and  conveyances,  and  the  like.  One 
particular  instance  of  relief  will  be  mentioned  as  an  illus- 
tration. Where  an  agreement  has  been  verbally  made 
which  the  statute  requires  to  be  in  writing,  and  through 
the  actual  fraud  of  one  party  the  execution  of  the  written 
instrument  is  prevented,  and  the  other  party  is  induced 
to  accept  and  rely  upon  the  verbal  agreement  as  valid 
and  binding,  a  court  of  equity  will  not  permit  the  fraudu- 
lent party  to  set  up  the  statute  of  frauds  as  a  defense,  but 
will  enforce  the  agreement  against  him,  although  it  is 
merely  verbal.  Of  course,  there  must  be  actual  fraud  as 
the  distinguishing  feature  of  the  transaction,  —  something 
more  than  the  mere  omission  to  put  the  contract  into 
writing.  The  plaintifif  must  be  induced  through  the  de- 
ceit, false  statements,  or  concealments  of  the  other  party 
to  waive  a  written  instrument,  and  to  rely  upon  the  parol 
undertaking.  The  same  relief,  it  seems,  will  be  given 
when  the  execution  of  a  written  contract,  otherwise  fully 
agreed  upon,  is  prevented  by  an  inevitable  accident,  as 
by  the  death  of  a  party .^ 

'  Mestaer  v.  Gillespie,  11  Ves.  621,  Walker,  2  Atk.  98;  Joynes  v.  Statham, 
627,  628,  per  Lord  Eldoa;  Haigh  v.  3  Atk.  388;  Whitchurch  v.  Bevis,  2 
Kaye,  L.  R.  7  Ch.  469;  Jervis  v.  Ber-  Brown  Ch.  559,  565;  Lincoln  v.  Wright, 
ridge,  L.  R.  8  (Jh.  351;  Lincoln  v.  4  De  Gex  &  J.  16,  22;  Wood  v.  Midg. 
Wright,  4  De  Gex  &  J.  16;  Wood  v.  ley,  5  De  Gex,  M.  &  G.  41;  Cookes  v. 
Midgley,  5  De  Gex,  M.  &  G.  41;  Wil-  Mascall,  2  Vern.  200;  Taylor  v.  Luther, 
link  v.Vander veer,  1  Barb.  599;  Miller  2  Sum.  228;  Jenkins  v.  Eklridge,  3 
V.  Gotten,  5  Ga.  341,  346;  Shields  v.  Story,  181,  290-293;  Phyfe  v.  Wardell, 
Trammell,  19  Ark.  51;  Trapnall  v.  2  Edw.  Ch.  47;  Whitridge  v.  Park- 
Brown,  19  Ark.  39;  [Wood  v.  Rabe,  hurst,  20  Md.  62;  Wesley  v.  Thomas, 
96  N.  Y.  414;  Woodbury  v.  Gardner,  6  Har.  &  J.  24;  Walkins  v.  Stockett, 
77  Me.  68.]  6  Har.  &  J.  4H5;  Schmidt  v.  Gatewood, 

-  Mestaer  V.  Gillespie,  11  Ves.  621,  2  Rich.   Eq.   162;  Kinard  v.  Hiers,  3 

627,  628;  Montacute  v.  Maxwell,  1  P.  Rich.  Eq.  423;  55  Am.  Dec.  643;  Chet- 

Wms.  618;  1  Strange,  236;  1  Eq.  Gas.  wood   v.    Brittan,    2  N.  J.    Eq.    438; 

Abr.  19;  Attorney-General  v.  Sitwell,  Kennedy    v.    Kennedy,    2    Ala.     571; 

1   Younge  &  C.  557,  583;  Walker  v.  Collins  v.  Tillou,  26  Conn.  308;  08  Am. 


1311 


CONSTRUCTIVE   FRAUD, 


§921 


SECTION   IV. 

CONSTRUCTIVE  FRAUD. 


§922. 

§923. 

S§  924-942. 

§923. 
§926. 
§927. 
§928. 
§§  929-936. 
§930. 

§§  931-935. 
§931. 


932. 
933. 
934. 


935. 


Definition:  essential  elements. 
Three  principal  classes. 

First.  Constructive  fraud  apparent  from  the  intrinsic  nature  and 
subject  of  the  transaction  itself. 

I.  Inadequacy  of  consideration. 
Inadequacy  pure  and  simple. 

Gross  inadequacy  amounting  to  fraud. 

Inadequacy  coupled  with  other  inequitable  incidents. 

II.  Illegal  contracts  and  transactions. 

1.  Contracts  illegal  because  contrary  to  statute:  usury,  gaming, 
smuggling. 

2.  Transactions  illegal  because  opposed  to  public  policy. 

A.  Contracts  interfering  with  the  freedom  of  marriage;  marriage 
brokerage;  in  restraint  of  marriage;  rewards  for  marriage;  se- 
cret contracts  in  fraud  of  marriage;  secret  contracts  to  marry; 
rewards  for  procuring  wills. 

Agreements  for  a  separation. 

B.  Conditions  and  limitations  in  restraint  of  marriage. 

C.  Contracts  directly  belonging  to  and  afiFecting  business  rela- 
tions; restraint  of  trade;  interfering  with  bidding  at  auctions 
and  governmental  lettings;  puffers;  fraudulent  trade-marks; 
violating  policy  of  statutes  prescribing  business  methods;  trad- 
ing with  alien  enemies. 

D.  Contracts  affecting  public  relations;  interfering  with  the 
election  or  appointment  of  oflScers;  interfering  with  legislative 
proceedingss;  ditto,  executive  proceedings;  ditto,  judicial  pro- 
ceedings. 


Dec.  398;  Brown  v.  Lynch,  1  Paige, 
147;  Sweet  v,  Jacocks,  6  Paiije,  355; 
31  Am.  Dec.  252;  Wo) ford  v.  Herring- 
ton,  74  Pa.  St.  311;  15  Am,  Rep.  548; 
Murphy  V.  Hubert,  16  Pa.  St.  50;  7 
Pa.  St.  420;  Bernard  v.  Flinn,  S  Ind. 
204;  Finucane  v.  Kearney,  1  Freem. 
(Miss.)  65,  69;  Trapnall  v.  Brown,  19 
Ark.  39,  49;  Shields  v.  Trammel!,  19 
Ark.  51;  Chiklers  v.  Childers,  1  De  Gex 
&  J.  482;  Da  vies  V.  Otty,  35  Beav.  208; 
Colyer  v.  Clay,  7  Beav.  188;  Syines  v. 
Hughes,  L.  R.  9  Eq.  475;  Clarke  v. 
Grant,  14  Ves.  619,  525;  compare 
Blodgett  V.  Hildreth,  103  Mass.  484; 
Glass  V.  Hulbert,  102  Mass.  24;  3 
Am.  Rep.  418;  Walker  v.  Looke,  5 
Cush.  90;  [Equitable  Gas  Light  Co.  v. 


Baltimore  Coal  Tar  etc.  Co.,  63  Md. 
285;  Peek  v.  Peek,  77  Cal.  106;  11  Am. 
St.  Rep.  244.]  In  Taylor  v.  Luther, 
2  Sum.  228,  Judge  Story  lays  down 
tlie  doctrine  very  broadly,  more  so 
perhaps  than  is  warranted  by  the  prin- 
ciple or  sustained  by  the  authorities. 
The  doctrine  of  the  text  and  the  fore- 
going cases  should  be  considered  in 
connection  with  the  discussion  con- 
cerning parol  evidence  in  cases  of 
fraud  and  mistake,  near  the  end  of  the 
section  on  mistake.  [§§  858-867.  See 
also  the  remarks  of  Lord  Westbury 
quoted  in  §  431.]  They  lie  at  the 
foundation  of  the  conclusions  there 
reacliud,  and  fully  support  them- 


§  922  EQUITY    JURISPRUDENCE.  1312 

§  936.     3.  Contracts  illegal  becanse  opposed  to  good  morals;  for  illicit 
intercourse;  champerty  and  maintenance;  compounding  with 
a  felony  or  preventing  a  prosecution. 
§§  937-942.     III.  Equitable  jurisdiction  in  case  of  illegal  contracts. 
§  937.     In  usurious  contracts;  usurious  mortgages. 
§  938.     In  gaming  contracts. 

§  939.     In  other  illegal  contracts;  explanation  of  maxim,  In  pari,  etc 
§  940.    In  "pari  delicto,  general  rules. 
§  941.     In  pari  delicto,  limitations  on  general  rules. 
§  942.     Not  in  pari  delicto. 
§§  943-965.     Second.    Constructive  fraud  inferred  from  the  condition  and  rela- 
tions of  the  immediate  parties  to  the  transaction. 
§  943.     General  description  and  divisions. 
§§  944-954.     I.  Transactions  void  or  voidable  with  persons  wholly  or  partially 
incapacitated. 
§  945.     Coverture;  infancy, 
§  946.     Insanity. 
§  947.     Mental  weakness. 

§  948.     Persons  in  vinculis;  ditto,  illiterate  or  ignorant. 
§  949.     Intoxication. 
§  950.     Duress. 
§  951.     Undue  influence. 
§  952.     Sailors. 

§  953.     Expectants,  heirs,  reversioners. 
§  954.     Post  obit  contracts. 
§§  955-965.     II.  Transactions  presumptively  invalid  between  persons  in  fidu- 
ciary relations. 
§  955.     Circumstances  to  which  the  principle  applies. 
§  956.     The  general  principle, 
§  957.     Two  classes  of  cases  in  which  it  operates. 
§  958.     Trustee  and  beneficiary. 
§  959.     Principal  and  agent. 
§  960.     Attorney  and  client. 
§  961.     Guardian  and  ward. 
§  962.     Parent  and  child. 
§  963.     Other   relations:   executors  and  administrators;   physician  and 

patient;  spiritual  advisers;  husband  and  wife;  partners,  etc. 
§  964.     Confirmation  or  ratification. 
§  965.     Acquiescence  and  lapse  of  time. 
8§  966-974,     Third.     Frauds  against  third  persons  who  are  not  parties  to  the 
transaction. 
§  967.     Secret  bargains  accompanying  compositions  with  creditors. 
§  968.     Conveyances  in  fraud  of  creditors. 
§  969.     The  consideration. 
§  970.     The  fraudulent  intent. 
§  971.     Modes  of  ascertaining  the  intent. 
§  972.     Existing  creditors. 
§  973.     Subsequent  creditors. 
S  974.     Conveyances  in  fraud  of  subsequent  purchaser!. 


1313  CONSTRUCTIVE    FRAUD.  §  922 

§922.  Definition  —  Essential  Elements.  —  The  term 
"  constructive  fraud  "  is  not  a  very  appropriate  one,  but  has 
been  used  so  long  that  any  attempt  to  substitute  another 
in  its  place  would  be  useless.  It  is  important,  however, 
to  form  an  accurate  notion  of  the  meaning  given  to  it  in 
equity,  and  of  the  peculiar  element  or  criterion  which 
distinguishes  the  various  classes  of  cases  belonging  to  it. 
The  distinguishing  element  of  actual  fraud,  as  has  been 
shown,  is  always  untruth  between  the  two  parties  to  the 
transaction,  so  that  actual  fraud  may  be  reduced  to  mis- 
representations and  concealments.  This  untruth  at  law 
must  be  virtually  intentional,  —  a  falsehood;  in  equity  the 
intention  is  not  so  essential.  Untruth  is  not  the  distin- 
guishing element  of  constructive  fraud;  it  is  never  essen- 
tial that  there  should  be  untruth  between  the  immediate 
parties  to  a  transaction,  in  order  that  it  may  come  within 
the  denomination  of  constructive  fraud;  in  a  great  many 
instances  it  would  be  impossible  to  predicate  untruth  of 
the  wrong-doer's  conduct.^  Constructive  fraud  is  simply 
a  term  applied  to  a  great  variety  of  transactions,  having 
little  resemblance  either  in  form  or  in  nature,  which 
equity  regards  as  wrongful,  to  which  it  attributes  the 
same  or  similar  effects  as  those  which  follow  from  actual 
fraud,  and  for  which  it  gives  the  same  or  similar  relief 
as  that  granted  in  cases  of  real  fraud.  It  covers  different 
grades  of  wrong.  It  embraces  contracts  illegal,  and  there- 
fore void  at  law  as  well  as  in  equity;  transactions  voidable 
in  equity  because  contrary  to  public  policy;  and  transac- 
tions which  merely  raise  a  presumption  of  wrong,  and 
throw  upon  the  party  benefited  the  burden  of  proving  his 
innocence  and  the  absence  of  fault.^ 

^  It   should   be  carefully  observed,  not  a  party  to  the  transaction,  who  is 

however,  that  in  certain  instances  of  the  one  defrauded,  and   who  obtains 

constructive  fraud,  although  there  is  relief;  e.  g.,  a  conveyance  by  A  to  B 

no  element  of   untruth  whatever  be-  with  intent  to  defraud  A's  creditors, 

tween   the  two  immediate  parties  to  This  particular  species  has,  therefore, 

the    transaction,  —  the    grantor    and  a  strong  analogy  to  actual  fraud,  and 

grantee,   donor  and   donee,   promisor  the  cases  belonging  to  it  are  governed, 

and  promisee, — there  is  such  an  ele-  to   a   great   extent,    by   the   rales   of 

ment,  and  even  perhaps  an  intention  actual  fraud. 

to  deceive,   towards   a  third   person,  *  The  term  "  presumptive  fraud "  is 
2  Eq.  Jue.— 83 


§§  923,  924  EQUITY    JUillSl'llUDENUE.  1314 

§  923.  Three  Principal  Classes. — In  the  great  case  of 
Chesterfield  v.  Jansseu,  quoted  in  the  preceding  section/ 
Lord  Hardwicke,  after  mentioning  actual  fraud,  added 
the  three  other  following  classes:  1.  That  apparent  from 
the  intrinsic  nature  and  subject  of  the  bargain  itself;  2. 
That  presumed  from  the  circumstances  and  condition  of 
the  immediate  parties  to  the  transaction;  3.  That  which 
is  an  imposition  on  third  persons  not  parties  to  the  trans- 
action. As  these  three  groups  constitute  the  constructive 
fraud  of  equity,  the  classification  of  the  great  chancellor 
will  be  adopted  in  the  discussions  of  the  present  section.^ 

§  924.  First.  Constructive  Fraud  Apparent  from  the 
Intrinsic  Nature  and  Subject  of  the  Transaction  Itself.  — 
This  class  includes  three  principal  subjects:  1.  Inadequacy 
of  consideration;  2.  Contracts  illegal  because  opposed  to 
statute,  or  to  public  policy,  or  to  good  morals;  and  3. 
Certain  transactions  which,  in  analogy  with  contracts, 
equity  regards  as  contrary  to  public  policy,  and  therefore 
illegal.  I  shall  specify  these  various  instances  with  as 
much  explanation  as  may  be  needed  to  exhibit  the  doc- 
trines peculiar  to  equity,  and  shall  then  describe  the 
equitable  jurisdiction  which  they  occasion,  and  the  re- 
liefs, defensive  or  affirmative,  which  may  be  obtained  by 
its  means. 

sometimes  used  as  a  substitute    for  is  great  diSerence  among  text-writers, 

"constructive  fraud, "but improperly.  2.   A  large   number   of   instances   be- 

In  a  great  number  of  instances  there  longing     to    constructive     fraud    are 

is  no  presumption  of  fraud,  in  the  true  simply  cases  of   illegal  contracts  and 

sense  of  that  word;  and  no  such  pre-  of  personal  incapacity, — insanity,  in- 

sumption  could  possibly  arise.  fancy,    etc., — the    rules    concerning 

1  [§  874,  and  note.]  which   are   the   same  at  law  and   in 

'  Before  entering  upon  the  subject,  equity,  and  are  found  in  every  trea- 

two  explanatory  statements  should  be  tise  upon  contracts.     Since  the  main 

made:    1.   Although  the  divisions  are  object  of  the  present  work  is  to  ascer- 

in  the  main  sharplj'  distinguished,  yet  tain  when  these  matters  give  occasion 

there   are  a  few  particular   instances  for  the  equitable  jurisdiction,  and  to 

which  cannot  with  certainty  be  allot-  determine  the  extent  of  its  exercise,  it 

ted  to  their  single  appropriate  place,  does  not  seem  necessary  to  enter  upon 

since  they  possess  features  which  are  any   examination    of    subjects   which 

common  to  two,  or  even  to  all,  of  the  properly  belong  to  the  general  law  of 

classes.      Without   attempting   to  be  contracts.       A   mere   enumeration   of 

strictly  logical,  I  have  pursued  an  ar-  those  cases  of  illegality  and  incapacity 

rangement  which  is  natural  and  prac-  which  come  within  the  cognizance  of 

tical.     In  thia  matter  of  order  there  equity  is  all  that  is  needed. 


1315  CONSTRUCTIVE    FRAUD.  §§  925,  92G 

§  925.  I.  Inadequacy  of  Consideration.  —  Inadequacy 
of  consideration  must  ordinarily  occur  either  in  convey- 
ances, executed  or  executory  contracts  of  sale,  or  in  agree- 
ments analogous  to  sale  where  there  is  a  subject-matter 
transferred  or  dealt  with,  and  a  price  paid  or  to  be  paid. 
It  may  exist  in  the  price  or  in  the  subject-matter,  the 
latter  case  being  the  same  as  exorbitancy  of  price.  It 
necessarily  implies  that  the  price  is  either  too  small  or 
too  great.  The  former  is  the  condition  ordinarily  meant 
by  inadequacy,  and  is  plainly  more  susceptible  of  judicial 
investigation  than  the  other.  In  both  these  forms  in- 
adequacy of  consideration  will  be  considered:  1.  By  itself 
free  from  any  other  fact;  2.  As  connected  with  other 
inequitable  facts  and  circumstances. 

§  926.  Inadequacy  Pure  and  Simple.  —  The  rule  is 
well  settled  that  where  the  parties  were  both  in  a  situa- 
tion to  form  an  independent  judgment  concerning  the 
transaction,  and  acted  knowingly  and  intentionally,  mere 
inadequacy  in  the  price  or  in  the  subject-matter,  unac- 
companied by  other  inequitable  incidents,  is  never  of 
itself  a  sufficient  ground  for  canceling  an  executed  or  ex- 
ecutory contract.  If  the  parties,  being  in  the  situation 
and  having  the  ability  to  do  so,  have  exercised  their  own 
independent  judgment  as  to  the  value  of  the  subject-mat- 
ter, courts  of  equity  should  not  and  will  not  interfere  with 
such  valuation.'     In  some  of  the  earlier  decisions,  mere 

^  Harrison  v.  Guest,  6  De  Gex,  M.  lin,   41  Vt.  62;  Bedel  v.   Lootnis,    11 

&  G-.  424;  8  H.  L.  Gas.  481;  Curson  v.  N.   H.  74;   Lee  v.  Kirby,   J  04   Mass. 

Belworthy,  3  H.  L.  Gas.   742;    Mere-  420,  428;   Park  v.  Johnson,  4  Allen, 

ditha  V.  Saunders,  2  Dow,  514;  Gart«  259;  Osgood  v.  Franklin,  2  Johns.  Gh. 

side  V.  Isherwood,   1  Brown  Ch.  559;  1,  23;   7  Am.  Dec.  513;   Seymour  v. 

Griffith  V.  Spratley,  1  Gox,  383,  388;  Delancey,  3  Cow.  445;    15  Am.  Dec. 

GoUier  v.  Brown,  1  Gox,  428;    Fox  v.  270;   Worth   v.  Gase,  42   N.  Y.  362; 

Mackreth,  2  Gox,  .322;  2  Dick.  689;  Go-  Shaddle  v.  Disborough,  .30  N.  J.  Eq. 

pis  V.  Middleton,  2  Madd.  409;  Wood  370;  Ready  v.  Noakes,  29  N.  J.  Eq. 

V.   Abrey,    3   Madd.  417;    Murray   v.  497;  Wintermute  v.  Snyder,  3N.  J.  Eq. 

Palmer,    2   Schoalea   &   L.    474,    488;  489;  Weber  v.  Weitling,  18  N.  J.  Eq. 

Erwin  V.  Parham,  12  How.  197;  Eyre  441;  Harris  v.  Tyson,  24  Pa.  St.  347, 

V.  Potter,   15  How.  42;   Barribeau  v.  360;    64  Am.  Dec.   661;   Davidson    v. 

Brant,  17  How.  43;  Slater  v.  Maxwell,  Little,  22  Pa.  St.  245,  247;  60  Am.  Dec. 

6  Wall.  268,  273;  Warner  v.  Daniels,  81;  Gummiiigs's  Appeal,  67  Pa.  St.  404; 

1    Wood.   &   M.   90,   110;    Howard    v.  Shepherd  v.  Bevin,  9  Gill.  32;    Mayo 

Edgell,  17  Vt.  9;  Kidder  v.  Chamber-  v.  Carrington,  19  Gratt.  74;  Cribbins 


926 


EQUITY    JURISPRUDENCE. 


1316 


inadequacy,  either  in  the  price  or  in  the  value  of  the  sub- 
ject-matter, M'as  held  to  be  a  sufficient  hardship  which 
might  defeat  the  specific  performance  of  an  executory- 
contract  when  set  up  as  a  defense.^  The  doctrine,  how- 
ever, is  now  settled,  that  mere  inadequacy  —  that  is,  in- 
equality in  value  between  the  subject-matter  and  the 
price  —  is  not  a  ground  for  refusing  the  remedy  of  spe- 
cific performance;  in  order  to  be  a  defense,  the  inade- 
quacy must  either  be  accompanied  by  other  inequitable 
incidents,  or  must  be  so  gross  as  to  show  fraud.  In  short, 
inadequacy  as  a  negative  defense,  and  as  an  affirmative 
ground  for  a  cancellation,  is  governed  by  one  and  the 
same  rule.''  When  a  sale  is  made  at  public  auction,  con- 
ducted in  a  fair  and  open  manner,  with  opportunity  for 


V.  Markwood,  13  Gratt.  495;  67  Am. 
Dec.  775;  Butler  v.  Haskell,  4  Desaus. 
Eq.  651;  Juzan  v.  Toulmin,  9  Ala.  662; 
44  Am.  Dec.  448;  Delafield  v.  Ander- 
son, 7  Smedes  &  M.  630;  Steele  v. 
Worthington,  2  Ohio,  182;  Weld  v. 
Rees,  48  111.  428;  Scovill  v.  Barney,  4 
Or.  288;  [Hamblia  v.  Bishop,  41  Fed. 
Rep.  74;  Clark's  Appeal,  67  Conn.  565; 
Diffendarfer  v.  Dicks,  105  N.  Y.  445; 
Phillips  V.  Pullen,  45  N.  J.  Eq.  5;  45 
N.  J.  Eq.  830;  Matthews  v.  Crockett's 
Adm'r,  82  Va.  394;  Tillery  v.  Wren, 
86  N.  C.  217;  Berry  v.  Hall,  105  N.  C. 
154;  Birke  v.  Abbott,  103  Ind.  1;  63 
Am.  Rep.  474.] 

^  Tilly  V.  Peers,  cited  10  Ves.  301, 
per  Eyre,  C.  B.;  Day  v.  Newman,  2 
Cox,  77,  and  cited  10  Ves.  300,  per 
Lord  Alvanley;  Savile  v.  Savile,  1 
P.  Wms.  745;  6  Vin.  Abr.  516,  pi.  25. 
la  the  celebrated  case  of  Seymour  v. 
Delancey,  6  Johns.  Ch.  222.  224,  225, 
Chancellor  Kent  reached  this  conclu- 
sion after  a  most  able  and  exhaustive 
review  of  all  the  then  existing  author- 
ities. His  decree  was  reversed  by  a 
bare  majority  of  the  court  of  errors, 
although  all  the  supreme  court  judges 
sustained  Chancellor  Kent's  views: 
Seymour  v.  Delancey,  3  Cow.  445;  15 
Am.  Dec.  270.  See  also  Clitherall  v. 
Ogilvie,  1  Desaus.  Eq.  257;  Gasque  v. 
Small,  2  Strob.  Eq.  72;  Clement  v. 
Reid,  9  Smedes  &  M.  535. 

'  This  doctrine  was  first  introduced 
bj  Lord  El  don  and  Sir  William  Grant, 


and  has  since  prevailed  unchallenged 
in  England,  and  has  generally  been 
adopted  in  the  United  States,  although 
not  without  strong  dissent  and  pro- 
test from  individual  judges:  Coles  v. 
Trecothick,  9  Ves.  246;  White  v. 
Damon,  7  Ves.  30;  Underbill  v.  Hor- 
wood,  10  Ves.  209;  and  Stilwell  v. 
Wilkins,  Jacob,  280,  282,  per  Lord 
Eldon;  Burrowes  V.  Lock,  10  Ves.  470, 
per  Sir  William  Grant;  Lowther  v, 
Lowther,  13  Ves.  95,  103,  per  Lord 
Erskine;  Collier  v.  Brown,  1  Cox,  428; 
Griffith  V.  Spratley,  1  Cox,  383;  cited 

2  Brown  Ch.  179;  Bower  v.  Cooper,  2 
Hare,  408;  Borell  v.  Dann,  2  Hare, 
440;  Stephens  v.  Hotham,  1  Kay  &  J, 
.571;  Callaghan  v.  Callaghan,  8  Clark  & 
F.  374,  401;  Abbott  v.  Sworder.  4  De 
Gex  &  S.  448;    Seymour  v.  Delancey, 

3  Cow.  445;  15  Am.  Dec,  270;  Hale 
V.  Wilkinson,  21  Gratt.  75;  Booten  v. 
ScheflFer,  21  Gratt.  474;  Shaddle  v.  Dis- 
borough,  30  N.  J.  Eq.  370;  Ready  v. 
Noakes,  29  N.  J.  Eq.  497;  Rodman  v. 
Zilley,  1  N.  J.  Eq.  320;  Lee  v.  Kirby, 
104  Mass.  420;  Western  R.  R.  v.  Bab- 
cock,  6  Met.  346;  Westervelt  v,  Mathe- 
son,  1  Hoff.  Ch.  37;  Viele  v.  Troy  & 
B.  R.  R.,  21  Barb.  381 ;  Black  v.  Cord, 
2  Har.  &  G.  100;  White  v.  Thomp- 
son, 1  Dev.  &  B.  Eq.  493;  Curlin  v. 
Hendricks,  35  Tex.  225;  Harrison  v. 
Town,  17  Mo.  237;  Cathcart  v.  Robin- 
son, 5  Pet.  263;  Scovill  v.  Barney,  4 
Or.  288;  [Conaway  v,  Sweeney,  24 
W.  Va.  643.] 


1317  CONSTRUCTIVE    FRAUD.  §  927 

real  competition,  the  rule  is  even  stronger,  for  fraud  can- 
not then  be  inferred  from  any  inadequacy  in  the  price, 
without  other  circumstances  showing  bad  faith.'  The 
particular  case  of  selling  an  expectancy  or  reversion  for 
an  inadequate  price,  which  is  in  some  respects  an  excep- 
tion to  the  foregoing  general  rule,  is  considered  in  the 
subsequent  section. 

§  927.  Gross  Inadequacy  Amounting  to  Fraud.  —  Al- 
tliough  the  actual  cases  in  which  a  contract  or  convey- 
ance has  been  canceled  on  account  of  gross  inadequacy 
merely,  without  other  inequitable  incidents,  are  very 
few,  yet  the  doctrine  is  settled,  by  a  consensus  of  decis- 
ions and  dicta,  that  even  in  the  absence  of  all  other  cir- 
cumstances, when  the  inadequacy  of  price  is  so  gross 
that  it  shocks  the  conscience,  and  furnishes  satisfactory 
and  decisive  evidence  of  fraud,  it  will  be  a  sufficient 
ground  for  canceling  a  conveyance  or  contract,  whether 
executed  or  executory.  Even  then  fraud,  and  not  inade- 
quacy of  price,  is  the  true  and  only  cause  for  the  interpo- 
sition of  equity  and  the  granting  of  relief.^ 

'  White  V.  Damon,  7  Ves.   30,  per  Brown   Ch.     558,    560;    Heathcote  r. 

Lord  Eldon;  Borell  v.  Daiin,  2  Hare,  Paignon,  2Brown  Ch.  167,  173;  Griffith 

440.  450,  per  Wigram,  V.  C;   Ayers  v.  Spratley,  1  Cox,  ,383,  388,  389;  Fox 

V.  Baumgarteu,   15  111.  444;  Erwiii  v.  v.   Mackreth,  2  Dick.  689;   Evans  v. 

Parham,   12  How.  197  (a  debt  of  two  Llewellia,  1  Cox,  333;  Stdwell  v.  Wil- 

hundred   and    sixty  thousand   dollars  kins,  Jacob,  280;  Gibson  v.   Jeyes,  6 

sold  at  sherifif's  sale  for  six  hundred  Ves.  266,  273;  Underhill  v.  Horwood, 

dollars);  [Warner  v.  Jacob,  20 Ch.  Div.  10  Ves.  209,  219;  Coles  v.  Trecothick, 

220;  Learned  v.  Geer,   139  Mass.  31;  9  Ves.  234,  246;  Morse  v.    Royal,   12 

Lallance   v.    Fisher,  29  W.  Va.  512;  Ves.    355,  373;  Peacock  v.  Evans,  16 

Allen, V.  Martin,  61  Miss.  78;  Cleaver  Ves.  512;  Wood   v.  Abrey,  3    Madd. 

V.  Green,  107  111.  67;  Garden  v.  Lane,  417;  Borell  v.  Dann,  2  Hare,  440,  450; 

48   Ark.  219;  3   Am.    St.  Rep.  228-1  Rice  v.  Gordon,  11  Beav.  265;  Cockell 

An  auction  sale  will  be  set  aside,  and  v.    Taylor,    15  Beav.   103,   115;  Sum- 

aforliori  a  specific  performance  will  be  niers  v.  Griffiths,  35  Beav.  27;  Falcke 

refused,  when  there  was  actual  fraud  v.  Gray,  4  Drew.  651;   James  v.  Mor- 

in   conducting   it,  or   the  buyer  con-  gan,  1  Lev.  Ill  (exorbitancy  of  price; 

trolled  it:  Byers  v.   Surget,   19  How.  the    well-known  horse-shoe    case,    in 

303,  309;  [Pekiu  M.  &  M.  Co.  v.  Ken-  which  a  party  stipulated  to  pay  a  sum 

nedy,  81  Cal.  356.]  resulting   from   doubling  the  amount 

*  Gwynne  v.  Heaton,   1  Brown  Ch.  for  every  nail   in  the   horse's  shoes); 

1,  9,  per  Lord  Thurlow:  "Aninequal-  Howard  v.   Edgell,   17  Vt.  9;  Kidder 

ity  so  strong,  gross,  and  manifest  that  v.   Chamberlin,  41  Vt.   62;  Osgood    v. 

it  must  be  impossible  to  state  it  to  a  Franklin,  2  Johns.  Ch.    1,  23;  7  Am. 

man   of   common   sense  without  pro-  Dec.   513;    14    Johns.    527;    Dunn  v. 

<iuciiig  an  exclamatioii  at  the  inequal-  Chambers.   4    Barb.    376;    Worth    v. 

ity  of   it":  Gartside  v.  Isherwood,  1  Case,  42  N.  Y.  362;  Hodgson  v.  Far- 


928 


EQUITY   JURISPRUDENCE. 


1318 


§  928.     Inadequacy   Coupled  with    Other   Inequitable 
Incidents.  —  If  there  is  nothing  but  mere  inadequacy'  of 


rell,  15  N.  J.  Eq.  88;  Gifford  v.  Thorn, 
9  N.  J.  Eq.  702;  Davidson  v.  Little, 
22  Pa.  St.  245;  60  Am.  Dec.  81;  Hamet 
V.  Dundass,  4  Pa.  St.  178;  Sime  v. 
Xorris,  8  Phila.  84;  Green  v.  Thomp- 
son, 2Ired.  Eq.  365;Barnett  v,  Spratt, 
4  Ired.  Eq.  171;  Butler  v.  Haskell,  4 
Desaus.  Eq.  651;  Juzan  v.  Toulmin,  9 
Ala.  662;  44  Am.  Dec.  448;  Judge  v. 
Wilkins,  19  Ala.  765;  Morrisov.  Philli- 
ber,  30  Mo.  145;  Mitchell  v.  Jones,  50 
Mo.  438;  Kelly  v.  McGuire,  15  Ark. 
555;  Deaderick  v.  Watkins,  8  Humph. 
520;  Coffee  v.  Ruffiu,  4  Cold.  487; 
Tallv  V.  'Smith,  1  Cold.  290;  Mc- 
Cormick  v.  Malin,  5  Blackf.  509; 
Knobb  V.  Lindsay,  5  Ohio,  468;  Ma- 
coupin Co.  V.  People,  58111.  191;  Madi- 
son Co.  V.  People,  58  111.  456;  Case  v. 
Case,  26  Mich.  484;  Byers  v.  Surget, 
19  How.  303;  Eyre  v.  Potter,  15  How. 
42,  60;  Veazie  v.  Williams,  8  How, 
134;  [Berry  v.  Lovi,  107  HI.  612; 
Adair  v.  Cummin,  48  Mich.  375.] 

If  the  inadequacy  may  be  so  excess- 
ive as  to  be  ground  for  a  cancellation, 
it  may,  of  course,  be  sufficient  to  de- 
feat the  specific  performance  of  an 
executory  contract:  Eastman  v. 
Plumer,  46  N.  H.  464;  Graham  v. 
Pancoast,  30  Pa.  St.  89,  97;  Powers 
V.  Mayo,  97  Mass.  180;  and  see  cases 
in  preceding  note. 

The  rule  is  ordinarily  stated  that 
the  inadequacy  must  be  so  gross  that 
it  is  conclusive  evidence  of  fraud.  It 
is  so  laid  down  by  earlier  judges,  and 
by  Mr.  Kerr.  The  rule  had  its  origin 
at  a  time  when  fraud  was  generally 
inferred  by  presumptions  of  law,  and 
often  by  conclusive  presumptions.  In 
the  present  condition  of  the  law  on 
the  subject  of  fraud,  this  mode  of  for- 
mulating the  rule  seems  to  be  errone- 
ous. The  principle  is  now  almost 
universally  adopted,  that  fraud  is  a 
fact,  inferred,  like  other  conclusions  of 
fact,  from  the  evidence;  no  rule  of 
law  can  therefore  be  laid  down  as  to 
the  amount  of  inadequacy  necessary 
to  produce  the  resulting  fraud.  In- 
adequacy of  consideration  may  be 
evidence  of  fraud,  slight  or  powerful, 
according  to  its  amount,  and  other 
circumstances.  When  it  is  satisfac- 
tory and  decisive  evidence,  —  when 
from    the    proof   of   inadequacy'    the 


court  or  jury  are  convinced  that  fraud 
as  a  fact  did  exist,  —  then  the  relief  is 
granted.  Instead,  therefore,  of  repeat- 
ing the  usual  formula  which  has  been 
handed  down  for  generations,  that  the 
inadequacy  must  be  conclusive  evi- 
dence of  fraud,  I  have  said  in  the  text 
that  it  must  be  satisfactory  and  de- 
cisive evidence;  the  former  mode 
represented  fraud  as  the  result  of  a 
conclusive  legal  presumption;  the 
latter  treats  it  as  a  conclusion  of  fact 
drawn  from  the  evidence,  and  is 
therefore  in  perfect  harmony  with  the 
theory  which  now  prevails  in  most, 
if  not  all,  of  the  states.  The  follow- 
ing seems  to  be  the  true  rationale  of 
the  doctrines  concerning  inadequacy 
of  price.  Whenever  it  appears  that 
the  parties  have  knowingly  and  delib- 
erately fixed  upon  any  price,  however 
great  or  however  small,  there  is  no' 
occasion  nor  reason  for  interference  by 
courts,  for  owners  have  a  right  to  sell 
property  for  what  they  please,  and 
buyers  have  a  right  to  pay  what  they 
please:  See  Harris  v.  Tyson,  24  Pa. 
St.  347,  360;  64  Am.  Dec.  661;  David- 
son V.  Little,  22  Pa.  St.  245,  247;  60 
Am.  Dec.  81.  But  where  there  is  no 
evidence  of  such  knowledge,  inten- 
tion, or  deliberation  by  the  parties, 
the  disproportion  between  tlie  value 
of  the  subject-matter  and  the  price 
may  be  so  great  as  to  warrant  the 
court  in  inferring  therefrom  the  fact 
of  fraud.  Such  a  gross  inadequacy 
or  disproportion  will  call  for  explana- 
tion, and  will  shift  the  burden  of  proof 
upon  the  party  seeking  to  enforce  the 
contract,  and  will  require  him  to  show 
affirmatively  that  the  price  was  the 
result  of  a  delil:)erate  and  intentional 
action  by  the  parties;  and  if  the  fact» 
do  prove  such  action,  the  fact  of  fraud 
will  be  more  readily  and  clearly  in- 
ferred. I  do  not  mean  that  judges 
and  juries  are  no  longer,  under  any 
circumstances,  aided  by  legal  presump- 
tions in  dealing  with  fraud.  The 
number  of  instances,  however,  in 
which  legal  presumptions  are  invoked 
has  been  very  much  lessened;  the 
issue  of  fraud  or  no  fraud  is  generally 
decided  in  the  same  manner  as  any 
other  issue  of  fact. 

The    Roman   law   adopted   a    fixed 


1319 


CONSTRUCTIVE    FRAUD. 


§  928 


price,  the  case  must  be  extreme,  in  order  to  call  for  the 
interposition  of  equity.  Where  the  inadequacy  does  not 
thus  stand  alone,  but  is  accompanied  by  other  inequitable 
incidents,  the  relief  is  much  more  readily  granted.  But 
even  here  the  courts  have  established  clearly  marked 
limitations  upon  the  exercise  of  their  remedial  func- 
tions, which  should  be  carefully  observed.  The  fact 
that  a  conveyance  or  other  transaction  was  made  with- 
out professional  advice  or  consultation  with  friends,  and 
was  improvident,  even  coupled  with  an  inadequacy  of 
price,  is  not  of  itself  a  sufficient  ground  for  relief,  pro- 
vided the  parties  were  both  able  to  judge  and  act  in- 
dependently, and  did  act  upon  equal  terms,  and  fully 
understood  the  nature  of  the  transaction,  and  there  was 
no    undue    influence    or    circumstance    of    oppression.' 


standard  by  which  to  determine  all 
cases  of  inadequacy,  which  was  one 
half  of  the  real  value  of  the  subject- 
matter  when  that  consisted  of  immov- 
able property.  If  the  price  was  less 
than  one  half  of  the  real  value,  the 
seller  could  compel  the  buyer  to  elect 
either  to  rescind,  restore  the  thing 
and  take  back  the  price,  or  to  affirm 
and  make  up  the  deficiency:  Code, 
lib.  14,  tit.  44,  sec.  2;  and  see  Nott  v. 
Hill,  2  Cas.  Ch.  120,  per  Lord  Not- 
tingham; Burrowes  v.  Lock,  10  Ves. 
470,  474,  per  Sir  William  Grant.  A 
like  method  is  found  in  the  French 
law.  Such  arbitrary  rules  are  entirely 
contrary  to  the  spirit  of  our  law, 
and  our  methods  of  administering 
justice.  If  the  price  was  less  than 
one  half  of  the  value  of  the  subject- 
matter,  and  there  were  no  circum- 
stances showing  an  intention  on  the 
part  of  the  vendor  to  confer  a  bounty 
or  favor,  the  sale  would  doubtless  be 
set  aside.  Where  the  circumstances 
show  that  a  favor  or  bounty  was  in- 
tended, the  inference  of  fraud  is  neces- 
sarily destroyed ;  even  a  pure  gi  ft  would 
be  sustained:  Whalley  v.  Wlialley,  1 
Mer.  436.  As  to  the  time  of  the  in- 
adequacy, in  order  that  it  may  ever 
be  fatal,  it  must  exist  at  the  conclud- 
ing of  the  contract.  If  tliere  was  no 
inadequacy  at  the  making  of  the  con- 
tract, none  can  arise  from  subsequent 
events   or   change    of    circuinstanceSi: 


Mortimer  v.  Capper,  1  Brown  Ch. 
156;  Batty  v.  Lloyd,  1  Vern.  141; 
Hale  v.  Wilkinson,  21  Gratt.  7j;  Lee 
v.  Kirby,  104  Mass.  420.  The  old 
case  of  Savile  v.  Savile,  1  P.  Wms. 
745,  was  decided  otherwise,  but  lias 
long  been  overruled  on  this  point. 
See,  however,  the  somewhat  remark- 
able case  of  Willard  V,  Tayloe,  8  Wall. 
557,  which  was  really  an  instance  of 
the  price  becoming  inadequate  by  su')- 
sequent  events.  This  rule  is  subject 
to  a  certain  modification  in  suits  for 
the  specific  performance  of  contracts. 
If  a  plaintiff,  instead  of  obtaining  his 
remedy  promptly  as  soon  as  he  was 
able,  should  unnecessarily  delay,  and 
should  not  bring  a  suit  until,  by  his 
delay  or  change  of  circumstances,  the 
price  or  subject-matter  had  become 
inadequate,  a  specific  enforcement 
might  and  generally  would  be  re- 
fused: Booten  v.  Scheffer.  21  Gratt. 
474;  Whitaker  v.  Bond,  G3  N.  C.  290; 
Hudson  v  King,  2  Heisk.  560;  Mc- 
Carty  v.  Kyle,  4  Cold.  348. 

'  Harrison  v.  Guest.  6  De  Gex,  M. 
&  G.  424;  8  H.  L.  Cas.  481;  Mere- 
diths V.  Saunders,  2  Dow,  514:  Blackie 
v.  Clark,  15  Beav.  595;  Denton  v. 
Donner,  23  Beav.  285,  291;  Toker  v. 
Toker,  31  Beav.  629;  Dunn  v.  Cham- 
bers, 4  Barb.  376;  Green  v.  Thomp- 
son, 2  Ired.  Eq.  365;  Juzan  v.  Toul- 
min,  9  Ala.  602;  44  Am.  Dec.  448; 
Scovill  V.  Barney,  4  Or.  2S8.     Harri- 


§  928  EQUITY   JURISPRUDENCE.  1320 

When  the  accompanying  incidents  are  inequitable  and 
show  bad    faith,  such   as   concealments,  misrepresenta- 
tions, undue  advantage,  oppression  on  the  part  of  the  one 
who  obtains  the  benefit,  or  ignorance,  weakness  of  mind, 
sickness,  old  age,  incapacity,  pecuniary  necessities,  and 
the  like,  on  the  part  of  the  other,  these  circumstances, 
combined  with  inadequacy  of  price,  may  easily  induce  a 
court  to  grant  relief,  defensive  or  affirmative.     It  would 
not  be  correct  to  say  that  such  facts  constitute  an  absolute 
and  necessary  ground  for  equitable  interposition.     They 
operate  to  throw  the  heavy  burden   of  proof  upon  the 
party  seeking  to  enforce  the  transaction  or  claiming  the 
benefits  of  it,  to  show  that  the   other  acted  voluntarily, 
knowingly,    intentionally,    and     deliberately,    with    full 
knowledge  of  the  nature  and  effects  of  his  acts,  and  that 
his  consent  was  not  obtained  by  any  oppression,  undue  in- 
fluence, or  undue  advantage  taken  of  his  condition,  situa- 
tion, or  necessities.     If  the  party  upon  whom  the  burden 
rested  should  succeed  in  thus  showing  the  perfect  good 
faith    of  the   transaction,    it   would  be  sustained;    if  he 
should  fail,  equity  would  grant  such  relief,  affirmative  or 
defensive,  as    might    be   appropriate.^     There  are  cases, 

son  V.  Guest,  6  De  Gex,  M.  &  G.  424,  alone,  will  not  warrant  the  interposi- 

8  H.  L.  Cas.  481.  is  a  very  illustra-  tion   of   equity;    but   when   lioth   are 

tive   case.     An  old  man  of   seventy-  combined,  relief  will  be  granted.     It 

one,  bedridden,  illiterate,  without  any  is,  perhaps,  not  possible  to  reconcile 

independent  professional  advice,  and  this  naked  proposition  with   the  au- 

withont  consulting  his  friends  or  rela-  thorities. 

tives,  conveyed  property  worth  four  '  Deane  v.  Rastron,  1  Anstr.  64; 
hundred  pounds,  for  the  considera-  Lewis  v.  Lord  Lechmere,  10  Mod.  503; 
tion  of  being  provided  with  board  Clarkson  v.  Hauway,  2  P.  Wnis.  203; 
and  lodging  during  the  rest  of  his  Ardglasse  v.  Muschainp,  1  Vern.  236; 
life.  He  lived  only  six  weeks  after  Gartside  v.  Isherwood,  1  Brown  Ch. 
the  conve3'ance;  his  representatives  558;  Evans  v.  Llewellin,  1  Cox,  333; 
sought  to  have  the  conveyance  set  Morse  v.  Royal,  12  Ves.  355,  373;  Pick- 
aside.  The  evidence  showed  that  he  ett  v.  Loggon,  14  Ves.  231;  Murra-y  v. 
had  refused  to  employ  professional  Palmer,  2  Schoales  &  L.  474,  486; 
advice  for  himself,  that  he  was  able  Falkner  v.  O'Brien,  2  Ball  &  B.  220; 
to  understand  the  nature  of  the  trans-  Griffiths  v.  Roiiins,  3  Madd.  191; 
action,  and  that  there  were  no  cir-  Wood  v.  Abrey.  3  Madd.  417;  Willaa 
cumstances  of  oppression;  the  court  v.  Willan,  2  Dow,  274;  Collins  v.  Hare, 
held  that  there  was  not  sufficient  2  Bligh,  N.  S..  106;  McDiarmid  v.  Mc- 
ground  to  impeach  the  conveyance.  Diarmid.  3  Blish,  N.  S.,  374;  Smith  v. 
In  Scovill  v.  Barney,  4  Or.  288,  the  Kay,  7  H.  L.  Cas.  750;  De_nt  v.  Ben- 
court  said  that  inadequacy  of  consid-  nett,  4  Mylne  &  C.  209,  273;  Gibson 
eratiou  or  mental  weakness,  standing  v,  Russell,    2   Youuge  &  C.   Ch.  104j 


1321 


CONSTRUCTIVE    FRAUD. 


923 


however,  which  theoretically  call  for  the  interposition  of 
equity  on  account  of  such  circumstances  of  bad  faith,  as 
well  as  other  forms  of  fraud,  but  in  which  no  relief  can 
actually  be  given,  because  the  contract  —  conveyance  or 


Prideaux  v.  Lonsdale,  1  De  Gex,  J.  & 
S.  433;  Tate  v.  Williamson,  L.  R.  2 
Ch.  65;  1  Eq.  528;  Rhodes  v.  Bate, 
L.  R.  1  Ch.  252;  Sturge  v.  Sturge, 
12  Beav.  229,  244;  Cockell  v.  Taylor, 
15  Beav.  103,  115;  Cooke  v.  Lamotte, 
15  Beav.  234;  Grosvenor  v.  Sherratt, 
28  Beav.  659;  Summers  v.  Griffiths,  35 
Beav.  27;  Longmatev.  Ledger,  2Gifi'. 
157;  Powers  v.  Hale,  25  N.  H.  145; 
Howard  v.  Edgell,  17  Vt.  9;  Mann  v. 
Betterly,  21  Vt.  32ti;  Osgood  v.  Frank- 
lin,  2  Johns.  Ch.  1,  24:  7  Am.  Dec. 
513;  Hall  v.  Perkins,  3  Wend.  626; 
Kloepping  V.  Stellmacher,  21  N.  J. 
Eq.  328  (mistake  and  inadequacy  in  a 
sheriflf's  sale);  Graham  v.  Paucoast,  30 
Pa.  8t.  89  (age  of  a  party);  Henderson 
V.  Hays,  2  Watts,  148,  151  (intemper- 
ance and  weakened  mind);  Campbell 
V.  Spencer,  2  Binn.  133  (ditto);  Todd 
V.  Grove,  33  Md.  188;  Brooke  v.  Berry, 

2  Gill,  83;  McKinney  v.  Pinckard,  2 
Leigh,  149;  21  Am.  Dec.  601;  Clitherall 
V.  Ogilvie,  1  Desaus.  Eq.  257  (one  party 
young  and  inexperienced,  the  other 
mature  and  cunning);  Neeley  v,  An- 
derson, 2  Strob.  Eq.  262;  Gasque  v. 
Small,  2  Strob.  Eq.  72;  Bunch  v.  Hurst, 

3  Desaus.  Eq.  273;  5  Am.  Dec.  551; 
Maddox  v.  Simmons,  31  Ga.  512;  Wor- 
mack  V.  Rogers,  9  Ga.  60;  Black- 
wilder  V.  Loveless,  21  Ala.  371  (undue 
advantage  of  party's  pecuniary  neces- 
Bities, — an  instructive  case);  Harri- 
son V.  Town,  17  Mo.  237;  Holmes  v. 
Fresh,  9  Mo.  200;  Cadwallader  v. 
West,  48  Mo.  483  (physician  and  pa- 
tient); Mitchell  V.  Jones,  50  Mo.  438 
(mistake  and  inadequacy  in  a  partition 
sale);  Newland  v.  Gaines,  1  Heisk. 
720;  Benton  V.  Shreeve,  4  Ind.  66; 
Modisett  v.  Johnson,  2  Blackf.  431; 
McCormick  v.  Malin,  5  Blackf.  509; 
Fish  V.  Leser,  69  111.  394  (ignorance 
and  fear  of  one  party,  conceaiment  of 
value  and  undue  advantage  by  the 
other,  —  a  very  instructive  case);  Cath- 
cart  V.  Robinson,  5  Pet.  263;  Byera 
V.  Surge t,  19  How.  303;  [GraflFan  v. 
Burgess,  117  U.S.  184,  and  cases  cited; 
Cleere  v.  Cleere,  82  Ala.  581;  60  Am. 
Rep.  750;  Haskins  v.  Wallet,  63  Tex. 
213;  Davis  v.  Chicago  Dock  Co.,  129 


HI.  180  (gross  inadequacy  in  judicial 
sale,  with  irregularities  and  trifling 
circumstances  indicating  unfairness); 
Smith  v.  Huntoon,  134  111.  24  (same); 
Parker  v.  Glenn,  72  Ga.  637  (same); 
Bean  v.  Haffendorfer,  84  Ky.  685 
(same);  Sioux  City  etc.  Land  Co.  v. 
Walker,  78  Iowa,  476  (execution  sale); 
Cole  Co.  V.  Madden,  91  Mo.  585  (execu- 
tion sale);  Dickson  v.  Kempinsky,  96 
Mo.  252  (contract  with  person  of  weak 
mind).] 

When  the  inadequacy  appears  in  a 
contract  between  a  parent  and  child, 
or  between  other  near  relatives,  the 
circumstances  may  be  such  that  all 
suspicion  of  fraud  or  hardship  is  re- 
moved by  the  fact  of  relationship. 
This  would  especially  be  so  if  tlie  one 
obtaining  the  benefit,  and  from  whom 
the  inadequate  consideration  comes,  is 
a  person  who  would  naturally  be  a  re- 
cipient of  the  other  party's  bounty: 
Shepherd  v.  Bevin,  9  Gill,  32,  39,  per 
Frick,  J.;  Hays  v.  HoUis,  8  Gill,  357; 
Haines  v.  Haines,  6  Md.  435;  White  v. 
Thompson,  1  Dev.  &  B.  Eq.  493;  Fripp 
V.  Fripp,  I  RiceEqi  84;  [John's  Appeal, 
102  Pa.  St.  59.]  On  the  other  hand, 
in  transactions  between  the  same  class 
of  parties,  the  circumstances  may  be 
such  as  to  raise  a  strong  inference,  if 
not  even  a  presumption  of  bad  faith. 
The  fact  of  inadequacy  in  a  contract 
between  near  relatives,  and  especially 
when  the  party  obtaining  the  benefit 
is  in  a  position  of  natural  superiority 
and  command  over  the  other,  —  as  a 
father  and  child,  an  elder  brother  and 
younger  sister,  —  might  raise  a  strong 
inference  and  even  presumption  of  un- 
due influence,  and  thus  call  for  the 
interposition  of  a  court:  Whelan  v. 
Whelan,  8  Cow.  537;  and  see  Calla- 
ghan  V.  Caliaghan,  8  Clark  &  F.  374. 
The  questions  concerning  inadequacy 
of  price  accouipanied  by  other  inequi- 
table incidents  cannot,  in  practice,  be 
easily  separated  from  the  more  com- 
prehensive .subjects  of  undue  influence 
and  fiduciary  relations,  and  will  be 
more  fully  illustrated  in  the  subse- 
quent paragraphs  which  tr'at  of  those 
topics. 


§929 


EQUITY   JURISPRUDENCE. 


1322 


settlement  —  being  executed,  the  parties  cannot  "be  restored 
to  their  original  position.'  Some  special  rules  as  to  the 
effect  of  a  false  statement  of  the  consideration  in  a  con- 
veyance, and  as  to  the  evidence  admissible  to  impeach  or 
to  sustain  the  consideration  recited,  are  collected  in  the 
foot-note.' 

§929.  II.  Illegal  Contracts  and  Transactions.  —  In 
this  subdivision  I  shall  merely  enumerate  the  most  im- 
portant kinds  of  illegal  contracts  and  transactions  which 
may  permit  the  interposition  of  equity,  with  such  very 


'  The  most  striking  illustration  is 
that  of  marriage  settlements,  since  the 
parties  cannot  be  unmarried:  North 
V.  Ansell,  2  P.  Wms.  619. 

*  See  Kerr  on  Fraud,  191.  A  false 
statement  of  the  consideration  does 
not  necessarily  vitiate  a  deed:  Bowen 
V.  Kirwan,  Lloyd  &  G.  47.  But  it 
may,  in  some  cases,  invalidate  the  en- 
tire transaction:  Bowen  v.  Kirwan, 
Lloyd  &  G.  47;  Uppington  v.  BuUen, 
2  Dru.  &  War.  184;  Gibson  v.  Russell, 
2  Younge  &  C.  Oh.  104.  In  general, 
where  no  consideration  at  all  is  ex- 
pressed in  a  deed,  a  party  may  prove 
the  actual  consideration  to  support  it; 
and  where  a  consideration  is  expi-essed, 
a  party  may  prove  any  other  actual 
consideration,  if  not  wholly  inconsis- 
tent with  that  stated:  Hartopp  v.  Har- 
topp,  17  Ves.  184,  192;  Clifford  v. 
Turrell,  1  Younge  &  C.  Ch.  138;  on  ap- 
peal,  14  L.  J.  Ch.  390;  Nixon  v.  Ham- 
ilton. 2  Dru.  &  V^'alsh,  364,  387.  To 
this  general  rule  there  is  the  limitation 
that,  where  the  consideration  ex- 
pressed in  a  deed  is  impeached  on 
account  of  fraud,  the  party  claiming 
under  the  conveyance  cannot  sustain 
it  by  proving  another  consideration 
different  from  that  stated:  Clarkson 
V.  Hanway,  2  P.  Wms.  203;  Bridgman 
V.  Green,  2  Ves.  Sr.  627;  Watt  v. 
Grove,  2  Schoales  &  L.  492,  501;  Wil- 
lan  V.  Willan,  2  Dow,  274.  If  a  pe- 
cuniary consideration  is  stated  in  the 
deed,  and  is  impeached,  the  party  can- 
not show  and  rely  on  the  consideration 
of  blood,  or  love  and  affection:  Clark- 
son  V.  Hanway,  2  P.  Wms.  203;  VVil- 
Ian  V.  Willan,  2  Dow,  274;  [see, 
however,  Carty  v.  Connolly,  91  Cal. 
15.]  If  the  recitals  state  a  pecuniary 
consideration,  and  the  operative  part 


mentions  love  and  affection  as  being  in 
part  the  consideration  of  the  deed,  this 
discrepancy  is  not  sufficient  to  raise  a 
presumption  of  fraud:  Filmer  v.  Gott,  4 
Brown  Pari.  C.  230;  Whalley  v.  Whal- 
ley,  3  Bligh,  1,  13.  If  the  transaction 
on  which  a  deed  is  represented  to  be 
based,  and  the  consideration  for  which 
it  purports  to  be  given,  are  stated  un- 
truly, and  this  untruth  would  operate 
fraudulently,  the  instrument  may  lose 
all  of  its  validity  in  equity,  even 
though  it  cannot  be  attacked  at  law: 
Watt  v.  Grove,  2  Schoales  &  L.  492, 
504.  A  deed  between  parties,  one  of 
whom  is  subject  to  the  influence  of  the 
other,  should  contain  a  fair  and  truth- 
ful statement  of  the  transaction.  If 
the  statement  of  the  consideration  is 
untrue,  the  instrument  cannot  be  up- 
held. The  party  seeking  to  uphold  it 
cannot  prove,  in  order  to  sustain  it, 
that  the  actual  consideration  was 
partly  that  represented  in  the  deed 
and  partly  something  else,  since  this 
would  be  inconsistent  with  the  consid- 
eration stated  on  the  face  of  the  instru- 
ment: Ahearne  v.  Hogan,  Dru.  310; 
Uppington  v.  Bullen,  2  Dru.  &  War. 
184;  Clifford  v.  Turrell,  1  Younge  & 
C.  Ch.  138;  Gibson  v.  Russell,  2 
Y'ounge  &  C.  Ch.  104.  A  statement 
of  a  consideration  where  there  was 
actually  none,  or  a  wrong  statement 
of  the  consideration,  or  other  suspi- 
cious circumstances,  may  shift  the 
burden  of  proof  from  the  party  attack- 
ing a  deed  to  the  one  sustaining  it: 
Watt  V.  Grove,  2  Schoales  &  L.  492, 
502;  Griffiths  v.  Robins,  3  Madd.  191; 
Gibson  v.  Russell,  2  Younge  &  C.  Ch- 
104;  Ahearne  v.  Hogan,  Dru.  310; 
Harrison  v.  Guest,  6  De  Gex,  M.  & 
G.  424;  8  H.  L.  Cas.  481. 


1323  CONSTRUCTIVE  FRAUD.  §  930 

brief  description  as  shall  seem  necessary.  The  general 
subject  of  illegality  in  the  terms  or  the  consideration, 
with  the  special  rules  which  define  its  extent,  limitations, 
and  exceptions,  will  be  found  in  treatises  upon  contracts, 
to  which  the  reader  is  referred.  The  equitable  jurisdic- 
tion which  may  be  exercised  on  the  occasion  of  such 
transactions  is  described  in  the  following  subdivision.  It 
is  sufficient  at  present  to  say  that  a  court  of  equity  does 
not  aid  a  party  to  enforce  an  illegal  transaction  which  is 
still  executory,  in  pursuance  of  the  principle  embodied  in 
the  maxim.  Ex  turpi  causa  non  oritur  actio.  It  may,  how- 
ever, grant  the  affirmative  relief  of  cancellation  or  in- 
junction in  such  a  condition,  when  the  defense  would  not 
be  available  at  law.  If  the  contract  has  been  executed 
by  the  payment  of  the  money,  conveyance  or  delivery  of 
the  property,  and  the  parties  have  equally  participated 
in  the  wrong,  and  are  equally  in  fault,  the  court,  unless 
compelled  to  do  so  by  statute,  does  not  generally  inter- 
pose its  aid.  The  maxims,  In  pari  delicto,  potior  est  conditio 
possidentis,  and  Potior  est  conditio  defendentis,  are  then  con- 
trolling. Affirmative  relief  is  sometimes,  prescribed  by 
statute,  as  in  usurious  and  gaming  contracts.  "When  the 
parties  are  not  in  pari  delicto,  equity  may  give  affirmative 
relief  to  the  one  who  is  comparatively  innocent. 

§  930.  1.  Contracts  Illegal  because  Contrary  to  Stat- 
ute.—  I  place  under  this  head  those  few  instances  in 
which  the  illegality  is  wholly  or  chiefly  the  result  of  stat- 
utory prohibition.  Very  many  of  the  contracts  illegal  at 
the  common  law,  because  opposed  to  public  policy  or  to 
good  morals,  have  also  been  brought  within  the  domain 
of  positive  legislation  in  the  various  states;  and  a  very 
few  which  are  illegal  by  the  English  common  law  are 
not  generally  made  so  by  the  law  of  this  country.  The 
important  species  which  fall  under  the  present  head  are 
usurious,  gaming,  and  smuggling  contracts.^  The  policy 
of  prohibiting  usury  has  been  abandoned,  and  the  statutes 

[See  also  §  402.] 


§  930  EQUITY   JURISPRUDENCE.  1324 

concerning  it  repealed,  in  England  and  in  several  of  the 
American  states.  In  some  of  the  states  which  still  adhere 
to  the  policy,  the  usurious  contract  itself,  the  instrument 
by  which  it  is  evidenced,  and  all  its  securities,  are  de- 
clared to  be  utterly  void;  in  others,  the  stipulation  for 
the  usurious  excess  over  the  legal  interest  is  alone  made 
void;  while  in  others  a  further  penalty  is  added  to  this 
usurious  excess.^  Although  at  the  common  law  certain 
kinds  of  contracts  based  upon  wagers  were  not  unlawful, 
while  those  made  upon  a  gaming  consideration  were  il- 
legal, the  modern  legislation  of  England  and  of  the  United 
States  declares  all  gaming  and  wagering  agreements,  and 
the  instruments  by  which  they  are  evidenced  or  secured, 
to  be  illegal,  null,  and  void.^  The  subject  of  smuggling 
belongs  to  the  exclusive  province  of  the  national  legisla- 
ture, and  forms  a  part  of  the  customs  revenue  system. 
All  contracts  entered  into  in  the  course  of  smuggling 
operations,  or  made  for  the  purpose  of  aiding,  abetting, 
or  procuring  smuggling,  are  null  and  void.* 

»  Waller  v.  Dalt,  1  Ch.   Cas.  276;  1  v.  Bouvier,  70  Pa.  St.  325;  Kirkpat- 

Dick.    8;    Barker    v.    Vansommer,     1  rick  v.  Bonsall,  72  Pa.  St.   155;  Max- 

Browu   Ch.    149;    Scott   v.  Nesbit,   2  ton  v.  Gheen,  75  Pa.  St.  166;  Cole  v. 

Brown   Ch.   641;  2  Cox,    183;  Bosan-  Milmine,  88  111.  349;   [Embrey  v.  Jem- 

quett  V.  Dashvvood,  Cas.  t.  Talb.  38;  ison,  131  U.  S.  336;   Lehman  v.  Feld, 

Fanning  v.  Dunham,  5  Johns.  Ch.  122,  37  Fed.  Rep.  852;  Boyd  v.  Hanson,  41 

142,  143;  9  Am.  Dec.  283.  Fed.  Rep.  174;  Harvey  v.  Merrill,  150 

«Ra\vden  v.  Shadwell,  Amb.  269;  Mass.  1;  15  Am.  St.  Rep.  159;  Flagg 
Woodroffe  v.  Farnham,  2  Vern.  291;  v.  Baldwin,  38  N.  J.  Eq.  219;  48  Am. 
Da  Costa  v.  Jones.  Cowp.  729;  Robin-  Rep.  308;  Hawley  v.  Bibb,  69  Ala.  52; 
son  V.  Bland,  2  Burr.  1077;  Skip  with  Clay  v.  Allen,  63  Miss.  426;  McGrew 
V.  Strother,  3  Rand.  214;  Dade  v.  v.  City  Produce  Exchange,  85  Tenn. 
Madison,  5  Leigh,  401;  Wilkinson  v.  572;  4  Am.  St.  Rep.  771.]  An  offer 
Tousley,  16  Minn.  299;  10  Am.  Rep.  to  pay  a  premium  to  the  owner  of  a 
139.  The  ordinary  so-called  time  con-  horse  that  shall  "make  the  quickest 
tracts  purporting  to  be  for  the  pur-  time  "  at  an  agricultural  fair,  etc.,  is 
chase  of  stocks,  but  in  reality  wholly  not  opposed  to  public  policy:  Alvord 
speculative,  and  without  any  intention  v.  Smith,  63  Ind.  58.  In  Harris  v. 
to  sell  or  buy  specific  stocks,  but  only  White,  81  N.  Y.  532,  and  cases  cited, 
to  gain  or  lose  the  difference  resulting  the  meaning  of  "  bet,"  "  wager,"  and 
from  the  rise  or  fall  of  the  market  "  stakes  "  is  determined, 
price,  are  clearly  within  the  definition  *  Adams's  Equity,  360  (175). 
"gaming  contracts,"  and  therefore  [A  contract  in  violation  of  the  stat- 
void.  If  they  are  made  in  good  faith,  ute  of  another  state,  and  to  be  exe- 
with  the  intention  of  actually  selling  cuted  wholly  within  that  state,  will 
and  buying  certain  specific  stocks  to  be  not  be  enforced,  nor  can  a  bill  be  sus- 
obtained  by  the  vendor  in  the  future,  tained  for  accounting  of  the  profits  of 
they  have  no  element  of  invalidity:  such  contract  when  executed:  Cham- 
See  Story  V.  Salomon,  71  N.  Y.  420;  l)ers  v.  Church,  14  R.  I.  398;  51  Am. 
Brua's  Appeal,  55  Pa.  St.  294;  Smith  Rep.  410.] 


1325  CONSTRUCTIVE  FRAUD.  §  931 

§  931.  2.  Transactions  Illegal  because  Opposed  to  Pubr 
lie  Policy. —  A.  Contracts  Interfering  with  the  Freedom 
of  Marriage.  —  The  law  of  England  and  our  own  law 
regard  the  marriage  relation  as  the  ver}'-  foundation  of 
society.  Since  the  true  conception  of  marriage  assumes 
and  requires  a  perfectly /ree  consent  and  union  of  the  two 
spouses,  equity  has,  from  its  earliest  periods,  treated  all 
agreements,  executory  or  executed,  between  the  immedi- 
ate parties  or  between  third  persons,  which  might  directly 
or  indirectly  interfere  in  any  degree  with  this  absolute 
freedom,  either  by  promoting  or  restraining  marriage,  as 
opposed  to  public  policy  and  illegal,  and  has  therefore  de- 
clared them  null  and  void.  Although  a  court  of  equity  will 
apply  this  principle  in  whatever  kind  of  agreement  the 
illegality  may  appear,  yet  there  are  certain  well-defined 
forms  of  these  contracts  which  have  received  judicial  con- 
demnation. The  following  are  the  most  important:  Mar- 
riage brokerage  contracts,  by  which  one  party  agrees,  for 
a  consideration,  to  negotiate  or  procure  a  marriage  for 
the  other.  Courts  of  equity  have  condemned  these  agree- 
ments with  an  especial  emphasis.  They  are  absolutely 
void,  without  the  slightest  regard  to  the  situation  of  the 
spouses  or  the  fitness  of  the  marriage  between  them  in 
the  particular  case.  They  are  so  utterly  null  that  they 
cannot  be  ratified  and  confirmed;  and  it  has  even  been 
held  that  money  paid  in  pursuance  of  them  may  be 
recovered  back,^  Contracts  in  restraint  of  marriage : 
While  mutual  promises  by  a  man  and  a  woman  to  marry 
each  other  are,  of  course,  valid,  although  they  are  thereby 
prevented  from  marrying  others,  agreements  not  to  marry 

'  These  contracts  seem  to  have  been  Law  v.  Law,  Cas.  t.   Talb.  140,  142; 

quite  frequent  at  an  early  day:  Hall  Drury  v.  Hooke,  1   Vern.  412;  Vaux- 

V.  Potter,  Show.  Pari.  C.  70;  3  Lev.  hall  Bridge  Co.  v.  Spencer,  Jacob,  64, 

411  (cannot  be   confirmed);   Roche  v.  67;  Williamson  v.  Gihon,  2  Schoales  & 

O'Brien,  1  Ball  &  B.  330,  358  (ditto);  L.  357;  Boynton  v.  Hubbard,  7  Mass. 

Smith  V.  Briining,  2  Vern.  392  (money  112;  and  see  2  Lead.  Cas.  Eq.,  4th  Am. 

recovered   back);   Goldsmith   v.  Bru-  ed.,  494-499,  note  to  Scott  v.  Tyler; 

ning,  1  Eq.  Cas.  Abr.  89  (ditto);  Cole  [Duval  v.  Wellman,   124  N.  Y.    158. 

V.  Gibson,   1  Ves.    Sr.  503,  506,  507;  See,  however,  as  to  recovery  of  money 

Roberts  v.  Roberts,  3  P.  Wms.  66,  74;  paid,  Wiiite  v.  Equitable  etc.  Union, 

Arundel  v.  Trevillian,  1  Ch.  Rep.  87;  76  Ala.  251;  52  Am.  Rep.  325.] 


§  931  EQUITY   JURISPRUDENCB.  1326 

•at  all,  or  not  to  marry  any  one  unless  it  be  the  promisee, 
without  any  corresponding  stipulation  by  that  party,  as 
well  as  more  general  forms  of  contract  restraining  the 
freedom  and  power  of  marriage,  are  void/  Rewards  for 
marriages:  Agreements  to  pay  a  reward  or  compensa- 
tion to  a  parent  or  guardian,  for  procuring  or  consenting 
to  a  marriage  with  his  daughter  or  ward,  are  clearly  void.^ 
Secret  contracts  in  fraud  of  marriage:  Secret  agreements 
of  any  kind  or  form,  concealed  from  one  or  both  of  the 
spouses,  the  object  of  which  is  to  promote  a  particular 
marriage,  or  to  induce  one  or  both  the  parties  to  enter 
into  a  marriage,  are  plainly  opposed  to  public  policy  and 
void.^  Secret  agreements  to  marry  between  a  man  and 
woman,  for  the  purpose  of  deceiving  or  misleading  a  par- 
ent or  relative  of  one  of  the  parties,  have  been  declared 
void/  Analogous  to  marriage  brokerage  contracts,  and 
depending  upon  the  same  reasons,  are  agreements  to  pay 
a  compensation  to  a  person  for  using  his  influence  with 
a  testator  to  procure  a  will,  devise,  or  bequest  to  be  made 
in  favor  of  the  promising  party/ 

'  Lowe   V.    Peers,    4    Burr.    2225;  ments,  or  the  acts  agreed  to  be  done 

Baker  v.  White,  2  Vera.   215;  Key  v.  ia  a  negotiation  for  a  marriage,  or  for 

Bradshaw,  2  Vern.  102;  Woodhouse  v.  the  purpose   of    defrauding  either   or 

Shepley,  2  Atk.  535,  539,  540;  Atkins  both   the  spouses   or  their   relatives: 

V.  Farr,  1  Atk.  287;  Cock  v.  Richards,  See  Peyton  v.  Bladwell,  1  Vern.  240; 

10   Ves.    429;    England  v.  Downs,  2  Turton  v.  Benson,  1  P.  Wms.  496;  Scott 

Beav.    522;    Phillips   v,    Medbury,    7  v.  Scott,  1  Cox,  366;Dalbiac  v.  Dalbiac, 

Conn.  568;  Conrad  v.  Williams,  6  Hill,  16  Ves,  116,  124;  Morris  v.  Clarkson, 

444;  see    2  Lead.    Cas.    Eq.  494-499;  1  Jacob  &  W.  107;  Lamlee  v.  Hanman, 

[White  V.  Equitable  Nuptial  Benefit  2  Vern.  499;  Barret  v.  Wells,  Prec.  Ch. 

Union,  76  Ala.  251;52  Am.  Rep.  325.]  131;  Jones  v.  Martin,  3  Anstr.  882;  Ran- 

2  Keat  V.  Allen,  2  Vern.  588;  Strib-  dall  v.  Willis,  5  Ves.  261;  McNeill  v. 

lilehiU  V.  Brett,  2  Vern.  445;  Peyton  Cahill,2Bligh,228;Stockenv.  Stocken, 

V.  Bladwell,  1  Vern.  240;  Crawford  v.  4  Mylne  &  C.  95;  Bell  v.  Clarke,  25 

Russell,  62  Barb.  92.  Beav.  437;  Kerr  on  Fraud,  216,  217. 

^  Such  cases  must   depend   largely         *  Woodhouse  v.  Shepley,  2  Atk.  536; 

upon  their  own  special  circumstances:  Cock  v.  Richards,  10  Ves.  429. 
Gale  V.  Lindo,  1  Vern.  475;  Redman         ^  Debenham  v.  Ox,  1   Ves.  Sr.  276. 

V.  Redman,   1    Vern.  348;  Neville  v.  While  such  contracts  are  clearly  void, 

Wilkinson,  1  Brown  Ch.  543;  Palmer  agreements  between  the  heirs  or  near 

v.   Neave,  11  Ves.   165.     In  McClurg  relatives  of  a  testator,  in  anticipation 

V.  Terry,  21  N.  J.  Eq.  225,  a  marriage  of  a  will,  stipulating  to  share  equally 

entered    into  in   sport    was  declared  the  property  which  may  be  bequeathed 

void.     Of  the  same  general  character  to    them,    are  valid,   and   are    rather 

with   the  contracts  mentioned  in  the  favored    by  courts  of  equity:  Beckley 

text  are  those  contracts  secretly  made  v.  Newland,  2  P.  Wms.  182;  Harwood 

for  the  purpose  of  rendering  nugatory  v.    Tooke,    2    Sim.    192;  Wethered  v. 

the  stipulations    of    marriage    agree-  Wethered,  2  Sim.  183. 


1327  CONSTRUCTIVE    FEAUD.  §§  932,  933 

§  932.  Agreements  for  a  Separation.  —  "Wliutever  may 
have  been  the  opinion  at  an  earlier  day,  it  is  now  thor- 
oughly settled  that  agreements  for  a  separation  between 
husband  and  wife,  if  valid  in  form,  made  upon  a  sufficient 
consideration,  and  executed  by  parties  legally  capable  of 
contracting,  are  not  illegal;  they  will  even  be  specifically 
enforced  in  equity,  by  decreeing  the  execution  of  the 
proper  deed,  and  by  restraining  either  party  from  per- 
sonally interfering  with  the  other  in  violation  of  their 
covenants/  The  agreement,  however,  must  be  made 
upon  a  valuable  consideration  accruing  to  the  husband's 
benefit;^  and  under  the  strict  common-law  rules,  a  third 
person  must  be  added  as  a  trustee  and  contracting  party 
on  behalf  of  the  wife,  so  that  the  stipulations  on  her  side 
may  be  binding.' 

§  933.  B.  Conditions  and  Limitations  in  Restraint  of 
Marriage.  —  Intimately  connected  with  contracts  in  re- 
straint of  marriage,  and  depending  upon  the  same  prin- 
ciple, are  conditions  and  limitations  operating  in  like 
manner  annexed  to  or  forming  part  of  testamentary  dis- 
positions, or  of  family  settlements,  or  similar  gifts.  Al- 
though the  subject,  in  some  of  its  special  applications  and 
phases,  is  still  more  confused  and  uncertain  than  perhaps 
any  other  branch  of  equity  jurisprudence,  yet  certain  gen- 
eral rules  have  been  established  beyond  all  further  contro- 
versy.*    Two  propositions  lie  at  the  foundation,  and  are 

^  Wilson   V.    Wilson,    1    H.  L.  Cas.  Wellesley  v.  Wellesley,  10  Sim.  256 ; 

538;  5  H.  L.    Caa.  40;    14  Sim.  405;  Stephens   v,   Olive,  2  Brown  Ch.   90; 

Fletcher  v.  Fletcher,  2  Cox,  99;  San-  Earl   of   Westmeath    v.    Countess    of 

ders   V.  Rodway,  22  L.  J.  Ch.,  N.  S.,  Westmeath,    Jacob,     126,     141;     El- 

230;  Gibbsv.  Harding,  L.  R.  5  Ch.  336;  worthy   v.  Bird,  2   Sim.    &    St,    372; 

8   Eq.    490;   Besant  v.   Wood,    L.   R.  Hobbs  v.  Hull,  1  Cox,  445. 

12    Ch.    Div.    605;    Hunt    v.    Hunt,  «  Hope   v.   Hope,  26  L.  J.  Ch.  417; 

4   De   Gex,    F.   &   J.    221,    235;    Mc-  Wilkes  v.  Wilkes,  2  Dick.  791;  Van- 

Crocklin  v.    McCrocklin,  2   B.    Mon.  eittart  v.  Vansittart,  4   Kay  &  J.  62. 

370;  [Clark  v.  Fosdick,  118  N.  Y.  14;  Such  additional   party  would  clearly 

16  Am.  St.  Rep.  733;  Commonwealth  be  unnecessary  in  many  states  of  this 

V.Richards,   131    Pa.    St.  209.]     See,  country.  [See  Commonwealth  v.  Rich- 

per  contra,  Aylett  v.  Ashton,  1  Mylue  ards,  131  Pa.  St.  209.] 

&    C.    105;    Duke  of   Bolton    v.  Wil-  *  The  direct  civil-law  origin  of  these 

liams,  2  Ves.  138;  [§  402,  last  note.]  rules,  and  also  the  ditforence  l)etweea 

^  V^ilson    V,   Wilson,    1    H.    L.   Cas.  certain    dogmas   of   the  civil   l,iw  and 

538;  5   H.  L.   Cas.   40;    14  Sim.  405;  the  correspouding  doctriucs  of  English 


933 


EQUITY    JURISPRUDENCE. 


1325 


recognized  by  all  the  authorities:  1,  It  is  ordinarily  said 
that  all  conditions  annexed  to  gifts  which  prohibit  mar- 
riage generally  and  absolutely  are  void  and  inoperative. 
This,  however,  is  a  very  inaccurate  mode  of  statement,  since 
a  condition  precedent  annexed  to  a  devise  of  land,  even  if  in 
complete  restraint,  will,  if  broken,  be  operative  and  pre- 
vent the  devise  from  taking  efifect.  With  this  limitation 
all  conditions  in  general  restraint  are  void.  Also,  if  a 
condition  is  not  in  absolute  restraint,  but  is  of  such  form 
that  it  will  pro6(z6Z2/ operate  as  a  general  prohibition,  it  is, 
under  the  same  limitation,  void.^  2.  On  the  other  hand, 
conditions  annexed  to  testamentary  or  other  gifts,  in  par- 
tial and  reasonable  restraint  of  marriage,  are  valid  and 
operative;  such,  for  example,  as  that  a  devisee  or  legatee 
should  not  marry  under  age,  or  should  not  marry  without 
the  consent  of  parents,  guardians,  or  trustees,  or  should 
not  marry  a  particular  person,  or  a  person  belonging  to 
a  particular  religious  communion.^  In  the  application  of 
these  two  propositions,  certain  special  rules  have  been 
settled  with  more  or  less  certainty,  depending  upon  the 
facts  of  the  condition  being  precedent  or  subsequent,  of 


equity,  are  fully  explained  in  Stack- 
pole  V.  Beaumout,  3  Ves.  89,  96,  per 
Lord  Loughborough;  and  in  Scott  v. 
Tyler,  2  Brown  Ch.  431;  2  Dick.  712, 
per  Lord  Thurlow. 

'  Scott  V.  Tyler,  2  Brown  Ch.  431 ;  2 
Dick.  712;  2  Lead.  Cas.  Eq.,  4th 
Am.  ed.,  429,  475;  Keily  v.  Monck, 
3  Ridg.  App.  205,  244,  247,  261; 
Hervey  v.  Aston,  1  Atk.  361;  Stack- 
pole  V.  Beaumont,  3  Ves.  89,  95;  Rish- 
ton  V.  Cobb,  9  Sim.  615,  619;  Morley 
V.  Rennoldson,  2  Hare,  570;  Connelly 
V.  Connelly,  7  Moore  R  C.  C.  438; 
Long  V.  Dennis,  4  Burr.  2052;  Maddox 
V.  Maddox,  11  Gratt.  804;  Waters  v. 
Tazewell,  9  Md.  291.  The  same  is 
true  of  other  conditions  opposed  to 
public  policy,  annexed  to  testamentary 
gifts;  e.  g.,  preventing  husband  and 
wife  from  living  together,  tending  to 
procure  a  divorce,  and  the  like:  Ten- 
nant  v.  Braie,  Toth.  141;  Brown  v. 
Peck,  1  Eden,  140;  Wren  v.  Bradley, 
2  De  Gex  &  S.  49;  but  see  Cooper  v. 
Reuisen,    5    Johns.    Ch.   459,    which 


hardly  seems  to  be  sustained  by  the 
weight  of  authority.  A  condition 
that  a  legacy  to  a  daughter  should 
cease  if  she  became  a  nun  has  been 
held  valid,  although  there  was  no  gift 
over:  In  re  Dickson's  Trusts,  1  Sim., 
N.  S.,  37,  46;  Clavering  v.  Ellison, 
8  De  Gex,  M.  &  G.  662;  7  H.  L.  Cas. 
707. 

■■'  Scott  V.  Tyler,  2  Brown  Ch.  431; 
2  Dick.  712;  2  Lead.  Cas.  Eq.,  4th 
Am.  ed.,  429,  475;  Stackpole  v.  Beau- 
mont, 3  Ves.  89;  Younge  v.  Furse,  8 
De  Gex,  M.  &  G.  756;  Allen  v.  Jack- 
son, L.  R.  1  Ch.  Div.  o99;  reversing 
L.  R.  19  Eq.  631;  Desbody  v.  Boy- 
ville,  2  P.  Wms.  547;  Jervis  v.  Duke, 
1  Vern.  19;  Randal  v.  Payne,  1  Brown 
Ch.  55;  Clarke  v.  Parker,  19  Ves.  1; 
Dashwood  v.  Bulkley,  10  Ves.  229; 
Lloyd  v.  Branton,  3  Mer.  108;  Haugh- 
ton  V.  Haughton.  1  Molloy,  611;  Dug- 
gan  V.  Kelly,  10  L  R.  Eq.  295;  Collier 
v.  Slaughter,  20  Ala.  263;  Graydon  v. 
Graydon,  23  N.  J.  Eq.  229;  [Jenuer  v. 
Turner,  16  Ch.  Div.  188.] 


1329 


CONSTRUCTIVE    FRAUD. 


§  933 


there  being,  or  not,  a  gift  over  upon  its  breach,  and  of  the 
original  gift  to  which  the  condition  is  annexed  being  one 
of  real  or  of  personal  estate.^   The  system  which  has  been 

the  donee  retains  the  property  unaf- 
fected by  its  breach.  When  the  con- 
dition is  subsequent  and  valid,  on  its 
breach  the  donee's  estate  ceases;  if 
there  is  a  gift  over,  that  gift  takes 
effect;  if  there  is  none,  then  it  seems 
the  heir  may  re-enter  and  take  the 
property:  Bertie  v.  Lord  Falkland,  2 
Cas.  Ch.  129;  2  Vern.  333;  2  Freein. 
220;  Fry  v.  Porter,  1  Cas.  Ch.  138;  1 
Mod.  300;  Hervey  v.  Aston,  1  Atk. 
361;  Reynish  v.  Martin,  3  Atk.  330; 
Long  V.  Ricketts,  2  Sim.  &  St.  179; 
Commonwealth  v.  Stauffer,  10  Pa.  St. 
350;  51  Am.  Dec.  489;  and  see  2 
Lead.  Cas.  Eq.,  4th  Am.  ed.,  478- 
480;  Eng.  ed.,  notes  to  Scott  v.  Tyler. 
[See  also  Phillips  v.  Ferguson,  85  Va. 
509;  17  Am.  St.  Rep.  78  (condition 
precedent).] 

Gl/is  of  personal  estate.  —  In  decid- 
ing upon  the  effect  of  the  conditions 
when  annexed  to  these  dispositions, 
courts  of  equity  have  not  followed 
the  common-law  doctrines  concerning 
conditions.  Where  the  condition  ia 
subsequent,  and  in  unreasonable  re- 
straint, it  is  void,  and  the  legacy  be- 
comes absolute,  whether  there  is  or  is 
not  a  gift  over:  Morley  v.  Rennold- 
son,  2  Hare,  570;  Bellaira  v.  Bellairs, 
L.  R.  18  Eq.  510.  Where  the  condi- 
tion is  subsequent,  partial,  and  reason- 
able, and  there  is  a  gift  over,  then  it 
is  operative,  and  on  its  breach  the 
gift  over  takes  effect.  But  under 
the  same  circumstances,  if  there  is 
no  gift  over,  then  the  condition  is  re- 
garded as  inserted  only  in  terrorem;  it 
has  no  effect,  and  the  legacy  contin- 
ues to  be  absolute,  even  though  it  be 
liroken:  Lloyd  v.  Branton,  3  Mer. 
108,  117;  Marples  v.  Bainbridge,  1 
Madd.  590;  Garret  v.  Pritty,  2  Vern. 
293;  Wheeler  v.  Bingham,  3  Atk.  3t54; 
Waters  V.  Tazewell,  9  Md.  291;  Mad- 
dox  v.  Maddox,  11  Gratt.  804;  Hoopes 
V.  Dundas,  10  Pa.  St.  75;  Mcllvaine 
V.  Gethen,  3  Whait.  575;  Cornell  v. 
Lovett,  35  Pa.  St.  100;  Hotz's  Estate, 
38  Pa.  St.  422;  80  Am.  Dec.  490.  Ia 
the  case  In  re  Dickson's  Trusts,  1  Sim., 
N.  S.,  37,  43,  44,  Lord  Cran worth,  in 
a  very  able  opinion,  expressed  a  strong 
dislike  for  the  notion  of  a  conditiou 
being  regarded  as  in  terrorein.     Where 


*  I  add  a  brief  summary  of  these 
rules,  together  with  some  of  the  most 
important  decisions  illustrating  them. 
There  is,  however,  a  very  great  con- 
flict of  judicial  opinion  with  respect 
to  their  nature,  extent,  and  operation. 
Some  of  the  ablest  judges  have  con- 
fessed that,  amid  all  the  uncertainty 
resulting  from  a  comparison  of  the 
decisions,  each  case  must,  to  a  great 
extent,  depend  upon  its  own  circum- 
stances. 

Whether  there  is  or  is  not  a  gift  over. 
—  If  a  condition  is  in  absolute  re- 
straint, and  therefore  void,  it  could 
make  no  difference  whether  there  was 
a  gift  over  or  not.  Where  there  is  a 
gift  over,  and  the  condition  is  partial 
and  reasonable,  the  gift  over  takes 
effect  on  a  breach  of  the  condition: 
Clarke  v.  Parker,  19  Ves.  1,  13;  Lloyd 
V.  Branton,  3  Mer.  108,  117,  119; 
Stratton  v.  Grymes,  2  Vern.  357;  Bar- 
ton V.  Barton,  2  Vern.  308;  Wheeler 
V.  Bingham,  3  Atk.  364,  367;  Mal- 
colm V.  O'Callaghan,  2  Madd.  349, 
353;  see  Poole  v.  Bott,  11  Hare,  33. 
Where  there  is  no  gift  over,  the  con- 
dition, although  only  partial,  may  be 
inoperative  and  merely  in  terrorem, 
and  this  seems  to  be  the  settled  rule 
whenever  the  condition  is  annexed  to 
a  bequest  of  personal  estate:  Hervey 
V.  Aston,  1  Atk.  361,  375,  377:  Rey- 
nish V.  Martin,  3  Atk.  330;  Wheeler 
V.  Bingham,  3  Atk.  364;  Pullen  v. 
Ready,  2  Atk.  587;  Hicks  v.  Pen- 
darvis,  Freem.  Ch.  41 ;  Long  v.  Den- 
nis, 4  Burr.  2052,  2055;  Parsons  v. 
Winslow,  6  Mass.  169;  4  Am.  Dec. 
107. 

Gifts  of  real  or  of  personal  estate.  — 
In  devises  and  other  gifts  of  real  es- 
tate, courts  of  equity  follow  the  rules 
of  the  common  law  concerning  the 
operation  of  conditions  generally,  and 
their  effects  upon  the  vesting  and 
divesting  of  estates.  In  gifts  of  real 
estate,  therefore,  when  a  condition  in 
restramt  of  marriage  is  precedent, 
and  is  broken,  it  prevents  the  estate 
from  vesting  at  all,  whether  the  re- 
straint be  absolute  or  partial,  and 
whether  there  be  a  gift  over  or  not. 
When  the  condition  is  subsequent  and 
void,  it  is  entirely  inoperative,  and 
2  Eo.  JuR.  —  84 


§  933 


EQUITY    JURISPRUDENCE. 


1330 


developed  is  a  partial  compromise  between  the  technical 
common-law  rules  concerning  conditions,  and  the   doc- 


the  condition  annexed  to  a  bequest  of 
personal  estate  is  precedent,  and  gen- 
eral in  its  restraint,  it  is  absolutely 
void,  and  the  legacy  takes  effect  not- 
vvitlistanding  its  breach:  Morley  v. 
Rennoldson,  2  Hare,  570,  579.  Where 
the  condition  is  precedent,  and  partial 
and  reasonable,  and  there  is  a  gift 
over,  then  on  its  breach  the  first 
legacy  does  not  vest,  and  the  gift  over 
takes  effect.  Where  the  condition  is 
precedent,  and  partial  and  reasonable, 
and  there  is  no  gift  over,  a  few  cases 
hold  that  the  result  is  exactly  the  same 
aa  with  conditions  subsequent  under 
like  circumstances,  namely,  that  it  ia 
merely  in  torrorem,  and  inoperative: 
Reynish  v.  Martin,  3  Atk.  330;  Keily 
v.  Mouck,  3  Ridg.  App.  205,  263; 
Malcolm  v.  O'Callaghan,  2  Madd.  349, 
353.  It  ia  now  settled,  however,  that 
such  a  condition  is  operative;  and  if 
broken,  the  legacy  does  not  vest, 
whether  there  is  a  gift  over  or  not. 
Younge  v.  Furse,  8  De  Gex,  M.  &  G. 
756;  Clifford  v.  Beaumont,  4  Russ. 
325;  Clarke  v.  Parker,  19  Ves.  1,  13; 
Knight  V.  Cameron,  14  Ves.  389; 
Hemmings  v.  Munckley,  1  Brown  C'h. 
303;  and  see  2  Lead.  Cas.  Eq.  480- 
482;  [also  Phillips  v.  Ferguson,  85  Va. 
509;  17  Am.  St.  Rep.  78,  where  the 
foregoing  summary  is  adopted.] 

Conditions  restraining  marriage  by 
widows.  —  Conditions  annexed  to  de- 
vises and  legacies  restraining  the 
testator's  widow  from  marrying  have 
generally  been  pronounced  valid  and 
operative:  Lloyd  v.  Lloyd,  2  Sim., 
N.  S.,  255;  Grace  v,  Webb,  15  Sim.  384; 
Poole  V.  Bott,  11  Hare,  33;  Shewell 
V.  Dwarris,  Johns.  172;  Craven  v. 
Brady,  L.  R.  4  Eq.  209;  Parsons  v. 
Winslow,  6  Mass.  169;  4  Am.  Dec. 
107;  Phillips  v.  Medbury,  7  Conn.  5G8; 
Chapiu  V.  Marvin,  12  Wend.  538; 
Stroud  v.  Bailey,  3  Grant  Cas.  310; 
Commonwealth  v.  Stauffer,  10  Pa.  St. 
350;  51  Am.  Dec.  489;  McCullough'a 
Appeal,  12  Pa.  St.  197;  Hoopes  v. 
Dundas,  10  Pa.  St.  75;  Bennett  v. 
Ro'iinson,  10  Watts,  348;  Binnerman 
v.  Weaver,  8  Md.  517;Goughv.  Mann- 
ing, 26  Md.  347;  O'Neale  v.  Ward,  3 
Bar.  &  McH.  93;  Collier  v.  Slaughter, 
20  Ala.  263;  Vance  v.  Campbell's 
Heirs.  1  Dana,  229;  Holmes  v.  Field,  12 


111.  424.  When  the  gift  is  not  upon  con- 
dition, butthe  deviseorlegacy  is  limited 
to  be  during  widowhood,  or  until  she 
marries,  the  disposition  is  generally 
held  to  l)e  valid:  Beekman  v.  Hudson, 
20  Wend.  53;  Hotz's  Estate,  38  Pa. 
St.  422;  80  Am.  Dec.  490;  Cornell  v. 
Lovett,  35  Pa.  St.  100;  Mitchell  v. 
Mitchell,  18  Md.  405;  29  Md.  551; 
Pringle  v.  Dunkley,  14  Smedes  &  M. 
16;  Hughes  v.  Boyd,  2  Sueed,  512; 
and  see  American  cases  supra;  [also, 
Knight  V.  Mahoney,  152  Mass.  523.] 
In  some  cases,  however,  a  condition 
subsequent  in  restraint  of  marriage  by 
a  widow,  where  there  was  no  gift 
over,  has  been  held  merely  in  terrorem: 
See  Parsons  v.  Winslow,  6  Mass.  169; 
4  Am.  Dec.  107;  Hoopes  v.  Dundas,  10 
Pa.  St.  75;  Mcllvame  v.  Gethen,  3 
Whart.  575;  Mack  v.  Mulcahy,  47  Ind. 
68.  A  condition  in  restraint  of  the 
marriage  of  the  widow  of  another  per- 
son, not  of  the  testator,  has  been  held 
operative.  Newton  v.  Marsden,  2 
Johns.  &  H.  356;  Allen  v.  Jackson, 
L.  R.  1  Ch.  Div.  399.  It  has  also  been 
held  that  a  condition  in  restraint  of 
the  second  marriage  of  a  man  —  the 
husband  of  the  testator's  niece  —  is 
valid:  Allen  v.  Jackson,  L.  R.  1  Ch. 
Div.  399;  reversing  L.  R.  19  Eq.  631. 

Limitations  as  distinguished  frvm 
conditions.  —  It  appears  to  be  the  ten- 
dency of  the  English  cases  to  draw  a 
material  distinction  between  condi- 
tions in  restraint  of  marriage  annexed  J 
to  testamentary  dispositions,  and  re-  I 
straints  on  marriage  contained  in  the 
very  terms  of  the  limitation  of  the 
estate  given,  and  to  hold  such   limi-  ; 

tations  valid  although  the  restraint  if 
imposed  in  the  form  of  a  condition 
might  be  void.  See  this  question 
fully  discussed  in  the  English  editor's 
note  to  Scott  v.  Tvler,  2  Lead.  Caa. 
Eq.  483-485;  Evans' v.  Rosser,  2  Hem. 
&  M.  190;  Morley  v.  Rennoldson,  2 
Hare,  570,  580;  Heath  v.  Lewis,  3  De 
Gex,  M.  &  G.  954;  Webb  v.  Grace,  2 
Phill.  Ch.  701;  Potter  v.  Richards,  1 
Jur.,  N.  S.,  462;  Little  v.  Birdwell,  21 
Tex.  597;  73  Am.  Dec.  242;  Hotz'a 
Estate,  38  Pa.  St.  422;  80  Am.  Dec. 
490;  see,  per  contra,  Otia  v.  Prince,  10 
Gray,  581.  In  my  opinion,  this  theory, 
as  maintained  by  the  English  courts. 


1331  CONSTRUCTIVE    FRAUD.  §  933 

trines  of  the  Homan  law,  which  made  void  all  attempts 
to  restrict  the  perfect  freedom  of  marriage;  and,  like  most 
compromises,  it  has  some  incongruous  features.  If  a 
condition  is  precedent  and  annexed  to  a  gift  of  land,  it 
operates  as  at  the  common  law;  when  broken,  it  prevents 
the  estate  from  vesting,  whatever  be  its  nature;  when  an- 
nexed to  a  gift  of  personal  property,  if  general  or  unrea- 
sonable, it  is  wholly  void,  and  the  gift  takes  effect;  if 
partial  and  reasonable,  it  is  operative.  When  a  condition 
is  subsequent  and  annexed  to  a  gift  of  land,  if  general,  it 
is  void,  and  although  broken,  the  estate  of  the  donee  con- 
tinues; if  partial  and  reasonable,  it  is  operative,  and  on 
its  breach  the  estate  of  the  donee  is  defeated.  When  a 
subsequent  condition  is  annexed  to  a  gift  of  personal 
property,  if  general,  it  is  void;  if  partial  and  reasonable, 
and  there  is  a  gift  over,  it  is  operative,  and  upon  its 
breach  the  interest  of  the  first  donee  ceases,  and  the  gift 
over  takes  efiect;  but  if  there  is  no  gift  over,  then  the  con- 
dition is  said  to  be  in  terrorem  merely,  and  is  inoperative. 
It  seems  to  be  settled  by  an  overwhelming  weight  of  au- 
thority that  limitations  and  conditions,'  precedent  or 
subsequent,  tending  to  restrain  the  second  marriage  of 
women  are  valid,  and  by  the  most  recent  decisions  the 

is  directly  opposed  to  the  spirit  of  property,  seems  to  violate  the  spirit  of 
equity  jurisprudence.  Undoubtedly  equity  jurisprudence  in  dealing  with 
the  contimon-Iaw  rules  are  well  settled  kindred  questions.  It  is  the  settled 
which  establish  a  distinction  between  and  familiar  policy  of  courts  of  equity, 
a  limitation  and  a  condition  subsequent,  except  when  they  are  prevented  by 
If  land  is  devised  to  a  widow  "for  some  compulsory  legal  dogma,  to  dis- 
and  during  her  widowhood,  and  if  regard  the  mere  form  in  which  the 
she  marries,"  then  over;  and  in  an-  intention  of  parties  is  expressed,  to 
other  case  land  is  devised  to  a  widow  ascertain  that  intention  as  correctly 
"for  and  during  her  natural  life,  but  as  possible,  and  then  to  carry  out  tho 
if  she  marries,"  then  over;  at  the  actual  intention  unrestricted  by  tech- 
common  law  the  nature  and  operation  nical  rules  which  relate  solely  to  ex- 
of  these  two  dispositions  are  quite  ternal  form.  If  it  is  considered  that 
different.  These  rules  belong  to  the  the  common-law  doctrines  concerning 
law  of  conveyancing,  of  future  and  limitations  and  comlitions  in  disposi- 
expectant  estates,  of  contingent  re-  tions  of  real  estate  are  too  firmly  es- 
maindera  and  conditional  limitations;  tablished  to  be  disregarded,  there  is 
they  are  in  the  highest  degree  ar-  certainly  no  necessity  for  extending 
bitrary  and  technical.  To  adopt  them  those  rules  to  dispositions  of  personal 
and  apply  them  in  equity,  for  the  property.  Such  a  course  of  decision 
purpose  of  determining  the  validity  of  is  not  only  unnecessary, — it  is  im- 
restraints  imposed  upon  marriage,  and  proper;  for  it  tends  to  subvert  some  of 
especially    in     bequests    of     personal  the  fundamental  principles  of  equity. 


§  934  EQUITY    JURISPRUDENCE.  1332 

same  rule  has  been  applied  to  the  second  marriages  of 
men.  Where  a  partial  and  reasonable  condition  has  been 
imposed,  requiring  the  consent  of  certain  persons  to  the 
marriage  of  a  donee,  courts  of  equity  are  very  liberal  in 
construing  the  provision  so  that  the  gift  shall  not  be  de- 
feated by  a  mere  formal  omission.  Where  the  consent  of 
three  trustees  or  guardians  is  requisite,  the  consent  of  two 
without  consulting  the  third  is  insufficient;  but  if  one  of 
the  three  has  renounced,  or  has  never  acted,  his  consent 
is  unnecessary.  Where  the  consent  of  three  is  required, 
and  one  of  them  dies,  the  action  of  the  other  two  becomes 
valid.  And  generally,  "  where  the  condition  has  become 
impossible  by  the  person  dying  whose  consent  was  neces- 
sary before  marriage,  it  is  an  excuse."*  Where  the  re- 
quired consent  has  been  refused,  and  the  refusal  is  alleged 
to  be  fraudulent,  or  to  be  the  result  of  any  vicious,  cor- 
rupt, or  unreasonable  cause  or  motive,  a  court  of  equity 
will  examine  into  the  matter,  and  if  the  fact  is  clearly  es- 
tablished, it  will  grant  relief;  the  court  will  not  suffer  the 
gift  to  be  defeated  by  such  a  breach  of  the  condition.' 

§  934.  C.  Contracts  Directly  Belonging  to  and  Affect- 
ing Business  Relations.  —  It  has  been  the  policy  of  the 
law  to  promote  the  freedom  of  engaging  in  and  carrying 
on  all  kinds  of  business  which  are  beneficial  to  the  public, 
and  to  maintain  fairness  and  honesty  towards  the  public 
in  all  business  transaction.  The  monopolies  which  were 
so  frequent  in  the  early  periods  of  English  history  re- 
sulted in  most  instances  from  the  exercise  of  the  royal 
prerogative  or  from  legislation.  The  common  law  and 
equity  would  prevent,  as  far  as  possible,  all  contrivances 

*  Clarke  v.  Parker,  19  Vea.  1,  15,  in  the  first  instance,  the  person  is  not 
16;  Worthington  v.  Evans,  1  Sim.  &  obliged  to  assign  his  reason  for  his  re- 
St.  165;  Graydon  v.  Hicks,  2  Atk.  16;  fiisal  to  consent:  Clarke  v.  Parker,  19 
Aislabie  v.  Rice,  3  Madd.  256;  Peyton  Ves.  1,  22,  per  Lord  Eldon.  The  Eng- 
V.  Bury,  2  P.  Wms.  626;  Grant  v.  lish  decisions  concerning  consent  under 
Dyer,  2  Dow,  93;  CoUett  v.  Collett,  35  these  circumstances  are  very  numer- 
Beav.  312,  315.  ous.     The  questions  are  fully  discussed 

*  Dash  wood   v.    Lord   Bulkeley,    10  in  the  English  editor's  note  to  Scott 
Ves.  230,  245;  Clarke   v.  Parker,   19  v.  Tyler,  2  Lead.  Cas.  Eq.  486-493. 
Ves,   1,  18.     Generally,  however,  and 


1333  CONSTRUCTIVE    FRAUD.  §  934 

and  means  by  which  the  public  would  De  deprived  of  the 
skill,  industry,  or  economic  and  productive  labor  of  indi- 
vidual citizens,  or  by  which  the  public  would  be  deceived 
in  business  dealings.  The  following  are  the  important 
applications  of  the  principle:  Contracts  in  restraint  of 
trade:  Contracts  in  general  restraint  of  trade,  whatever 
be  their  form  or  the  nature  and  immediate  object  of  their 
stipulations,  are  void  at  law  as  well  as  in  equity.  The 
term  "  general "  is  not  synonymous  with  "  universal." 
The  criterion  is  the  unreasonableness  of  the  restraint;  and 
this  is  always  a  matter  of  law  to  be  determined  by  the 
court.  This  unreasonableness  may  be,  and  often  is,  in 
respect  to  the  amount  of  territory  over  which  the  restric- 
tion extends,  or  it  may  be  in  respect  alone  to  the  number 
of  persons  with  whom  the  trading  is  debarred,  or  in  re- 
spect to  the  duration  of  the  restraint.  Where  the  agree- 
ment is  thus  void,  a  court  of  equity  may  always  exercise 
its  jurisdiction  defensively,  by  defeating  a  suit  brought 
for  the  enforcement  of  the  contract;  or  affirmatively,  by 
granting  the  remedy  of  cancellation  or  of  injunction 
when  the  defensive  remedy  at  law  would  not  be  certain, 
complete,  and  adequate.*     On  the  other  hand,  contracts 

*  Since  the  illegality  does  not  de-  ment;  comljinations  by  two  or  more 
pend  upon  the  form  of  the  agreement,  parties  in  the  same  business  to  pre- 
it  is  impossible  to  describe  the  kinds  vent  other  persons  from  carrying  oa 
of  contracts  which  might  operate  in  a  the  business,  and  thus  to  create  a  mo- 
general  restraint  of  trade  within  the  nopoly  for  themselves;  similar  corn- 
principle.  The  simplest  and  ordinary  binations  and  agreements  betweea 
species  is  a  contract  between  A  and  several  parties,  for  the  purpose  of  pre- 
B,  whereby  A  agrees  not  to  carry  on  venting  some  of  them  from  engaging 
a  trade  within  a  specified  territory,  in  the  business,  so  that  the  other  might 
The  principle  extends  to  combinations  secure  a  monopoly;  combinations  by 
among  workmen  for  the  purpose  of  several  parties  to  enhance  the  price  of 
forcing  a  higher  rate  of  wages  from  an  article  by  temporarily  withdraw- 
employers,  by  preventing  others  from  ing  it  from  the  market  and  preventing 
working  or  being  employed,  etc.;  anal-  any  dealing  with  it  by  the  public  in 
ogous  combinations  and  agreements  open  market,  often  called  "  making  a 
among  employers  for  the  purpose  of  corner";  combinations  and  agreements 
forcing  a  lower  rate  of  wages,  by  stip-  between  persons  engaged  in  the  same 
ulating  not  to  carry  on  their  business,  business  for  the  express  purpose  of  de- 
etc. ;  combinations  and  agreements  by  stroying  competition,  and  thus  defeat- 
parties  engaged  in  the  same  business  ing  the  natural  results  of  economic 
to  enhance  prices  by  compelling  the  laws  when  left  to  their  free  operation, 
public  to  deal  with  themselves,  and  This  last  species  of  agreement,  so  corn- 
preventing  it  from  trading  with  others  mou  at  the  present  day,  and  which  is 
who  are  engaged  in  the  same  employ-  doing  much  to  overthrow    the  entire 


§934 


EQUITY   JURISPRUDENCE. 


1334 


in  partial  restraint  of  trade  are  valid.  To  this  end,  they 
must  be  partial  with  respect  to  the  territory  included; 
reasonable  with  respect  to  the  amount  of  territory,  the 
circumstances  and  rights  of  the  party  burdened  and  the 


system  of  economic  science,  in  my 
opinion,  falls  directly  within  the  oper- 
ation of  the  general  principle;  more 
than  any  other  kind,  perhaps,  it  tends 
to  defeat  the  freedom  of  trade  which 
the  principle  protects.  The  following 
cases  are  illustrations:  Mitchel  v. 
Reynolds,  1  P.  VVms.  181;  1  Smith's 
Lead.  Cas.  705  (the  leading  case,  in 
which  the  doctrine  is  carefully  dis- 
cussed and  the  previous  authorities 
are  cited);  Morris  v.  Colman,  lb  Ves. 
436;  Bryson  v.  Whitehead,  1  Sim. 
&  St.  74;  Kimberley  v,  Jennings,  6 
Sim.  340;  Kemble  v.  Kean,  6  Sim.  333; 
Harms  v.  Parsons,  32  Beav.  328;  Ben- 
well  V.  Inns,  24  Beav.  307;  Whittaker 
V.  Howe,  3  Beav.  383;  Allsopp  v. 
Wheatcroft,  L.  R.  15  Eq.  59;  Rigby 
V.  Connol,  L.  R.  14  Ch.  Div.  482;  Ore- 
gon etc.  Co.  V.  Winsor,  20  Wall.  64; 
Alger  V.  Thacher,  19  Pick.  51;  31 
Am.  Dec.  119;  Bowen  v.  Matheson,  14 
Allen,  499;  Taylor  v,  Blanchard,  13 
Allen,  370;  90  Am,  Dec.  203;  Carew 
V.  Rutherford,  106  Mass.  1;  8  Am. 
Rep.  287;  Sampson  v.  Shaw,  101  Mass. 
145;  Boutelle  v.  Smith,  116  Mass.  Ill; 
Lawrence  v.  Kidder,  10  Barb.  641,  653; 
Stanton  v.  Allen,  5  Denio,  434;  49 
Am.  Dec.  282;  Brewer  v.  Marshall..  19 
N.  J.  Eq.  537;  97  Am.  Dec.  679;  Mor- 
ris Run  etc.  Co.  v.  Barclay  C.  Co.,  68 
Pa.  St.  173;  Keeler  v.  Taylor,  53  Pa. 
St.  467;  91  Am.  Dec.  221;  Crawford 
V.  Wick,  18  Ohio  St.  190;  98  Am.  Dec. 
103;  Maguire  v.  Smock,  42  Ind.  1; 
Gale  V.  Kalamazoo,  23  Mich.  344;  9 
Am.  Rep.  80;  Long  v.  Towl,  42  Mo. 
545;  97  Am.  Dec.  355;  Callahan  v. 
DonnoUy,  45  Cal.  152;  13  Am.  Rep. 
172;  More  v.  Bonnet,  40  Cal.  251;  6 
Am.  Rep.  621;  Wright  v.  Rvder,  36 
Cal.  342;  95  Am.  Dec.  186;  Rigby  v. 
Connol,  L.  R.  14  Ch.  Div.  482,  491 
("trades  unions  "  held  to  be  illegal  at 
the  common  law,  and  still  illegal  ex- 
cept so  far  as  their  provisions  and  rules 
had  been  expressly  authorized  by  stat- 
ute); Sampson  v.  Shaw,  101  Mass.  145 
(an  agreement  to  "  make  a  corner  "  in 
stocks  held  illegal);  Central  etc.  Co.  v. 
Guthrie,  35  Ohio  St.  666  (an  agree- 
ment  by   a  voluntary  association  of 


salt  manufacturers  that  no  member 
should  sell  salt  except  on  certain  con- 
ditions, void);  Dethlefs  v.  Tamsen,  7 
Daly,  354;  Wiggins  Ferry  Co.  v.  Chi- 
cago etc.  R.  R.,  5  Mo.  App.  347  (con- 
tract between  common  carriers  to 
refuse  shippers  advantages  of  im- 
provements or  new  facilities  for  trans- 
portation, void);  Arnot  v.  Pittston 
etc.  Co.,  68  N.  Y.  558;  23  Am.  Rep. 
190  (an  agreement  between  two  coal- 
mining companies  that  one  should  take 
all  the  other  should  mine,  and  that  the 
latter  should  not  sell  to  any  third  per- 
sons, void);  Craft  v.  McConoughy,  79 
111.  346;  22  Am.  Rep.  171  (a  contract 
between  several  grain  dealers  for  the 
purpose  of  forming  a  secret  combina- 
tion to  control  the  price  of  grain,  the 
cost  of  storage,  and  the  expense  of 
shipment,  void).  [See  also  the  follow- 
ing recent  cases:  Davies  v.  Davies,  36 
Ch.  Div.  359;  Baker  v.  Hedgecock,  39 
Ch.  Div.  520;  Irwin  v.  Williar,  113 
U.  S.  510;  Leonard  V.  Poole,  114N.  Y. 
371;  11  Am.  St.  Rep.  667;  Gibbs  v.  Bal- 
timore Gas  Co.,  1.30  N.  Y.  405;  Bishop 
v.  Palmer,  146  Mass.  469;  4  Am.  St. 
Rep.  339;  Mandeville  v.  Harman,  42 
N.  J.  Eq.  185;  Tardy  v.  Creasy.  81 
Va.  553;  59  Am.  P^ep.  676;  West 
Virginia  Tj^ansportation  Co.  v.  Ohio 
River  Pipe  Line  Co.,  22  W.  Va.  600; 
46  Am.  Rep.  527,  and  cases  cited; 
Moses  V.  Scott,  84  Ala.  608  (agree- 
ment in  restraint  of  alienation  of 
stock);  Emery  v.  Ohio  Candle  Co.,  47 
Ohio  St.  320;  21  Am.  St.  Rep.  819 
(association  organized  for  the  purpose 
of  increasing  the  price  and  decreasing 
the  production  of  a  commodity  of  gen- 
eral use);  Chicago  Gas  Light  Co.  v.  Gas 
Light  Co.,  121  ill.  530;  2  Am.  St.  Rep. 
124  (contract  by  a  corporation  to 
abandon  a  public  duty,  as  by  a  gas- 
light company  to  refrain  from  supply- 
ing gas  to  a  certain  portion  of  the  city, 
though  only  in  partial  restraint  of 
trade,  will  not  be  enforced  in  equity); 
Samuels  v.  Oliver,  130  111.  73  (agree- 
ment to  effect  a  "corner,"  void);  Ber- 
lin V.  Perry,  71  Wis.  495;  5  Am.  St. 
Rep.  236.] 


1335 


CONSTRUCTIVE    FRAUD. 


§934 


one  benefited  b}'  the  restriction,  and  the  number  and 
interests  of  the  public  whose  freedom  of  trading  is  cir- 
cumscribed; and  made  upon  a  valuable  and  sufficient 
consideration.  The  jurisdiction  of  equity  is  generally 
exercised,  in  respect  to  these  contracts,  for  the  purpose 
of  indirectly  compelling  their  specific  performance,  by 
means  of  an  injunction  preventing  their  violation.'     In- 

not  to  engage  ia  the  same  business  in 
a  certain  town  for  a  certain  tioie, 
valid);  Goodman  v.  Henderson,  58  Ga. 
567  (agreement  to  withdraw  from  the 
purchasing  of  hides  in  a  particular 
market,  valid);  Curtis  v.  Gokey,  68 
N.  Y.  300  (agreement  by  a  retiring 
partner  not  to  engage  in  the  business 
at  the  place  for  a  certain  time,  or  so 
long  as  the  other  shall  continue  the 
business,  valid);  Ellis  v,  Jones,  56  Ga. 
504  (a  contract  not  to  carry  on  a  cer- 
tain trade  within  a  specified  town  will 
be  enforced).  [See  also  §  1344,  note; 
Baines  v.  Geary,  35  Ch.  Div.  154;  Mills 
v.  Dunham,  (1891)  1  Ch.  576;  Bowling 
V.  Taylor,  40  Fed.  Rep.  404;  Carter  v. 
Ailing,  43  Fed.  Rep.  '208  (fact  that  re- 
striction is  unlimited  as  to  the  territory 
over  which  it  extends  does  not  neces- 
sarily render  it  unreasonable);  Tole  v. 
Gross,  127  N.  Y.  480  (same);  Diamond 
Match  Co.  V.  Roeber,  106  N.  Y.  473; 
60  Am.  Rep.  464  (an  important  case, 
in  which  the  tendency  of  modern  de- 
cisions to  a  relaxation  of  tlie  doctrine 
is  pointed  out;  a  covenant  permitting 
the  sale  of  a  manufactured  article  only 
in  Nevada  and  Montana  was  held  not 
to  be  in  general  restraint);  Smith's 
Appeal,  113  Pa.  St.  579;  Robbins  v. 
Welch,  68  Ala.  393;  Moore  etc.  Hard- 
ware Co.  v.  Hardware  Co.,  87  Ala. 
206;  13  Am.  St.  Rep.  23;  Timmerman 
V.  Dever,  52  Mich.  34;  50  Am.  Rep. 
240;  Watrous  v.  Allen,  57  Mich.  362; 
58  Am.  Rep.  353;  Thompson  v.  An- 
drus,  73  Mich.  551;  National  Benefit 
Co.  V.  Union  Hospital  Co.,  45  Minn.  272 
(an  instructive  case).]  Analogous  to 
the  sale  of  a  good-will  is  the  sale  of  a 
trade  secret,  or  secret  recipe  or  pro- 
cess of  manufacture,  with  an  agree- 
ment by  the  vendor  not  to  use  tha 
secret  in  his  business,  or  not  to  make 
or  vend  articles  by  its  means,  and  the 
like.  Sucii  a  contract  will  be  enforced 
bv  enjoining  its  violation:  Brj'son  v. 
Whitehead,  1  Sim.  &  St.  74;  Benwell 


•  Mitchel  V.  Reynolds,  1  Smith's 
Lead.  Cas.  705,  and  notes.  Such  con- 
tracts are  frequently  made  in  connec- 
tion with  a  sale  of  a  business  and 
good-will,  the  vendor  stipulating  that 
he  will  not  carry  on  the  same  business 
within  a  specified  distance  from  the 
old  place,  or  for  a  specified  time,  or 
will  not  solicit  the  old  customers  for 
their  trade,  and  the  like.  These 
kinds  of  stipulations,  if  reasonable  as 
to  territory  and  time,  will  be  enforced 
against  the  vendor,  often  by  an  in- 
junction: Catt  V.  Tourle,  L.  R.  4  Ch. 
654;  Harms  v.  Parsons,  32  Beav.  32S; 
Leather  Cloth  Co.  v.  Lorsont,  L.  R.  9 
Eq.  .345;  Carter  v.  Wdliams,  L.  R.  9 
Eq.  678;  Gravely  v.  Barnard,  L.  R.  18 
Eq.  518;  Altman  v.  Royal  etc.  Co., 
L.  R.  3  Ch.  Div.  228;  Ginesi  v.  Cooper, 
L.  R.  14  Ch.  Div.  596;  Rousillou  v. 
Rousillon,  L.  R.  14  Ch.  Div.  351;  Leg- 
gott  V.  Barrett,  L.  R.  15  Ch.  Div.  306 
(soliciting  old  customers  restrained); 
Perkins  v.  Clay,  54  N.  H.  518;  Dean 
V.  Emerson,  102  Mass.  480;  Morse  etc. 
Co.  V.  Morse,  103  Mass.  73;  4  Am. 
Rep.  513;  Taylor  v.  Blanchard,  13  Al- 
len, 370;  90  Am.  Dec.  203;  Gilman  v. 
Dwight,  13  Gray,  356;  74  Am.  Dec. 
634;  McClurg's  Appeal,  58  Pa.  St.  51; 
Keeler  v.  Taylor,  53  Pa.  St.  467;  91 
Am.  Dec.  221;  Gillis  v.  Hall,  2  Brewst. 
342;  Warfield  v.  Booth,  33  Md.  63; 
Guerand  v.  Dandelet,  32  Md.  561;  3 
Am.  Rep.  164:  Lange  v.  Werk,  2  Ohio 
St.  519;  Hubbard  v.  Miller,  27  Mich. 
15;  15  Am.  Rep.  1.53;  Lightner  v. 
Menzel,  35  Cal.  452;  Schwalm  v. 
Holmes,  49  Cal.  665;  Cal.  Nav.  Co.  v. 
Wright,  6  Cal.  258;  65  Am.  Dec.  511; 
Smalley  v.  Greene,  52  Iowa,  241;  35 
Am.  Rep.  267  (contract  not  to  engage 
in  law  business  in  a  certain  town, 
valid);  Dethlefs  v.  Tamsen,  7  Daly, 
354  (sale  of  a  good-will  and  agreement 
not  to  carry  on  a  competing  business); 
Hedge  v.  Lowe,  47  Iowa,  137  (sale  of 
a  business  and  good-will,  and  contract 


§  934  EQUITY    JURISPRUDENCE.  1336 

terfering  with  bidding  at  auctions:  Where  property  is  to 
be  sold  at  public  auction,  and  especially  where  the  sale 
is  by  order  of  a  court,  or  is  made  in  the  course  of  govern- 
mental administration,  a  secret  combination  and  agree- 
ment among  persons  interested  in  bidding,  whereby  they 
stipulate  to  refrain  from  bidding  in  order  to  prevent  com- 
petition and  to  lower  the  selling  price  of  the  property,  is 
illegal,  according  to  the  uniform  course  of  decision  in 
this  country.  The  stipulations  of  the  buyer  to  pay  com- 
pensation to  the  others  in  consideration  of  their  promise 
not  to  bid,  or  to  share  the  property  with  them,  are  void, 
and  the  sale  itself,  made  as  the  result  of  the  combination, 
is  also  tainted  with  the  frauds,  and  will  be  set  aside  at  the 
suit  of  the  vendor.*  Where,  in  pursuance  of  its  general 
policy  of  letting  contracts  for  public  works  or  for  supplies 
to  the  lowest  bidder,  the  governmental  officers  issue 
proposals  for  bids,  a  secret  combination  and  agreement 
among  contractors,  to  refrain  from  bidding  and  to  pre- 
vent competition,  falls  under  the  same  rule,  and  is  equally 
illegal.^      Employment  of  puffers:    The   secret   employ- 

V.    Inns,    24   Beav.    307;   Peabody  v.  Dec.  575;   Plaster  v.   Burger,    5  Ind. 

Korfolk,  98  Mass.  452;  96  Am.  Dec.  232;  Wooton  v.   Hinkle,  20  Mo.  290; 

604;  Vickery  v.  Welch,  19  Pick.  523.  Piatt  v.  Oliver,  2  McLean,  267;  Cocks 

[See  also  §  1340,  note.]  v.  Izard.  7  Wall.  559;  Slater  v.  Max- 

*  The  English  courts  are  said  to  have  well,  6  Wall.  26S;  Trist  v.  Child,  21 

taken  a   different  view,  and   to   have  Wall.  441.     In  connection  with  this 

held  such  a  transaction  valid:  Galtonv.  rule,  there  are   decisions  which   hold 

Emuss,  1  Coll.  C.  C.  243;  In  re  Carew's  that  a  mere  agreement  of  persons  in- 

Estate,  26  Beav.  187.    The  rule  estab-  terested  in  tlie  bidding,  for  the  pur- 

lished  by  the  American  courts  is  cer-  pose  of  having  them  all  share  in  the 

tainly  a  reasonable  and  just  one.     A  property  when  bid  off  by  one  of  their 

secret  combination  as  described  is  in-  number,   and  not  for  the  purpose  of 

trinsically  much  worse  than  the  em-  preventing   competition,  is   not   open 

ployment  of  "puffers"  by  the  vendor:  to  the  objection  of  illegality,   but  is 

Jones  V.  Caswell,  3  Johns.  Cas.  29;  2  valid.     This  is  probably  all  that  the 

Am.    Dec.    1.34;    Doolin   v.    Ward,    6  English  courts  meant  to  decide  in  the 

Johns.   194;  Troup  v.  Wood,  4  Johns,  cases  cited  supra:  Kearney  v.  Taylor, 

Cli.  228;  Hawley  v.   Cramer,  4  Cow.  15  How.  494;  Phippen  v.  Stickney,  3 

717;    Brisbane    v.    Adams,    3    N.   Y.  Met.   384,   387;  Goode  v,  Hawkins,  2 

]-29;  Gardiner  v.  Morse,  25  Me.   140;  Dev.   Eq.  393;  National  Bank  of   the 

Gulick  V.   Ward,    10  N.  J.  L.   87;   18  Metropolis  v.  Sprague,  20  N.  J.  Eq.  159. 

Am.  Dec.  389;  Hamilton  v.  Hamilton,  *  In  such   a   case,    the   stipulations 

2  Rich.    Eq.    355;   46   Am.    Dec.    58;  among  the  parties  to  the  arrangement 

Johnston  V.  La  Motte,  6  Rich.  Eq.  347;  for  compensation  to  those  who  with- 

Grant  v.  Lloyd,  12  Smedes  &  M.  191;  hold  their  bids,  or  for  a  share  in  the 

Newman  V.  Meek,  1  Freem.  Ch.  441;  contract   when   awarded,   are   clearly 

Dudley  v.  Little,  2  Ohio,  50S;  15  Am.  void,  and  the  contract  itself  awarded 


1337  CONSTRUCTIVE    FKAUD.  §  934 

merit,  by  the  vendor,  of  one  or  more  persons  —  called 
"puffers" — :  to  make  fictitious  and  collusive  bids  at  an 
auction,  and  thus  to  enhance  the  price  by  an  apparent 
competition,  is  clearly  a  wrong  against  the  bona  fide  bid- 
ders and  against  the  one  who  finally  becomes  the  pur- 
chaser. Whether  it  is  absolutely  illegal  has  given  rise  to 
a  conflict  of  decision  between  the  courts  of  law  and  of 
equity;  and,  strangely  enough,  the  courts  of  law  have  been 
more  equitable,  more  strict  in  maintaining  good  faith, 
than  those  of  equity.  A  vendor  can  always  protect  himself 
against  sacrifice  by  announcing,  as  one  of  the  conditions 
of  the  sale,  that  he  reserves  the  right  to  start  the  bidding 
by  naming  an  "upset"  price  as  the  minimum,  or  the 
right  to  bid  generally,  or  the  right  to  withdraw  the  prop- 
erty. In  regard  to  puffing,  two  cases  may  arise:  1.  Where 
the  sale  is  made  without  any  preliminary  announcement 
at  all;  2.  Where  it  is  announced  to  be  without  reserve. 
In  the  first  case,  the  rule  is  settled  at  law  that  any  puffing — 
the  employment  of  even  one  puffer  —  is  illegal,  and  renders 
the  sale  voidable,  at  the  option  of  the  purchaser.^  Courts 
of  equity,  in  this  case,  allowed  one  puffer;  in  other  words, 
puffing  to  the  extent  of  one  fictitious  bidder  did  not  ren- 
der the  sale  voidable.^  If  the  vendor  transgressed  this 
limit,  and  employed  more  than  one  puffer,  the  transaction 
became  illegal  at  equity  as  well  as  at  law;  the  fictitious 
competition  was  a  fraud  upon  the  bona  fide  bidders,  which 

by  means  of  such  combination  might  Shore,  16  Pa,    St.  200;  55   Am.  Dec. 

be  set  aside:    Weld  v.  Lancaster,  56  492;  Faucett  v.  Currier,  115  Mass.  20; 

Me.  453;  Atcheson  V.  Mallon,  43N.  Y.  Williams   v.   Bradley,    7    Heisk,    54. 

147;  3  Am.  Rep.  678;  People  v.  Steph-  This  rule  is  approved   by  Chancellor 

ens,  71  N.  Y.  527;  Stevens  v.  Perrier,  Kent,  in  2  Com.  538,  539  (5th  ed.). 

12  Kan.  297;  Swan  v.  Chorpenning,  20  *  Although  this  rule  was  settled,  it 

Cal.  182;  and  cases  in  last  note.  has  been  applied  very  reluctantly  in 

'  Thornett  v.   Haines,    15   Mees.  &  recent  decisions,  and  the  tendency  ia 

W.  367,  372,  per  Parke,  B.;  Crowder  evident,  both  in  England  and  in  the 

V.  Austin,  3  Bing.  368;  Fuller  v.  Abra-  United  States,  to  bring  the  equity  rule 

hams,    3  Brod.   &  B.    116;    6  Moore,  into  an  agreement  with  the  legal  one, 

316;   Green  v.   Baverstock,    14    Com.  even  in   the   absence  of  any  statute: 

B.,  N.   S.,   204;   Howard  v.  Castle,  6  Bramley  v.  Alt,  3  Ves.  620;  Smith  v. 

Term  Rep.  642;  Bexwell  v.  Christie,  Clarke,    12   Ves.    477;    Woodward  v. 

Cowp.  395;  Towle  v.  Leavitt,  23  N.  H.  Miller,    2  Coll.    C.  C.  279;    Flint   v. 

360;  55  Am.  Dec.  195;  Trust  v.  Dela-  Woodin,  9  Hare,  618;  Woods  v.  Hall, 

plaiue,  3E.  D.  Smith.  219;  Staines  v.  1  Dev.  Eq.  415. 


§  934  EQUITY    JURISPRUDENCE.  1338 

rendered  the  sale  voidable.'  In  the  second  place,  where 
an  announcement  is  made  that  "the  sale  will  be  without 
reserve,"  or  words  to  that  ejffect,  this  is  a  pledge  by  the 
vendor  that  the  competition  shall  be  absolutely  free;  the 
employment  of  any  puffing  —  one  or  more  puffers — ren- 
ders the  sale  voidable  in  equity  as  well  as  at  law,  and  of 
course  defeats  a  specific  performance.^  The  subject  is 
now  regulated  in  England  by  a  recent  statute.'  Fraudu- 
lent trade-marks:  Another  illustration  of  frauds  upon 
the  public  in  business  dealings  consists  in  the  use  of 
fraudulent  trade-marks.  The  whole  doctrine  of  infringe- 
ment of  trade-marks  is  based  upon  the  notion  of  mis- 
leading the  public;  but  this  phase  of  the  subject  I  do  not 
at  present  touch  upon.*  The  fraud  now  referred  to  is 
that  of  the  original  proprietor  of  the  trade-mark,  whose 
alleged  right  is  invaded  by  an  infringer,  and  who  seeks 
the  protection  of  courts.  If  a  trade-mark  contains  a  false- 
hood on  its  face,  deceiving  the  public,  and  giving  the 
goods  a  character  and  reputation  which  they  do  not  pos- 
sess nor  deserve,  or  if  the  business  of  the  proprietor  is  it- 
self illegal,  or  is  knowingly  carried  on  by  him  in  a  false 
and  deceptive  manner,  the  trade-mark  is  in  fact  a  fraud 
upon  the  public;  no  protection  will  be  given  to  the  pro- 

^  Thorn ett  v.    Haines,   15   Mees.  &  thoritiea   reviewed  at  length  in  Peck 

W.  367,  372,  per  Parke,  B.;  Bramley  v.  List,  23  W.  Va.  338;  48  Am.  Rep. 

V.  Alt,  3  Ves.  620;  ConoUy  v.  Parsons,  398.] 

cited  3  Ves.  6'25;  Smith  v.  Clarke,  12  *  Thornett  v.  Haines,  15  Mees.  & 
Ves.  477;  Woodward  v.  Miller,  2  Coll.  W.  367,  and  cases  cited;  Robinson  v. 
C.  C.  279;  Flint  v.  Woodin,  9  Hare,  Wall,  2  Phill.  Ch.  372,  375,  per  Lord 
618;  Meadows  v.  Tanner,  5  Madd.  Cottenham;  Meadows  v.  Tanner,  5 
34;  Robinson  v.  Wall,  10  Beav.  61;  2  Madd.  34;  Mortimer  v.  Bell,  L.  R.  1 
Phill.  Ch.  372;  Mortimer  v.  Bell,  L.  R.  Ch.  10;  Dimmock  v.  Hallett,  L.  R.  2 
1  Ch.  10;  Dimmock  v.  Hallett,  L.  R.  2  Ch.  21;  Gilliat  v.  Gilliat,  L.  R.  9  Eq. 
Ch.  21;  Wood  V.  Hall,  1  T)ev.  Eq.  415;  60;  Veazie  v.  Williams,  8  How.  134; 
Morehead  v.  Hunt,  1  Dev.  Eq.  35;  3  Story,  611,  622. 
Nat.  Bank  of  Metropolis  v.  Sprague,  '  30  &  31  Vict.,  c.  48.  This  statute 
20  N.  J.  Eq.  159;  Davis  v.  Petway,  3  recites  that  dififerent  rules  have  pre- 
Head,  667;  75  Am.  Dec.  789;  Wil-  vailed  in  law  and  equity,  and  that 
liams  V.  Bradley,  7  Heisk.  54;  Wicker  the  same  rule  should  regulate  both 
V.  Hoppock,  6  Wall.  94;  Veazie  v.  jurisdictions.  It  makes  the  employ- 
Williams,  8  How.  134;  3  Story,  611,  ment  of  puffing  unlawful  in  every 
622.  It  is  probable  that  most  Ameri-  case,  unless  the  right  to  do  so  has  been 
can  courts  of  equity  would  now  disre-  expressly  reserved:  See  Gilliat  V. 
gard  this  distinction  between  one  puf-  Gilliat,  L.  R.  9  Eq.  60» 
fier  and  more  than  one.    [See  the  au-  *  [See  §  1354.] 


1339 


CONSTRUCTIVE    FRAUD. 


§  935 


prietor  against  an  infringement.  It  is  added,  however, 
that  a  false  re.presentation  by  the  proprietor,  as  to  a  mat- 
ter wholly  collateral  to  his  trade-mark,  does  not  affect  liis 
right  to  a  remedy  either  in  equity  or  at  law.'  Contracts 
opposed  to  the  policy  of  some  statute  prescribing  modes 
of  certain  business  dealings."  Contracts  of  trading  with 
alien  enemies.' 

§  935.  D.  Contracts  Affecting  Public  Relations.  — 
Contracts  made  for  the  purpose  of  unduly  controlling  or 
affecting  official  conduct,  or  the  exercise  of  legislative, 
administrative,  and  judicial  functions,  are  plainly  opposed 
to  public  policy.  They  strike  at  the  very  foundations  of 
government,  and  tend  to  destroy  that  confidence  in  the 


*  Leather  Cloth  Co.  v.  American 
Leather  etc.  Co.,  11  H.  L.  Cas.  523, 
542;  Pickling  v.  How,  8  Sim.  477; 
Perry  v.  Truefitt,  6  Beav.  66;  Flavel 
V.  Harrison,  10  Hare,  467;  Marshall 
V.  Ross,  L.  R.  8  Eq.  651;  Lee  v.  Haley, 
L.  R.  5  Ch.  155,  158;  Ford  v.  Fos- 
ter. L.  R.  7  Ch.  611;  Singer  Mfg.  Co. 
V.  Wilson,  L.  R.  2  Ch.  Div.  4.34;  Sie- 
gert  V.  Findlater,  L.  R.  7  Ch.  Div.  801; 
Orr  V.  Johnston,  L.  R.  13  Ch.  Div.  434: 
Civil  Service  etc.  Co.  v.  Dean,  L.  R.  13 
Ch.  Div.  512;  Boulnois  v.  Peake,  L. 
R.  13  Ch.  Div.  513,  note;  Fetridge  v. 
Wells,  4  Abh.  Pr.  144;  13  How.  Pr. 
385;  Curtis  v.  Bryan,  2  Daly,  312, 
317;  Palmer  v.  Harris,  60  Pa.  St.  156; 
100  Am.  Dec.  557;  Heath  v.  Wright, 
3  Wall.  Jr.  141;  [Manhattan  Med. 
Co.  V.  Wood,  108  U.  S.  218,  and 
cases  cited;  Siegert  v.  Abbott,  61 
Md.  276;  48  Am.  Rep.  101;  Par- 
lett  V.  Guggenheimer,  67  Md.  542;  1 
Am.  St.  Rep.  416,  and  note;  Kenney 
V.  Gillet,  70  Md.  574;  Buckland  v. 
Rice,  40  Ohio  St.  526. 

*  These  cases  depend  each  upon  their 
own  circumstances.  Such  statutes 
often  prescribe  the  kinds  of  business 
which  can  be  transacted  by  monetary 
corporations  and  associations,  the 
methods  of  transacting,  etc.:  In  re 
Arthur  Average  Ass'n,  L.  R.  10  Ch. 
642;  In  re  South  Wales  etc.  Co.,  L.  R. 
2Ch.  Div.  763;  Sykes  v.  Beadon,  L.  R. 
11  Ch.  Div.  170,  183,  197;  Smith  v.  An- 
derson, L.  R.  15  Ch.  Div.  247  (overrul- 
ing Sykes  V.  Beadon  on  one  point);  Rig- 
by  V.  Connol,  L.  R.   14  Ch.  Div.  482, 


491;  Johnson  v.  Shrewsbury  etc.  R'y,3 
De  Gex,  M.  &  G.  914,  per  Knight 
Bruce,  L.  J.;  Aubin  v.  Holt,  2  Kay  & 
J.  66,  70;  Carey  v.  Snxith,  11  Ga.  539, 
547;  Kelly  v.  Devlin,  58  How.  Pr.  487; 
Clarke  v.  Omaha  etc.  R.  R.,  5  Neb. 
314;  Christian  Union  v.  Yount,  101 
U.  S.  352;  Oscanyan  v.  Winchester 
etc.  Co.,  15  Blatchf.  79;  [Anderson  v. 
Carkins,  135  U.  S.  483  (contract 
against  the  policy  of  the  United 
States  land  laws);  Mitchell  v.  Cline, 
84  Cal.  409  (contract  to  locate  min- 
ing claim  contrary  to  United  States 
statute).] 

*  Seaman  v.  Waddington,  16  Johns. 
510,  opinion  of  Chancellor  Kent,  and 
authorities  cited  by  him;  Clements  v. 
Yturria,  81  N.  Y.  285;  Robinson  v. 
Internat.  Life  Ins.  Co.,  42  N.  Y.  54, 
66;  1  Am.  Rep.  400;  Woods  v.  Wilder, 
43  N,  Y.  164;  3  Am.  Rep.  684;  Bank 
of  N.  0.  V.  Matthews,  49  N.  Y.  12; 
Clements  v.  Graham,  24  La.  Ann.  446; 
Hanauerv.  Doane,  12  Wall.  .342;  Ha- 
nauer  v.  Woodruff,  15  Wall.  439; 
Montgomery  v.  United  States,  15 
Wall.  395;  United  States  v.  Grossmay- 
er,  9  Wall.  72;  The  Ouachita  Cotton, 
6  Wall.  521;  Sprott  v.  United  States, 
20  Wall.  459;  United  States  v.  La- 
pene,  17  Wall.  602;  Carlisle  v. United 
States,  16  Wall.  147,  151;  United 
States  v.  Huckabee,  16  Wall.  414; 
Titus  V.  United  States,  20  Wall.  475; 
Desmare  v.  United  States,  93  U.  S. 
605;  Whitfield  v.  United  States,  92 
U.  S.  165. 


§  935  EQUITY   JURISPRUDENCE.  1340 

integrity  and  discretion  of  public  official  action  which  is 
essential  to  the  preservation  of  civilized  society.  The 
principle  is  universal,  and  is  applied  without  any  refer- 
ence to  the  mere  outward  form  and  alleged  purpose  of  the 
transaction.  If  a  contract  does  unduly  interfere  with 
governmental  functions,  or  with  the  relations  of  the  citi- 
zen towards  his  own  government  in  any  of  its  depart- 
ments, whether  the  interference  be  direct  or  indirect, 
such  agreement  is  illegal,  whatever  form  it  may  have  as- 
sumed. It  is  impossible,  therefore,  to  mention  all  the 
instances  which  properly  come  within  this  principle.  The 
following  are  some  of  the  most  important  species:  Con- 
tracts for  the  procurement  of  office:  All  agreements 
which  interfere  with  the  integrity,  discretion,  or  freedom 
of  the  electing  or  appointing  power  are  illegal.^  Contracts 
interfering  with  legislative  proceedings:  "Where  a  private 
statute,  or  a  statute  directly  affecting  private  rights,  is 
pending  before  the  legislature,  a  secret  agreement  between 

'  This  group  contains  many  varieties:  Becker  v.  Ten  Eyck,  6  Paige,  68; 
contracts  directly  with  the  appointing  Hunter  v.  Nolf,  71  Pa.  St.  282;  Me- 
power,  for  the  purpose  of  obtaining  guire  v.  Corwine,  101  U.  S.  108  (con- 
the  office  by  means  of  any  reward,  tract  by  which  A  agrees  to  procure 
compensation,  or  consideration;  con-  B's  appointment  as  counsel  in  certain 
tracts  by  which  the  applicant  agrees  suits  against  the  United  States,  and  B 
to  pay  compensation  to  another,  or  to  agrees  to  give  A  half  of  the  fee  ob- 
share  the  emoluments  with  him,  in  tained,  held  void);  Hager  v.  Catlin,  18 
consideration  of  his  procuring  the  Hun,  448;  Gaston  v.  Drake,  14  Nev. 
office;  contracts  between  opposing  175;  33  Am.  Rep.  548  (agreement  to 
candidates,  by  which,  in  consideration  share  the  salary  of  a  public  office  in 
that  one  withdraws,  or  aids  the  other,  consideration  that  one  party  shall  use 
the  latter  stipulates  to  pay  a  compen-  his  influence  to  secure  the  other's  elec- 
sation,  or  to  share  the  emoluments,  tion,  void);  Reed  v.  Peper  etc.  Co.,  2 
The  form  is  immaterial  wherever  the  Mo.  App.  82  (agreement  by  which  A 
purpose  is  to  procure  an  office  by  was  to  receive  part  of  the  salary  of 
private  interference  with  the  freedom  certain  officers,  in  consideration  of  his 
and  integrity  of  the  appointing  body,  forbearing  to  use  his  influence  and 
The  principle  applies  to  private  offices  eflPorts  to  procure  a  repeal  of  the  stat- 
in corporations,  etc.,  as  well  as  to  ute  creating  the  offices,  void);  Guern- 
public  governmental  offices:  Hartwell  sey  v.  Cook,  120  Mass.  501  (contract 
v.  Hartwell,  4  Ves.  811;  Wallis  v.  for  the  sale  of  stock  for  the  purpose  of 
Duke  of  Portland,  3  Ves.  494;  Ste-  procuring  one  of  the  parties  to  be 
yens  v.  Bagwell,  15  Ves.  139;  Osborne  elected  treasurer  of  the  corporation, 
V.  Williams,  18  Ves.  379;  Law  v.  Law,  illegal);  [West  v.  Camden,  135  U.  S. 
3  P.  Wms.  391;  Cas.  t.  Talb.  140;  507  (contract  by  director  of  a  corpora- 
Morris  V.  MacCullock,  2  Eden,  190;  tion  to  keep  another  person  perma- 
Hanington  v.  Du  Chatel,  1  Brown  Ch.  nently  in  place  as  an  officer  of  the 
124;  Boynton  v.  Hubbard,  7  Mass.  corporation,  illegal).] 
112,  1 19;  Ferris  v.  Adams,  23  Vt.  136; 


1341 


CONSTRUCTIVE   FRAUD, 


§  935 


parties  interested,  which,  if  disclosed,  might  have  deter- 
mined the  action  of  the  legislature,  —  as,  for  example,  an 
agreement  by  one  party  to  withdraw  his  opposition  in 
consideration  of  a  compensation  to  be  paid  by  the  other, 
—  has  been  held  a  fraud  upon  legislation,  and  therefore 
void.*  The  doctrine  finds  its  most  important  application 
in  dealing  with  contracts  for  the  purpose  of  procuring 
legislation.  All  agreements,  in  every  possible  form,  for 
the  purpose  of  securing  or  using  private  and  personal 
influence  with  members  of  a  legislature,  or  of  securing  or 
using  labor  and  services  with  legislators  privately,  person- 
ally, and  individually,  for  the  object  of  obtaining  legisla- 
tion either  public  or  private,  are  in  the  highest  degree 
contrary  to  the  fundamental  theory  of  free  legislative  ac- 
tion.'    Contracts  interfering  with  executive  proceedings: 


*  The  most  recent  English  decisions, 
however,  have  modified  this  conclu- 
sion, by  requiring  not  merely  a  secret 
agreement,  but  one  which  it  was  the 
duty  of  the  parties  to  disclose  to  the 
legislature:  Vauxhall  Bridge  Co.  v. 
Earl  Spencer,  2  Madd.  356;  Jacob,  64; 
Simpson  v.  Lord  Howden,  1  Keen, 
683;  3  Mylne  &  C.  97;  9  Clark  &  F. 
61;  10  Ad.  &  E.  793;  Earl  of  Shrews- 
bury  V.  North  Stafi"ordshire  R'y>  L.  R. 
1  Eq.  593;  and  see  Mangles  v.  Grand 
Dock  C.  Co.,  10  Sim.  519.  It  has  been 
held  that  where  a  statute  has  been 
procured  by  actual  fraud  upon  the 
legislature,  equity  may  relieve,  not  by 
setting  aside  the  statute  or  declaring 
it  void,  but  by  depriving  the  wrong- 
doers of  the  advantages  acquired 
thereby,  treating  them  as  trustees,  etc. 
This  doctrine  must,  I  think,  be  con- 
fined within  very  narrow  limits:  See 
Williamson  v.  VVilliamson,  3  Smedes 
&  M.  715;  41  Am.  Dec.  636;  State  v. 
Reed,  4  Har.  &  Mcli.  6. 

*  Our  law  permits  a  private  citizen 
to  endeavor  to  influence  a  legislature, 
and  to  obtain  the  enactment  of  a  stat- 
ute, in  an  open,  public  manner,  by  ar- 
guments directed  to  the  whole  body 
or  to  a  committee,  in  the  same  manner 
as  arguments  are  presented  to  a  court 
by  counsel.  To  this  end,  agreements 
for  the  employment  of  an  agent  or 
attorney,    upon    a   compensation,    to 


argue  before  the  legislature  or  its  com- 
mittees, or  to  collect  facts,  reasons, 
etc.,  and  present  them  openly  to  all 
the  legislature  or  to  its  proper  com- 
mittees, are  valid.  Agreements  which 
go  beyond  this  line,  and  stipulate  for 
private  services  to  be  rendered  by 
dealing  with  individual  legislators  pri- 
vately and  personally,  have  been  uni- 
formly condemned  by  courts  of  the 
highest  authority.  The  varieties  of 
such  agreements  are  very  numerous 
The  following  cases  furnish  illustra 
tions:  Edward  v.  Grand  June.  R'y, 
1  Mylne  &  C.  650;  Marshall  v.  Balti 
more  &  0.  R.  R.,  16  How.  314  (a  lead 
ing  case;  the  opinion  of  Grier,  J.,  is 
an  able  discussion  of  the  doctrine) 
Frost  v.  Inhabitants  of  Belmont,  6 
Allen,  152;  Sedgwick  v.  Stanton,  14 
N.  Y.  289;  Nickelson  v.  Wilson,  60 
N.  Y.  362;  Mills  v.  Mills,  40  N.  Y. 
543;  100  Am.  Dec.  535;  Rose  v.  Truax, 
21  Barb.  361;  Smith  v.  Applegate,  '23 
N.  J.  L.  352;  Clippinger  v.  Hepbaugh, 
5  Watts  &  S.  315;  40  Ain.  Dec.  519; 
Miles.  V.  Thorne,  38  Cal.  335;  99  Am. 
Dec.  384;  Powell  v.  Maguire,  43  Cal. 
11;  McBratney  v.  Chandler,  22  Kan. 
692;  31  Am.  Rep.  213  (where  the  ser- 
vices are  partly  those  of  an  attorney 
and  partly  of  a  lobbyist,  but  blended 
as  a  single  employment,  the  entire  coa* 
tract  is  void). 


§  935 


EQUITY    JURISPRUDENCE. 


1342 


These  are  subject  to  the  same  general  rules  which  apply 
to  similar  agreements  concerning  legislation.  All  agree- 
ments, whether  made  with  officials  or  with  third  persons, 
which  directly  or  indirectly  control  or  interfere  with  the 
due  exercise  of  executive  and  administrative  functions  as 
prescribed  or  regulated  by  law,  are  clearly  illegal.*  Con- 
tracts interfering  with  judicial  proceedings:  All  agree- 
ments directly  or  indirectly  preventing  or  controlling  the 
due  administration  of  justice  are  opposed  to  the  universal 
and  most  elementary  principles  of  public  policy.  What- 
ever be  their  form  and  immediate  purpose,  and  however 


*  This  group  includes  contracts  with 
officers  themselves  stipulating  for  the 
omission  or  violation  of  their  official 
duties,  or  stipulating  for  compensation 
other  or  greater  than  the  fees  provided 
by  law  lor  the  performance  of  their 
duties;  contracts  with  third  persons 
stipulating  for  their  influence  in  pro- 
curing administrative  acts  to  be  done 
or  omitted,  and  the  like:  Cooth  v. 
Jackson,  6  Ves.  12,  31,  35;  Methwold 
V.  Walbank,  2  Ves.  Sr.  238;  Tool  Co.  v. 
Norris,  2  Wall.  45;  Trist  v.  Child,  21 
Wall.  441;  Nichols  v.  Mudgett,  32  Vt. 
546;  Robinson  V.  Kalbfieisch,  5Thomp. 
&  C.  212;  Cook  V,  Freudenthal,  80 
N.  Y.  202;  Hatzfield  v.  Gulden,  7 
Watts,  152;  31  Am.  Dec.  750;  Win- 
penny  V.  French,  18  Ohio  St.  469; 
Edwards  v.  Estell,  48  Cal,  194;  Pack- 
ard V.  Bird,  40  Cal.  378;  Swan  v.  Chor- 
penning,  20  Cal.  182;  Spence  v. 
Harvey,  22  Cal.  337;  83  Am.  Dec.  69; 
Kelly  V.  Devlin,  58  How.  Pr.  487; 
Macon  v.  Huff,  60  Ga.  221;  Berrymau 
V.  Cincinnati  etc.  R'y,  14  Bush,  755 
(contract  with  an  officer  of  a  railroad 
company  to  use  his  influence  to  pro- 
cure the  railroad  to  be  located  in  a 
particular  place,  void);  [Woodstocki 
Iron  Co.  V.  Extension  Co.,  129  U.  S. 
643  (an  agreement  by  which  agents  of 
a  railroad  company  may  acquire  gain 
by  inducing  the  company  unnecessarily 
to  lengthen  the  road,  and  thus  impose 
a  burden  on  the  public,  illegal);]  St. 
Louis  V.  St,  Louis  etc.  Co.,  5  Mo.  App. 
484  ,  (an  agreement  by  a  corporation 
not  to  exercise  a  portion  of  the  fran- 
chises granted  to  it  for  public  purposes 
is  invalid);  Western  U.  T.  Co.  v. 
Chicago  etc.  R.  R.,  86  111.  246;  29  Am. 


Rep.  28;  Western  U.  T.  Co.  v.  Atlantic 
etc.  T.  Co.,  7  Biss.  367  (contracts  be- 
tween a.  railroad  and  telegraph  com- 
pany giving  exclusive  right  of  way 
and  of  use  are  valid);  Denison  v. 
Crawford  Co.,  48  Iowa,  211  (agreement 
between  a  county  and  its  agent  for 
special  services  and  compensation  held 
valid);  Reed  v.  Peper  etc.  Co.,  2  Mo. 
App.  82;  Stanton  v.  Embrey,  93  U.  S. 
548  (an  agreement  to  pay  counsel  a 
contingent  fee  for  legitimate  profes- 
sional services  in  prosecuting  a  claim 
against  the  United  States  is  valid); 
Fowler  v.  Donovan,  79  III.  310  (an 
agreement  between  several  persons  to 
contribute  and  pay  for  a  substitute  for 
such  of  them  as  should  be  drafted  into 
the  United  States  military  service  is 
valid);  Marsh  v.  Russell,  66  N.  Y.  288; 
Caton  V.  Stewart,  76  N.  C.  357;  Ash- 
burner  v.  Parrish,  81  Pa.  St.  52;  and 
see  cases  of  contracts  made  colore 
officii,  in  the  next  following  note;  [Os- 
cunyan  v.  Arms  Co.,  103  U.  S.  261  (a 
contract  entered  into  by  a  consul-gen- 
eral of  a  foreign  government,  residing 
in  this  country,  whereby,  in  considera- 
'tion  of  a  stipulated  percentage,  he 
agreed  to  use  his  influence  in  favor  of 
a  manufacturing  company  with  aa 
agent  of  his  government  sent  to  ex- 
^.mine  and  report  in  regard  to  the  pur- 
chase of  arms  for  it);  Hawkeye  Ins. 
Co.  v,  Brainard,  72  Iowa,  130  (con- 
'tract  whereby  an  officer  agrees  to  ac- 
cept a  less  or  greater  compensation 
than  that  prescribed  by  statute,  or 
whereby  he  agrees  not  to  avail  himself 
of  the  statutory  mode  of  enforcing 
the  collection  of  his  fees,  void).] 


1343 


CONSTRUCTIVE    FRAUD. 


§936 


innocent  may  be  the   motives  of  the    parties,  they   are 
plainly  invalid.^ 

§  936.  3/  Contracts  Opposed  to  Good  Morals.  —  It 
is  unnecessary  to  discuss  the  meaning  of  the  phrase 
contra  bonos  mores,  since  the  doctrine  is  familiar.  It  is 
enough  to  say  that  all  agreements  in  which  the  considera- 
tion past  or  future,  or  the  executory  terms  stipulating  for 
acts  to  be  done  or  omitted,  are  contrary  to  good  morals, 
are  illegal  and  void  in  equity,  and  with  a  very  few  excep- 
tions at  the  common  law.  This  doctrine  applies  in  equity, 
whatever  be  the  external  form  of  the  contract,  or  its  im- 
mediate purpose,  or  the  particular  nature  of  its  illegality. 
Among  the  most  important  and  familiar  illustrations  are 
the  following:  Contracts  based  upon  the  consideration, 
either  past  or  future,  of  illicit  sexual  intercourse,  or  stipu- 
lating for  such  future  intercourse,  or  in  any  manner 
promoting  or  furnishing  opportunities  for  unlawful  co- 


*  Under  this  head  are  included  agree- 
ments with  judicial  officers  relating  to 
and  controlling  their  judicial  action; 
•with  third  persons  stipulating  for  their 
personal  influence  in  procuring  judi- 
cial action;  contracts  to  remove  wit- 
nesses, or  in  any  manner  to  prevent 
them  from  testifying;  or  to  remove, 
conceal,  suppress,  or  in  any  way  pre- 
vent the  production  of  documentary 
or  other  evidence  at  an  expected  trial; 
agreements  to  procure  witnesses  to 
testify  to  a  certain  state  of  facts;  agree- 
ments to  indemnify  sheriffs  and  other 
executive  officers  of  a  court  for  a  will- 
ful violation  or  neglect  of  their  official 
duty;  and  a  great  variety  of  others: 
Ferris  v.  Adams,  23  Vt.  136;  Cook  v. 
Freudenthal,  80  N.  Y.  202;  Winter  v. 
Kinney,  1  N.  Y.  365;  Richardson  v. 
Crandall,  48  N.  Y.  348;  Barnard  v. 
Viele,  21  Wend.  88;  People  v.  Mei- 
ghan,  1  Hill,  298  (cases  of  bonds  taken 
colore  officii);  Dawkins  v.  Gill,  10  Ala. 
200;  Odineal  v.  Barry,  24  Miss.  9; 
Valentine  v.  Stewart,  15  Cal.  387,  404, 
405,  and  cases  cited;  Patterson  v. 
Donner,  48  Cal.  369,  379;  Speck  v. 
Dausnian,  7  Mo.  App.  165  (agreement 
between  the  parties  to  a  pending 
divorce  suit  held  void);  Hamilton  v. 
Hamilton,    89   111.    349   (ditto);  Com- 


stock  V.  Adams,  23  Kan.  513;  33  Am. 
E,ep.  191  (an  agreement  not  to  dis- 
turb a  decree  for  divorce  wrongfully 
granted,  invalid);  Bradley  v.  Cool- 
baugh,  91  111.  14S  (a  special  agree- 
ment among  the  creditors  of  an 
absconding  debtor,  providing  for  ju- 
dicial proceedings  in  the  name  of  one 
for  the  benefit  of  all,  held  valid);  Aver- 
beck  V.  Hall,  14  Bush,  505  (a  contract 
to  endeavor  to  procure  the  dismissal  of 
a  criminal  prosecution,  void);  Breath- 
wit  y.  Rogers,  32  Ark.  758;  Lind- 
say V.  Smith,  78  N.  C.  328;  24  Am. 
Rep.  463;  Mahler  v.  Phoenix  Ins.  Co., 
9  Heisk.  399;  Veramendi  v.  Hutchius, 
48  Tex.  531;  Laing  v.  McCall,  50  Vt. 
657;  Wight  v.  Rmdskopf,  43  Wis. 
344;  Ecker  v.  Bohn,  45  Md.  278; 
Ecker  v.  McAllister,  45  Md.  290; 
Glenn  v.  Mathews,  44  Tex.  400; 
[Moyer  v.  Cantieny,  41  Minn.  242  (a 
contract  to  secure  a  pardon,  improp- 
er methods  not  beint,'  contemplated, 
valid);  Bowman  v.  Phillips,  41  Kan. 
364;  13  Am.  St.  Rep.  292  (an  agree- 
ment by  attorneys  at  law  to  defend 
persons  for  criminal  offenses — viola- 
tions of  prohibitory  liquor  laws — which 
were,  in  contemplation  of  all  the  par- 
ties, to  be  committed  in  the  future, 
void).] 


§  936 


EQUITY   JURISPRUDENCE. 


1344 


habitation  or  prostitution;^  contracts  which  constitute 
or  amount  to  champerty  or  maintenance,  these  being 
highly  criminal  at  the  common  law;^  contracts,  executed 
or  executory,  given  upon  the  consideration  of  or  stipulat- 
ing for  the  compounding  a  felony,  the  forbearance  to 
prosecute  for  a  crime,  or  the  abandonment  of  a  pending 
criminal  prosecution.' 


'  All  contracts  providing  for  future 
illicit  intercourse,  and  all  unsealed 
contracts  upon  the  consideration  of 
past  intercourse,  were  void  at  law  as 
well  as  in  equity.  On  account  of  the 
arbitrary  effect  given  to  a  seal,  con- 
tracts based  upon  the  consideration  of 
past  intercourse,  if  sealed,  were  not 
void  at  the  common  law;  and  this  fact 
furnished  an  occasion  for  the  exercise 
of  the  equitable  jurisdiction  in  can- 
celing such  instruments,  since  there 
was  no  defense  at  law.  In  most  of 
the  states  where  the  common-law 
effect  of  the  seal  has  been  abrogated, 
or  where  a  seal  is  not  conclusive  evi- 
dence of  consideration,  this  technical 
distinction  can  no  longer  exist:  Ben- 
gon  V.  Nettlefold,  3  Macn.  &  G.  94, 
102,  103;  Batty  v.  Chester,  5  Beav. 
103;  Smyth  v.  Griffin,  13  Sim.  245; 
Hill  V.  Spencer,  Amb.  (541,  836;  Gray 
V.  Mathias,  5  Ves.  286;  and  cases 
cited  ante,  §  402,  note  1.  In  the  same 
class  are  leases  of  premises  for  the 
purpose  of  being  used  as  houses  of 
prostitution,  or  for  other  known  ille- 
gal objects:  Newby  v.  Sharpe,  L.  R. 
8  Ch.  Div.  39;  Riley  v,  Jordan,  122 
Mass.  231;  Marlatt  v.  Warwick,  19 
N.  J.  Eq.  439;  Cutler  v.  Tattle,  19 
N.  J.  Eq.  549,  562;  Sweet  v.  Tinsiar, 
52  Barb.  271;  D'Wolf  v.  Pratt,  42  111. 
198;  Smith  v.  White,  L.  R.  1  Eq. 
626. 

'  The  common-law  rules  concerning 
champerty  and  maintenance  have  been 
greatly  modified  in  the  United  States, 
and  to  a  large  extent  abrogat^l. 
Many  agreements  concerning  litiga- 
tions, legal  controversies,  and  disputed 
claims,  which  were  condemned  by  the 
ancient  law,  are  not  only  sustain9<l  by 
the  modern  law  of  this  country,  but 
are  of  frequent  occurrence.  The  good 
policy  of  the  change  may  well  be 
doubted.  Many  other  ancient  com- 
mon-law rules,  which  modern  civ  iliza- 
tion  came  to  regard  as  merelv  arbi- 
trary  and   oppressive,   are   found   by 


experience,  after  their  abolishment,  to 
have  been  wise,  and  based  upon  the 
unchangeable  facts  of  human  na- 
ture: Powell  V.  Knowler,  2  Atk.  224; 
Strachan  v.  Brander,  1  Eden,  303; 
cited  18  Ves.  127,  128;  Stevens  v. 
Bagwell,  15  Ves.  139;  Wallis  v,  Duke 
of  Portland,  3  Ves.  494;  Reynell  v. 
Sprye,  1  De  Gex,  M.  &  G.  660;  Knight 
V.  Bowyer,  2  De  Gex  &  J.  421; 
Strange  v.  IJrennan,  15  Sim.  346;  Hil- 
ton V.  Woods,  L.  R.  4  Eq.  432;  Sprye 
V.  Porter,  7  El.  &  B.  58;  3  Jur.,  N.  S., 
330;  Grell  v.  Levy,  16  Com.  B.,  N.  S., 
73;  Earle  v.  Hop  wood,  9  Com.  B.,  N. 
S.,  566;  7  Jur.,  N.  S.,  775;  Stanton  v. 
Embrey,  93  U.  S.  548;  Ballard  v.  Carr, 
48  Cal.  74  (agreement  giving  counsel 
an  interest  in  or  a  part  of  the  property 
to  be  recovered,  as  a  contingent  fee  for 
his  services  in  a  litigation,  valid);  Hoff- 
man V.  Vallejo,  45  Cal.  564  (ditto); 
Dorwin  v.  Smith,  35  Vt.  69;  Thurston 
v.  Percival,  1  Pick.  415;  Arden  v. 
Patterson,  5  Johns.  Ch.  44;  Thalimer 
V.  Brinkerhoff,  20  Johns.  3S6;  Slade 
V.  Rhodes,  2  Dev.  &  B.  Eq.  24;  Hollo- 
way  v.  Lowe,  7  Port.  488;  Brown  v. 
Beauchamp,  5  T.  B.  Mon.  413;  17  Am. 
Dec.  81;  Bryant  v.  Hill,  9  Dana,  67; 
Card  well  v.  Sprigg,  7  Dana,  36;  Wil- 
hite  V.  Roberts,  4  Dana,  172;  Coquil- 
lard  v.  Bearss,  21  Ind.  479;  83  Am. 
Dec.  362;  Martin  v.  Veeder,  20  Wis. 
466.  [Champertous:  .James  v.  Kerr, 
40  Ch.  Div.  449;  Blackwell  v.  Web- 
ster, 29  Fed.  Rep.  614;  Ackert  v. 
Barker,  131  Mass.  436  (contingent 
fee).  Not  champertous:  Torrence  v. 
Shedd,  112  111.  466;  Ware's  Adm'rs  v. 
Russell,  70  Ala.  174;  45  Am.  Rep.  82; 
Gilman  v.  Jones,  87  Ala.  691.] 

*  This  illegality  affects  nut  only  the 
main  agreement,  but  all  collateral  secu- 
rities given  upon  such  consideration, 
such  as  notes,  bonds,  mortgages,  etc.: 
Johnson  v.  Ogilby,  3  P.  Wms.  277; 
Shaw  v.  Reed,  30  Me.  105;  Harring- 
ton V.  Bigelow,  11  Paige.  349;  At- 
wood  V.  Fisk,  101  Mass.  363;  Swart- 


1345 


CONSTRUCTIVE    FRAUD. 


§  937 


§  937.  III.  Equitable  Jurisdiction  in  Case  of  Illegal  Con- 
tracts —  Usurious  Contracts.  — Equitable  relief  is  granted 
against  usurious  contracts,  whether  executory  or  exe- 
cuted, since,  from  considerations  of  public  policy,  the  two 
parties  are  not  regarded  as  standing  in  pari  delicto.  While 
the  contract  is  executory,  equity  will  not  aid  the  creditor 
in  enforcing  it.  If,  therefore,  suit  is  brought  upon  such 
an  agreement,  the  borrower  may  set  up  the  usury  as  a 
defense,  without  paying  or  offering  to  pay  the  amount 
actually  borrowed,  or  legal  interest  thereon,  and  a  re- 
covery will  be  entirely  defeated.  Equity  will  never  assist 
a  party  to  carry  into  effect  his  own  intentional  violation 
of  the  law.^  It  is  well  settled  that  courts  of  equity  will 
go  farther,  and  will  give  all  the  affirmative  relief  which 
is  just  to  the  borrower.  If  the  contract  is  executor}'-,  the 
borrower  may  obtain  the  remedy  of  a  surrender  and  can- 
cellation of  the  securities  which  he  has  given  for  the  usu- 
rious loan.^     If  the  contract  is  executed,  he  may  recover 


zer  V.  Gillett,  1  Chand.  207,  209,  210; 
Averbeck  v.  Hall,  14  Bush,  505;  Lind- 
say V.  Smith,  78  N.  C.  328;  24  Am. 
Rep.  463  (an  agreement  upon  a  single 
consideration  to  do  certain  acts,  not  of 
themselves  illegal,  and  to  stop  a  crim- 
inal prosecution,  is  wholly  void);  Laing 
V.  McCall,  50  Vt.  657  (a  contract  of 
sale  of  chattels  made  in  order  to  pre- 
vent a  prosecution  for  forgery  is  void); 
Wight  V.  Rindskopf.  43  Wis.  344  (an 
agreement  to  compromise  a  criminal 
case  arising  under  the  United  States 
internal  revenue  laws  will  not  be  en- 
forced in  the  state  courts).  [See  also 
Given's  Appeal,  121  Pa.  St.  260;  6 
Am.  St.  R,ep.  795.]  As  illustrations 
of  somewhat  analogous  contracts  which 
are  not  illegal,  see  Breathwit  v.  Ro- 
gers, 32  Ark.  758  (a  promise  not  to 
bring  a  civil  action  for  damages  on  ac- 
count of  a  tort  which  is  also  a  crime, 
is  a  valid  consideration  of  a  contract, 
provided  no  promise  is  involved  not 
to  prosecute  or  give  evidence  of  the 
crime);  [also  Barrett  v.  Weber,  125 
N.  Y.  IS;  Moog  V.  Strang,  69  Ala.  98; 
but  where,  in  such  a  contract,  a  prom- 
ise not  to  prosecute  criminally  is  by 
implication  involved,  the  contract  is 
invalid:  Jones  v.  Merionethshire  etc. 
2  Eq,  Juk.  —  85 


Soc,  (1891)  2  Ch.  587;  see  further, 
last  note  under  §  402;]  Mahler  v. 
Phoenix  Ins.  Co.,  9  Heisk.  399;  Ecker 
v.  Bohn,  45  Md.  278;  Ecker  v.  Mc- 
Allister, 45  Md.  290. 

^  Mason  v.  Gardiner.  4  Brown  Ch. 
436;  Fanning  v.  Dunham,  5  Johns. 
Ch.  122;  9  Am.  Dec.  283;  Hart  v. 
Goldsmith,  1  Allen,  145;  Smith  v. 
Robinson.  10  Allen,  130;  Union  Bank 
V.  Bell,  i4  Ohio  St.  200;  Sporrer  v. 
Eifler,  1  Heisk.  633,  636;  Kukner 
V.  Butler,  11  Iowa,  419;  Spain  v. 
Hamilton,  1  Wall.  004;  O'Neil  v. 
Cleveland,  30  N.  J.  Eq.  273  (on& 
of  two  executors  loaned  money  of  th& 
estate  on  bond  and  mortgage,  reserv- 
ing usury,  which  he  approj)riated  to 
his  own  use;  on  a  foreclosure  by  the 
executors  on  behalf  of  the  estate,  held 
that  the  usury  could  be  set  up  as  a. 
defense);  Powers  v.  Chaplain,  30  N.  J. 
Eq.  17  (defendant  in  a  foreclosure  suit 
was  let  in  to  answer,  on  terms  which 
precluded  him  from  setting  up  usury 
as  a  defense;  usury  was  shown  by 
the  evidence.  Held,  that  the  plaintiff 
could  only  recover  the  amount  justly 
and  equitably  due);  [Cook  v.  Patter- 
son, 103  N.  C.  130. J 

=*  Peters  v.  Mortimer,  4  Edw.  Ch.  279. 


§  937 


EQUITY    JUKISrRUDENCE. 


1346 


back  the  usurious  amount  paid  in  excess  of  the  sum  actu- 
ally borrowed,  and  legal  interest  thereon.^  This  affirma- 
tive interposition  of  the  court  is  subject,  however,  to  the 
principle  that  the  plaintiff  must  himself  do  equity.  It  is 
a  firmly  settled  rule,  in  the  absence  of  contrary  statutes, 
that  where  a  borrower,  who  has  not  already  paid  the  debt, 
brings  a  suit  for  affirmative  relief  against  a  usurious  con- 
tract, he  can  obtain  the  remedy  only  upon  the  condition 
of  repaying,  or  offering  to  repay,  the  sum  which  is  justly 
and  equitably  due  to  his  creditor,  —  the  amount  actually 
loaned  and  legal  interest.  The  absence  of  such  an  ofifer 
is  ground  for  defeating  the  suit.^  Since  the  illegality  of 
usury  is  wholly  the  creature  of  legislation,  the  provisions 
of  the  statute  must  furnish  the  rule  determining  the  ex- 
tent, limits,  and  occasion  of  relief.  It  results  from  a  just 
interpretation  of  the  legislation  that  the  right  to  complain 


1  Bosanquett  v.  Dashwood,  Cas. 
t.  Talb.  38,  41;  Rawdea  v.  Shad  well, 
Amb.  269;  Fanning  v.  Dunham,  5 
Johns.  Ch,  122,  142,  143,  144;  9  Am. 
Pec.  283;  Davis  v.  Demming,  12  W. 
Va.  24t5;  Morrison  v.  Miller,  46  Iowa, 
84;  Gantt  v.  Grindall,  49  Md.  310 
(where  the  usurious  interest  already 
paid  and  the  installments  of  the  prin- 
cipal paid  together  equal  or  exceed 
tlie  amount  of  the  actual  loan  secured 
by  a  usurious  mortgage,  equity  Iwill 
restrain  any  suit  or  proceeding  to 
f.^reclose  the  mortgage);  [Moseley  v. 
l^rown,  76  Va.  419;  Dickersoa  v. 
Thomas,  67  Miss.  777.  In  statiug  ac- 
count between  the  parties,  credit  will 
be  allowed  upon  the  principal  for  what- 
ever usurious  interest  has  been  paid: 
Norvell  V.  Hedrick,  21  W.  Va.  523.] 
See  also  cases  cited  in  the  next  note. 
In  one  or  two  states,  by  reason  of  a 
statutory  requirement,  it  seems  that 
tlie  borrower  can  recover  back  the 
entire  sum  which  has  been  paid, 
and  not  merely  the  usurious  excess. 
Wherever  the  usurious  loan  is  con- 
cealed under  the  appearance  of  a  pre- 
tended sale,  equity  will  look  at  the 
real  transaction,  and  give  relief  by 
setting  aside  the  sale:  Waller  v. 
Dalt,  1  Ch.  Cas.  276;  1  Dick.  8;  Barny 
V.  Beak,  2  Ch.  Cas.  136;  Barker  v. 
Vansommer,  1  Browu  Ch.  149. 


*  Mason  v.  Gardiner,  4  Brown  Ch 
436;  Fanning  v.  Dunham,  5  Johns 
Ch.  122,  142,  143,  144;  9  Am.  Dec.  283 
Rogers  v.  Rathbun,  1  Johns.  Ch.  367 
Williams  v.  Fitzhugh,  37  N.  Y.  444 
Ballinger  v.  Edwards,  4  Ired.  Eq.  449 
Ware  v.  Thompson,  13  N.  J.  Eq.  66 
Whitehead  v.  Peck,  1  Ga.  140;  No- 
ble V.  Walker,  32  Ala.  456;  Ruddell 
V.  Ambler,  18  Ark.  369;  Sporrer  v. 
Eifler,  I  Heisk.  633,  636;  Alden  v. 
Diossy,  16  Hun,  311;  Purnell  v. 
Vaughan,  82  N.  C.  134;  Campbell  v. 
Murray,  62  Ga.  86;  Pickett  v.  Mer- 
chants' Nat.  Bank,  32  Ark.  346;  Mor- 
rison V.  Miller,  46  Iowa,  84;  [see  also 
§391;  Matthews  v.  Warner,  6  Fed. 
Rep.  465;  Carver  v.  Brady,  104  N.  C. 
220;  Whatley  v.  Barker,  79  Ga.  790; 
Grider  v.  Driver,  46  Ark.  64;  Wygant 
V.  Dahl,  26  Neb.  562;  Neurath  v.  flecht, 
62  Md.  221.]  The  same  principle  has 
been  applied  to  a  lender  seeking  to 
reform  a  usurious  security  in  a  state 
where  the  statute  only  avoided  the 
excess  of  illegal  interest:  Corby  v. 
Beau,  44  Mo.  379.  In  one  or  two 
states  the  statute  requires  courts  of 
equity  to  grant  affirmative  relief  to 
the  borrower,  without  imposing  any 
condition  as  above  described:  Bissell 
V.  Kellogg,  60  Barb.  617;  and  see 
Cooper  V.  Tappan,  4  Wis.  376;  [Turner 
V.  Turner,  SO  Va.  379.] 


1347 


CONSTRUCTIVE    FRAUD. 


§938 


is  a  personal  one,  belonging  only  to  the  borrower  and  his 
representatives;  no  other  part}^  is  entitled  to  relief,  defens- 
ive or  affirmative.  The  doctrine  is  therefore  generally 
settled,  that  where  land  subject  to  a  usurious  mortgage  is 
conveyed  to  a  grantee  who  assumes  the  payment  thereof 
as  a  part  of  the  consideration  of  the  conveyance,  he  can- 
not set  up  the  usury  either  as  a  defense  to  a  foreclosure 
or  as  a  ground  for  a  cancellation  of  the  security.  The 
same  is  true  of  any  transferee  of  property  who,  as  a  part 
of  the  transaction,  assumes  payment  of  a  usurious  debt. 
For  the  same  reason  a  subsequent  mortgagee  or  encum- 
brancer cannot  defeat  a  prior  encumbrance  or  procure  it 
to  be  set  aside  upon  allegations  of  its  usurious  character.* 
§  938.  Gaining  Contracts.  —  In  gaming  contracts,  un- 
like usurious  loans,  it  cannot  be  said  that  one  party  takes 


^  The  reasons  for  these  conclusions 
given  by  different  courts  in  the  fol- 
lowing cases  are  not  always  the  same; 
but  they  are  not  conflicting:  De  Wolf 
V.  Johnson,  10  Wheat.  367,  392;  Green 
V.  Kemp,  13  Mass.  515,  575;  7  Am. 
Dec.  169;  Shufelt  v.  Shufelt,  9  Paige, 
137,  145;  37  Am.  Dec.  .381;  Cole  v. 
Savage,  10  Paige,  583;  Post  v.  Dart, 
8  Paige,  639,  641;  Morris  v.  Floyd,  5 
Barb.  130;  Sands  v.  Church,  6  N.  Y. 
347;  Merchants'  Ex.  Bank  v.  Com- 
mercial etc.  Co.,  49  N.  Y.  635,  643; 
Knickerbocker  Life  Ins.  Co.  v.  Nelson, 
78  N.  Y.  137,  150,  and  cases  cited; 
Barthet  v.  Elias,  2  Abb.  N.  C.  364; 
Spaulding  V.  Davis,  51  Vt.  77;  Citizens' 
Bank  v.  Cook,  61  Ga.  177;  Lee  v. 
Stiger,  30  N.  J.  Eq.  610;  Reed  v. 
Eastman,  50  Vt.  67  (a  purchaser  of 
the  mortgaged  property  cannot  set  up 
the  defense);  McGuire  v.  Van  Pelt, 
55  Ala.  344  (nor  an  assignee  of  the 
mortgagor);  Pickett  v.  Merchants' 
Nat.  Bank,  32  Ark.  346  (nor  a  third 
person  who  has  assumed  the  debt); 
Lamoille  Co.  Nat.  Bank  v.  Bingham, 
50  Vt.  105;  28  Am.  Rep.  490  (nor  can 
a  surety  avail  himself  of  usury  paid 
by  his  principal);  Ready  v.  Huebner, 
16  Wis.  692;  32  Am.  Rep.  749  (a  sub- 
sequent mortgagee  cannot  set  up  usury 
in  a  prior  mortgage  as  a  defense  tliere- 
to);  Bensley  v.  Homier,  42  Wis.  631 
(nor  can  a  subsequent  judgment  cred- 


itor); [Lea  V.  Feamster,  21  W.  Va. 
108;  45  Am.  Rep.  549;  Nance  v.  Greg- 
ory, 6  Lea,  343;  40  Am.  Rep.  41.]  It 
seems,  however,  under  the  statutes  of 
some  states,  that  a  subsequent  mort- 
gagee, when  made  a  defendant  in  a 
suit  to  enforce  a  prior  mortgage  given 
by  his  mortgagor,  may  allege  usury 
thereon  as  a  defense:  See  Union  etc. 
Sav.  Inst.  V.  Clark,  59  How.  Pr.  342. 
In  the  recent  case  of  Knickerbocker 
Life  Ins.  Co.  v.  Nelson,  78  N.  Y.  137, 
A  gave  a  usurious  mortgage  on  certain 
land;  he  afterwards  conveyed  the  land 
subject  to  the  mortgage  to  B,  who  as- 
sumed to  pay  it  as  "part  of  the  pur- 
chase price  of  the  premises  "  ;  B  thea 
conveyed  the  same  land  to  C,  subject 
to  the  mortgage,  who  in  like  manner 
assumed  its  payment;  finally,  C  recon- 
veyed  the  land  to  A,  but  this  convey- 
ance was  not  subject  to  the  mortgage. 
The  mortgagee  brought  suit  to  enforce 
the  mortgage,  but  asked  no  relief 
against  B  and  C,  and  made  no  allega- 
tions showing  tliat  he  had  accepted 
the  agreements  between  A  and  them. 
Held,  that  A  was  not  debarred  from 
setting  up  the  defense  of  usury  and 
defeating  the  action.  See  also  Hetfield 
V.  Newton,  3  Sand.  Ch.  564;  Hartley 
V.  Harrison,  24  N.  Y.  170,  173;  Scher- 
merhorn  v.  Talman,  14  N.  Y.  93;  Cope 
v.  Wheeler,  41  N.  Y.  303;  [Brooks  v, 
Todd,  79  Ga.  692.] 


I  938  EQUITY    JURISPRUDENCE.  1348 

advantage  of  the  necessities  of  the  other,  who  is  in  vincu- 
lis;  both  act  freely  and  are  in  pari  delicto;  the  general 
maxims  therefore  apply.  While  the  contract  is  still  ex- 
ecutory, a  court  of  equity  will  not  aid  the  creditor  to  en- 
force it,  the  illegality  being  a  perfect  defense  in  equity  as 
well  as  at  law.'  After  the  agreement  has  been  executed 
by  the  loser's  payment  of  the  money,  or  by  a  conveyance 
of  land  or  other  property,  equity  will  not  interfere  on  his 
behalf  and  decree  a  recovery  back  of  the  money  paid,  or 
a  cancellation  of  the  conveyance  or  assignment,  unless 
perhaps  there  were  circumstances  of  fraud,  oppression, 
duress,  and  the  like,  in  procuring  the  payment  or  trans- 
fer, which  would  of  themselves  be  a  sufficient  ground  for 
equitable  interposition  distinct  from  the  mere  illegality.^ 
Finally,  as  long  as  the  contract  is  still  executory,  equity 
has  jurisdiction  to  aid  the  losing  party  by  ordering  the 
written  agreement  and  other  securities  to  be  surrendered 
up  and  canceled,  and  by  granting  the  ancillary  remedy 
of  injunction  to  restrain  their  negotiation,  transfer,  or 
enforcement;  and  when  the  circumstances  are  such  that 
the  defensive  remedy  at  law  would  not  be  equally  certain, 
complete,  and  adequate,  this  jurisdiction  ought  to  be  and 
will  be  exercised.  This  conclusion  is  sustained  by  the 
highest  authority,  and  is  in  perfect  accord  with  prin- 
ciple.* 

^  Bosanquett  v,  Dasliwood,  Cas.   t.  Md.     46;     Weakley    v.    Watkins,    7 

Talb.  38,  41;  Adams  v.  Gay,   19  Vt.  Humph.  356,  357;  and  see  Solinger  v. 

.358;  Spaulding  v.  Preston,  21  Vt.  9;  Earle,  82  N.  Y.  393,  397,  399.    Where 

50  Am.  Dec.  68;  Adams  v.  Barrett,  5  money  is  loaned  expressly  to  enable 

Ga.  404;  Gotwalt  v.  Neal,  25  Md.  434;  the  borrower  to  pay  a  gambling  debt. 

Pope  V,  Chafee,  14  Ricli.  Eq.  69;  and  it  may  be  recovered  back:    Ex  parte 

cases  in  the  two  following  notes.  Pyke,  L.  R.  8  Ch.  Div.  754,  756,  757. 

*  There  were  a  few  early  dicta,  and  [It  is  said  that  advances  made  by  a 

perhaps  decisions,  opposed  to  this  con-  broker   who   has   no  interest    in   the 

elusion;  but  they  have  been  overruled:  stock-gambling  contract   are  recover- 

Bosanquett  v.  Dash  wood,  Cas.  t.  Talb.  able  by  him:  Hawley  v.  Bibb,  69  Ala. 

38,  41;    Rawdon   v.   Shadwell,    Anib.  52;   but   see    Harvey  v.   Merrill,    150 

269;  Thomas  v.  Cronise,   16  Ohio,  54;  Mass.  I;  15  Am.  St.  Rep.  159.] 
Cowles   V.    Raguet,   14   Ohio,   38,   55;         ^  See    Adams's    Equity,    360,    361, 

Adams  v.  Gay,  19  Vt.  358;  Spaulding  362  (m.  p.  175).  where  this  doctrine  is 

V.  Preston,  21  Vt.  9;  50  Am.  Dec.  68;  expressly   stated.     Judge    Story   also 

Gotwalt  V.  Neal,  25  Md.  434;  Adams  lays  down  the  same  rule  in  tlie  most 

V.  Barrett,  5  Ga.  404;  Pope  v.  Chafee,  positive  manner:    Eq.  Jur.,  sec.  303; 

14  Rich.  Eq.  69;  Paine  v.  France,  2G  Rawdea    v.    Shadwell,     Arab.     269;. 


1349 


CONSTRUCTIVE    FRAUD. 


§  939 


§  939.  Other  Illegal  Contracts. — I  have  already,  in 
the  former,  volume,  stated  and  illustrated  the  general 
rules  which  determine  when  relief  will  or  will  not  be 
given  in  cases  of  ordinary  illegal  contracts.  Without 
repeating  what  was  there  said,  I  purpose  to  explain  the 
meaning  and  effect  of  the  three  maxims  which  limit  the 
exercise  of  the  equitable  jurisdiction,  and  to  ascertain 
and  formulate,  if  possible,  such  conclusions  as  shall  be 
sustained  both  by  principle  and  by  authority.'  These 
maxims  are,  Ex  turpi  causa  non  oritur  actio.  In  pari  delicto 
vielior  est  conditio  possidentis,  or  In  pari  delicto  melior  est 
conditio  defendentis.     What  is  meant  by  the  "condition" 


Woodrofife  v.  Farnhatn,  2  Vern.  291. 
In  Lord  Portarlington  v.  Soulby,  3 
Mylne&  K.  104,  the  plaintiff  had  given 
a  bill  of  exchange  for  money  lost  in 
gaming,  which  had  been  transferred 
to  the  defendant  under  such  circum- 
stances that  he  was  not  a  bona  fide 
holder  without  notice.  Plaintiff  sought 
to  have  the  bill  surrendered  and  can- 
celed and  the  defendant  enjoined  from 
negotiating  it  and  suing  on  it  at  law. 
The  lord  chancellor  held  that  the  juris- 
diction was  settled  beyond  a  doubt, 
that  the  plaintiff  was  entitled  to  main- 
tain the  suit,  and  he  continued  an  in- 
junction which  had  been  granted.  In 
Wynne  v.  Callander,  1  Russ.  293,  29(i, 
297,  plaintiff  lost  money  at  play  to  de- 
fendant, and  gave  bills  of  exchange 
therefor;  when  they  fell  due  he  re- 
newed them  by  giving  others  in  their 
place.  He  brought  a  suit  to  have  the 
latter  securities  surrendered  and  can- 
celed. The  master  of  rolls  granted 
the  relief  as  asked,  and  the  exist- 
ence of  the  jurisdiction  was  hardly 
denied  by  counsel,  and  was  regarded 
by  the  court  as  unquestionable.  The 
master  of  rolls  expressly  declared  the 
plaintiff  par^ireps  criminis,  and  for  that 
reason,  and  because  of  his  delay  in 
suing,  refused  to  give  him  costs.  In 
Osbaldiston  v.  Simpson,  13  Sim.  513, 
securities  given  by  the  plaintiff  in  a 
gaming  transaction  were  decreed  to  be 
given  up  and  canceled,  the  vice-chan- 
cellor treating  the  jurisdiction  as 
firmly  settled.  See  also  Chapia  v. 
Dake,  57  111.  295;  11  Am.  Rep.  15; 
[Tantum  v.  Arnold,  42  N.  J.  Eq.  63.] 
In  Skipwith  v.  Strothcr,  3  Rand.  214, 


it  was  held  that  a  court  of  equity  may 
enjoin  a  judgment  recovered  at  law 
on  a  gaming  contract.  This  decisioa 
necessarily  involves  the  whole  doc- 
trine. If  the  creditor  may  be  re- 
strained from  enforcing  a  judgment, 
he  may  certainly  be  restrained  from 
proceeding  upon  the  contract  to  obtain 
a  judgment;  and  if  the  remedy  of  in- 
junction is  conceded,  the  jurisdiction 
to  order  a  surrender  and  cancellation 
cannot  be  consistently  denied.  When- 
ever the  loser's  contract  is  no  longer 
executory,  but  he  has  performed  it  by 
conveying  land  or  other  property,  the 
case  is  entirely  different;  to  relieve 
him  would  be  a  violation  of  the  gen- 
eral maxim.  A  cancellation  of  the 
conveyance  is  then  properly  denied: 
Cowles  V.  Raguet,  14  Ohio,  38,  55; 
Thomas  v.  Cronise,  16  Ohio,  54.  If 
in  these  or  other  cases  courts  have 
gone  farther,  and  held  that  equity  has 
no  power  to  cancel  an  executory  gaming 
security,  they  have  clearly  misappre- 
hended and  misapplied  the  general 
maxim,  and  have  reached  a  conclusion 
opposed  to  authority  as  well  as  to 
principle.  Of  course,  the  equitable 
jurisdiction  to  grant  the  aflBrmative 
relief  of  cancellation  will  not  be  exer- 
cised  whenever  the  losing  party  might 
have  a  perfect,  certain,  and  adequate 
remedy  at  law  by  way  of  defense;  it 
is  therefore  peculiarly  appropriate 
when  the  gaming  securities  consist  ol 
negotiable  instruments.  It  has  not, 
however,  been  entirely  confined  to 
that  species  of  securities. 
1  §S  401,  40J,  403,  and  notes. 


§  940  EQUITY   JURISPRUDENCE.  1350 

of  the  possessor,  or  the  defendant,  which  is  so  much 
"better"  —  or,  as  the  maxim  sometimes  reads,  "stronger" 
(potior)  —  that  it  will  not  be  disturbed  ?    Plainly,  it  is  not 
the  condition  merely  of  an  executory  contract  having  been 
made  and  subsisting  between  the  parties;  the  maxim  does 
not  refer  to  the  condition  of  the  executory  contract  which 
has  been  entered   into  remaining  unaltered  and  unmo- 
lested; otherwise  the  setting  up  the  illegality  as  a  defense 
would  be  prohibited,  for   it  would   directly  violate  the 
maxim.    The  defense  is  always  allowed,  and  this  necessa- 
rily disturbs  the  condition  of  the  contract.     The  "condi- 
tion" referred  to  in  the  maxim  is  clearly  the  condition  of 
the  parties  with  respect  to  their  property  rights  created  by 
or  resulting  from  the  contract.    If  the  contract  is  still  ex- 
ecutory, the  promisor  is  left  undisturbed  in  the  possession 
of  the  money  or  other  property  which  he  agreed  to  pay 
or  transfer;  if  the  contract  has  been  executed,  the  prom- 
isee is  left  undisturbed  in  the  possession  of  the  money  or 
other  property  which  has  been  paid  or  conveyed  to  him. 
This  is  the  true  meaning  of  the  maxim,  and  it  involves 
no  requirement  that  the  contract,  as  a  mere  executory  in- 
strument, should  remain  unmolested;  it  deals  solely  with 
the  rights  flowing,  or  which  would  flow,  from  the  agree- 
ment.    The    form,  therefore,  which    correctly  expresses 
the  thought  is,  Melior  est  conditio  possidentis;  "defenden- 
tis  "  is  appropriate  only  when  regarded  as  equivalent  to 
possidentis.     The  foregoing  analysis  is  not  a  mere  verbal 
discussion.     Upon  the  true  signification  given  to  "  con- 
dition," in   the  maxim,  depends  to   a  great  extent    the 
doctrine  concerning  affirmative  equitable  relief  against 
illegal  contracts. 

§  940.  In  Pari  Delicto  —  General  Rules.  —  The  proposi- 
tion is  universal  that  no  action  arises,  in  equity  or  at 
law,  from  an  illegal  contract;  no  suit  can  be  maintained 
for  its  specific  performance,  or  to  recover  the  property 
agreed  to  be  sold  or  delivered,  or  the  money  agreed  to  be 
paid,  or  damages  for   its  violation.     The  rule  has  some- 


1351 


CONSTRUCTIVE    FRAUD. 


§  940 


times  been  laid  doy\''n  as  tbough  it  Avere  equally  universal, 
that  where  the  parties  are  in  pari  delicto,  no  affirmative 
relief  of  any  kind  will  be  given  to  one  against  the  other. 
This  doctrine,  though  true  in  the  main,  is  subject  to  limi- 
tations and  exceptions  which  it  is  the  special  object  of  the 
present  inquiry  to  determine.'  As  applications  of  this 
principle,  the  following  rules  may  be  regarded  as  settled, 
where  the  parties  are  in  pari  delicto:  If  the  contract  has 
been  voluntarily  executed  and  performed,  a  court  of 
equity  will  not,  in  the  absence  of  controlling  motives  of 
public  policy  to  the  contrary,  grant  its  aid  by  decreeing  a 
recovery  back  of  the  money  paid  or  property  delivered,  or 
a  cancellation  of  the  conveyance  or  transfer.'^  As  long 
as  the  contract  is  executory,  it  cannot  be  enforced  in  any 
kind  of  action  brought  directly  upon  it;  the  illegality  con- 
stitutes an   absolute  defense.^     As  an  application  of  the 


'  Bosanquetfc  v,  Dashwood,  Cas.  t. 
Talb.  38;  Neville  v.  Wilkinson,  1 
Brown  Ch.  543,  547;  cited  Jacob,  67; 
Rawden  v.  Shadwell,  Arab.  209; 
Astley  V.  Reynolds,  2  Strange,  915; 
Smith  V.  Bromlev,  2  Doug.  696,  697, 
698;  Osborne  v.  Williams,  18  Ves.  379; 
St.  John  V.  St.  John,  11  Ves.  526,  535, 
536;  Knowles  v.  Haughton,  1 1  Ves. 
168;  Rider  v.  Kidder,  10  Ves.  300, 
366;  Tliomson  v.  Thomson,  7  Ves. 
470;  East  I.  Co.  v.  Neave,  5  Ves.  173, 
181,  184;  Watts  v.  Brooks,  3  Ves.  612; 
Sharp  V.  Taylor,  2  Phdl.  Ch.  801; 
Batty  V.  Chester,  5  Beav.  103;  Smith  v. 
White,  L.  R.  1  Eq.  6-J6;  Newby  v. 
Sharpe,  L.  R.  8  Ch.  Div.  39;  Svkes  v. 
Beadon,  L.  R.  11  Ch.  Div.  170;  York  v. 
Merritt,  77  N.  C.  213;  Shaw  v.  Carlile, 
9  Heisk.  594;  Iiihabitantsof  Worcester 
V.  Eaton.  11  Mass.  308,  375-379;  Wells 
V.  Smith,  13  Gray,  207;  74  Am.  Dec. 
631;  Harvey  v.  Varney,  98  Mass.  US; 
Harrington  v.  Bigelow.  11  Paige,  349; 
Sweet  V.  Tinslar,  52  Barb.  271; 
Solinser  v.  Earle,  82  N.  Y.  393;  Mar- 
latt  V.  Warwick,  19  N.  J.  Eq.  439; 
Cutler  V.  Tuttle,  19  N.  Eq.  549,  502; 
Ownes  V.  Ownes,  23  N.  J.  Eq.  60; 
Roman  v.  Mali,  42  Md.  513;  Jones  v. 
Grorman,  7  Ired.  Eq.  21;  Logan  v.  Gig- 
ley,  11  Ga.  243;  Gait  v.  Jackson,  9 
Ga.  151;  Adonis  v.  Barrett,  5Ga.  404; 
D'Wolf    V.    J'ratt,    42    III.    198   [also 


Irwin  V.  Williar,  110  U.  S.  510;  Gibba 
V.  Baltimore  Gas  Co..  130  N.  Y.  405; 
Leonard  v.  Poole,  114  N.  Y.  371;  11 
Am.  St.  Rep.  667;  Ellicott  v.  Cham- 
berlin,  38  N.  J.  Eq.  604;  48  Am.  Rep. 
327;  Samuels  v.  Oliver,  130  111.  73; 
Kahn  v.  Welton,  40  Ohio  St.  195; 
Horn  V.  Star  Foundry  Co.,  23  W.  Va. 
522;  Sparks  v.  Sparks,  94  N.  C.  527; 
Davis  V.  Sittig,  65  Tex.  497;  Gould  v. 
Kendall,  15  Neb.  549];  and  see  cases 
under  preceding  paragraphs  concern- 
ing various  illegal  contracts. 

a  Solinger  v.  Earle,  82  N.  Y.  39.3, 
.397,  399;  Shaw  v.  Carlile,  9  Heisk. 
504;  York  v.  Merritt,  77  N.  C.  213; 
[White  V.  Equitable  Nuptial  Bene- 
fit Union,  76  Ala.  251;  52  Am. 
Rep.  325.]  See  also  cases  cited  in  tie 
last  note,  under  the  preceding  para- 
graphs, and  ante,  under  §§  401,  402. 
Several  of  the  decisions  referred  to 
were  rendered  in  actions  at  law;  but 
as  these  rules  prevail  alike  in  e(iuity 
and  at  law,  such  cases  are  authori- 
ties. 

'  Ibid.  There  are  a  few  apparent 
exceptions  or  limitations.  If  money 
lias  been  illegally  borrowed  and  used 
by  a  corporation  with  the  assent  of  ita 
stockliolders,  the  corporation  may  be 
estopped  from  setting  up  the  illegality 
as  a  defense  to  a  suit  I)y  the  creditor: 
In  re  Cork  etc.  R'y,  L.  R.  4  Ch.  748; 


§  940 


EQUITY   JURISPRUDENCE. 


1352 


same  doctrine  merely  in  a  different  form/while  the  agree- 
ment is  executory,  courts  of  equity  may  relieve  the  debtor 
or  promising  party  by  ordering  the  written  instrument 
and  other  securities  to  be  surrendered  and  canceled,  and 
by  granting  the  ancillary  remedies  of  injunction,  dis- 
covery, and  the  like.  Whenever  the  circumstances  are 
such  that  the  defensive  remedy  at  law  would  not  be 
equally  certain,  perfect,  and  adequate,  this  jurisdiction 
will  be  exercised.  The  equitable  relief  so  conferred  does 
not  violate  the  general  maxim  concerning  parties  in  pari 
delicto;  on  the  contrary,  it  carries  that  maxim  into  effect. 
It  has  already  been  shown  that  the  maxim,  rightly  inter- 
preted, does  not  require  the  condition  of  the  parties,  with 


In  re  Magdalena  St.  Nav.  Co.,  Johns. 
690.  [See  also  ante,  §  819.]  Where 
the  contract  has  been  executed,  the 
party  in  possession  of  the  proceeds  or 
profits  may  be  unable  to  set  up  the 
illegality  to  defeat  an  action  for  an  ac- 
counting, or  to  recover  the  proceeds, 
brought  by  a  third  person  entitled  to 
the  money:  Gilliam  v.  Brown,  43 
Miss.  641;  Harvey  v.  Varney,  98  Mass. 
118;  Sykes  v.  Beadon,  L.  R.  11  Ch. 
Div.  170,  193,  197,  per  Jessel,  M.  R.; 
Worthingtonv.  Curtis,  L.  R.  1  Ch.  Div. 
419,  423;  Davies  v.  London  etc.  Co., 
L.  R.  8Ch.  Div.  469,  477;  Thomson  v. 
Thomson,  7  Ves.  470;  Tenant  v. 
Elliott,  1  Bos.  &  P.  3;  Farmer  v.  Rus- 
sell, 1  Bos.  &  P.  296;  Sharp  v.  Taylor, 
2  Phill.  Ch.  801;  Joy  v.  Campbell,  1 
Schoales  &  L.  328,  339;  McBlair  v. 
Gibbes,  17  How^.  232,  237;  Brooks  v. 
Martin,  2  V^^all.  70,  81;  Tracy  v.  Tal- 
mage,  14  N.  Y.  162;  67  Am.  Dec.  132; 
and  see  an(e,  vol.  1,  §  403,  and  note.  It 
should  be  observed  that  the  defense  of 
illegality  is  allowed  from  motives  of 
public  policy,  rather  than  from  a  re- 
gard for  the  interests  of  the  objecting 
party.  When  a  person,  having  ac- 
tively participated  in  the  illegal  trans- 
action, and,  having  obtained  all  the 
benefit  of  it  from  the  other  party,  re- 
fuses to  perform  his  own  executory  un- 
dertaking, and  sets  up  the  illegality 
as  a  defense,  his  position,  considered 
by  itself,  is  unjust,  but  the  law  sustains 
it  out  of  regard  to  the  interests  of 
society.  The  objection  comes  in  ap- 
pearance   from    the    individual     liti- 


gant, but  in  reality  from  society  — 
the  state  —  speaking  through  the 
courts:  See  Holman  v.  Johnson, 
Cowp.  341,  343,  per  Lord  Mansfield; 
Wood  v.  Griffith,  1  Swanst.  43. 
In  a  suit  for  the  specific  enforce- 
ment of  a  contract,  therefore,  if  the 
illegality  is  not  alleged,  but  is  first 
disclosed  by  the  evidence,  the  court 
will  itself  pursue  the  inquiry,  and 
dismiss  the  suit  upon  the  fact  being 
established:  Parken  v.  Whitby,  Turn,& 
R.  306;  Evans  v.  Richardson.  3  Mer. 
469.  In  respect  to  the  certainty  with 
which  the  illegality  must  be  estab- 
lished, in  order  to  be  a  defense  in 
equitable  suits  on  the  contract,  there 
is  some  discrepancy  of  opinion.  By 
one  theory,  the  agreement  must  ap- 
pear with  reasonable  certainty,  to  be 
legal;  by  the  other,  the  illegality  must 
be  clearly  shown  by  convincing  evi- 
dence. In  Johnson  v.  Shrewsbury 
etc.  R'y,  3  De  Gex,  M.  &  G.  914,  92.3, 
Knight  Bruce,  L.  J.,  said:  "The  court 
must  be  satisfied  that  there  was  not  a 
reasonable  ground  for  contending  that 
it  [i.  e.,  the  contract]  is  illegal  or 
against  the  policy  of  the  laM'. "  In 
Aubin  V.  Holt,  2  Kay  &  J.  66,  70,  Page 
Wood  (Lord  Hatherley),  V,  C,  said: 
"The  agreement  must  be  legal  or  il- 
legal; and  it  is  not  within  the  discre- 
tion of  the  court  to  refuse  specific 
performance  because  an  agreement 
savors  of  illegality;  it  must  be  shown 
to  be  illegal."  The  latter  opinion 
would  seem,  upon  principle,  to  be  the 
correct  one. 


1353 


CONSTRUCTIVE   FRAUD. 


§941 


respect  to  the  subsisting  executory  contract,  to  remain  un- 
changed and  undisturbed.  The  remedy  of  cancellation 
or  injunction,  under  the  circumstances,  is  simply  the 
equitable  proceeding  identical  with  the  setting  up  the 
illegality  as  a  defense  to  defeat  a  recovery  at  law,  and 
thus  to  get  rid  of  the  contract  as  a  binding  executory 
obligation.  The  parties  are  left  undisturbed  as  to  their 
property  rights.* 

§  941.  In  Pari  Delicto  —  Limitation  on  the  General 
Rules.  —  To  the  foregoing  rules  there  is  an  important 
limitation.  Even  where  the  contracting  parties  are  in 
pari  delicto,  the  courts  may  interfere  from  motives  of  pub- 
lic policy.  Whenever  public  policy  is  considered  as  ad- 
vanced by  allowing  either  party  to  sue  for  relief  against 
the  transaction,  then  relief  is  given  to  him.  In  pursu- 
ance of  this  principle,  and  in  compliance  with  the  de- 


*  The  setting  aside  gaming  contracts, 
heretofore  considered,  is  merely  a 
particular^  instance  of  this  general 
rule:  See  ante,  §  938,  and  cases  cited. 
Mr.  Adams  lays  down  this  rule  in  the 
most  positive  manner.  Speaking  of 
illegal  contracts,  he  says:  "Its  in- 
validity will  be  a  defense  at  law, 
while  it  remains  unexecuted;  and, 
pari  rattone,  if  its  illegal  character  be 
not  apparent  on  the  face  of  it,  will  be 
a  ground  for  cancellation  in  equity. 
....  So  long  as  the  contract  con- 
tinues executory,  the  maxim  of  in  pari 
delicto  does  not  apply;  for  the  nature 
of  the  contract  would  be  a  defense  at 
law,  and  the  decree  of  cancellation  is 
only  an  equitable  mode  of  rendering 
that     defense    effectual ":     Batty    v. 

Chester,  5  Beav.  103;  W v.  B , 

32  Beav.  574.  In  such  cases  the  party 
can  obtain  and  should  ask  nothing  but 
a  mere  cancellation.  If  his  allegations 
show  that  he  still  relies  upon  the  pro- 
visions of  the  illegal  contract  for  any 
relief  growing  out  of  it,  whether 
specific  performance,  reformation,  or 
pecuniary  recovery,  the  court  will  re- 
fuse all  aid:    Batty  v.  Chester.  5  Beav. 

103.       In  W V.    B ,  32  Beav. 

574,  a  mortgage  given  upon  a  gross- 
ly immoral  consideration  was  or- 
dered to  be  surrendered  up  and 
canceled    at    the   suit    of    the    mort- 


gagor. [See  also  Booker  v.  Wingo, 
29  S.  C.  116;  Foley  v.  Greene,  14  R.  I. 
618;  51  Am.  Rep.  419.]  It  cannot  be 
denied  that  this  view  has  been  rejected 
by  certain  American  cases,  which  seem 
to  show  some  misconception  of  the 
meaning  and  effect  of  the  general 
maxim.  See  remarks  ante,  in  note 
under  §  938;  [Shipley  v.  Reasoner,  80 
Iowa,  548.]  Where  an  assignment 
was  made  for  an  illegal  purpose,  and 
"  where  the  purpose  for  which  the  as- 
signment was  made  is  not  carried  into 
execution,  and  nothing  is  doneunder  it, 
the  mere  intention  to  effect  an  illegal 
object  does  not  deprive  the  assignor 
of  his  right  to  recover  the  property 
back  from  the  assignee  who  has  givea 
no  consideration  for  it ":  Symes  v. 
Hughes,  L.  R.  9  Eq.  475,  479;  Davies 
V.  Otty,  35  Beav.  208.  In  such  cases 
equity  will  not  permit  the  assignee  to 
work  a  fraud  and  retain  the  property 
himself  by  setting  up  the  statute  of 
frauds  as  a  defense:  Haigh  v.  Kaye, 
L.  R.  7  Ch.  409;  Lincoln  v.  Wright, 
4  De  Gex  &  J.  16.  [In  pursuance  of 
the  rule  stated  in  the  text,  equity 
may  perpetually  enjoin  suit  upon  an 
illegal  note,  although  the  defense  of 
illegality  could  be  made  in  an  action 
at  law  upon  the  note:  Booker  v. 
Wingo,  29  S.  C.  116.] 


§  942  EQUITY    JUEISPRUDENCE.  1354 

mands  of  a  high  puhlic  policy,  equity  may  aid  a  party 
equally  guilty  with  his  opponent,  not  only  by  canceling 
and  ordering  the  surrender  of  an  executory  agreement, 
but  even  by  setting  aside  an  executed  contract,  convey- 
ance, or  transfer,  and  decreeing  the  recovery  back  of  money 
paid  or  property  delivered  in  performance  of  the  agree- 
ment. The  cases  in  which  this  limitation  may  apply  and 
the  affirmative  relief  may  thus  be  granted  include  the 
class  of  contracts  which  are  intrinsically  contrary  to  pub- 
lic policy,  —  contracts  in  which  the  illegality  itself  con- 
sists in  their  opposition  to  public  policy,  and  any  other 
species  of  illegal  contracts  in  which,  from  their  particular 
circumstances,  incidental  and  collateral  motives  of  public 
policy  require  relief.^ 

§942.  Not  in  Pari  Delicto.  —  Lastly,  when  the  con- 
tract is  illegal,  so  that  both  parties  are  to  some  extent  in- 
volved in  the  illegality,  —  in  some  degree  affected  with  the 
unlawful  taint,  —  but  are  not  in  pari  delicto,  —  that  is, 
both  have  not,  with  the  same  knowledge,  willingness,  and 
wrongful  intent,  engaged  in  the  transaction,  or  the  un- 
dertakings of  each  are  not  equally  blameworthy, — a  court 
of  equity  may,  in  furtherance  of  justice  and  of  a  sound 
public  policy,  aid  the  one  who  is  comparatively  the  more 
innocent,  and  may  grant  him  full  affirmative  relief,  by 
canceling  an  executory  contract,  by  setting  aside  an  exe- 
cuted contract,   conveyance,  or  transfer,  by  recovering 

^  It  is  not  asserted  that  iu  all  con-  392;  Goldsmith  v,  Buning,  1  Eq.  Cas. 
tracts  which  are  illegal  because  op-  Al)r.  89;  Roberts  v.  Roberts,  3  P. 
posed  to  public  policy  relief  will  thus  Wms.  66,  74;  Morris  v.  MacCullock,  2 
be  given  to  a  party  in  pari  delicto;  but  Eden,  190;  Amb.  432;  Hatch  v.  Hatch, 
simply  that  in  this  class  of  contracts  9  Ves.  292,  298;  St.  John  v.  St.  John, 
the  limitation  finds  its  special  field  of  II  Ves.  526,  535,  536;  Smith  v.  Biom- 
operation.  The  equitable  remedies  of  ley,  cited  2  Doug.  696,  697,  698;  East- 
borrowers  in  usurious  contracts  are  a  abrook  v.  Scott,  3  Ves.  456;  Culling- 
familiar  illustration.  Marriage-brok-  worth  v.  Loyd,  2  Beav.  385,  390,  note; 
erage  contracts  are  another,  the  cases  McNeill  v.  Cahill,  2  Bligh,  228;  Bel- 
holding  that  money  paid  in  pursuance  laniy  v.  Bellamy,  6  Fla.  62,  103; 
of  their  stipulations  may  be  recovered  Weakley  v.  Watkins,  7  Humph.  356; 
back:  Reynell  v.  Sprye,  1  De  Gex,  M.  and  see  ante,  §  403,  and  note.  [Cox  v. 
&  G.  660,  679,  per  Knight  Bruce,  Donnelly,  34  Ark.  762;  see,  however, 
L.  J.;  Benyon  v.  Nettlefold,  3  Macn.  as  to  marriage-brokerage  contracts, 
&  G.  94,  102,  103;  Hill  v.  Spencer,  White  v.  Equitable  etc.  Union,  76  Ala. 
Amb.  641;  Rider  v.  Kidder,  10  Ves.  251;  52  Am.  Rep.  325.] 
360,   366;  Smith  v.  Bruning,  2  Vern. 


1355  CONSTRUCTIVE    FRAUD.  §  942 

back  money  paid  or  property  delivered,  as  the  circum- 
stances of  the  case  shall  require,  and  sometimes  even  by 
sustaining  a  suit  brought  to  enforce  the  contract  itself,  or 
if  this  be  impossible,  by  permitting  him  to  recover  the 
amount  justly  due,  by  means  of  an  appropriate  action  not 
directly  based  upon  the  contract.  Such  an  inequality  of 
condition  exists  so  that  relief  may  be  given  to  the  more 
innocent  party,  in  two  distinct  classes  of  cases:  1.  It 
exists  where  the  contract  is  intrinsically  illegal,  and  is  of 
such  a  nature  that  the  undertakings  or  stipulations  of 
each,  if  considered  by  themselves  alone,  would  show  the  par- 
ties equally  in  fault,  but  there  are  collateral  and  inciden- 
tal circumstances  attending  the  transaction,  and  affecting 
the  relations  of  the  two  parties,  which  render  one  of  them 
comparatively  free  from  fault.  Such  circumstances  are 
imposition,  oppression,  duress,  threats,  undue  influence, 
taking  advantage  of  necessities  or  of  weakness,  and  the 
like,  as  a  means  of  inducing  the  party  to  enter  into  the 
agreement,  or  of  procuring  him  to  execute  and  perform 
it  after  it  had  been  voluntarily  entered  into.*     2.  The 

'  Some  of  these  cases  were  decisions  While    the    decision    in    Soh'nger    v. 

at   law,  but   they   are   none   the    less  Earle,  82  N.  Y.  393,   is  correct,   the 

authorities   on  this   point   in   equity:  doubt  which   it   suggests   concerning 

Smith    V.    Bromley,    2     Doug.     696;  Smith  v.  Bromley,  2  Doug.   G9G,  and 

Browning  v.  Morris,  Cowp.  790;  Smith  other  cases  of  the  same  class,  is  un- 

V.  Cuff,  6  Maule  &  S.    160;  Atkinson  founded.     The  opinion  of  Lord  Mans- 

V.  Denby,  7  Hurl.  &  N.  934;  Bosan-  field  has  been  adopted  and  followed 

quett  V.  Dashwood,  Cas.  t.  Talb.  38,  by  other  courts,  has  been  approved  by 

40,  41;  Osborne  v.  Williams,   18  Ves.  text-writers,  and  is  based  upon  princi- 

379;  Bay  ley  v.  Williams,  4  Giff.   633  pie;  it  will  hardly  be  shaken  at  this  day 

(an  agreement  made  in  consequence  of  by  a  dictum.      [See  also  Harrington  v. 

threats  to  prosecute  the  plaintiff's  son  Grant,  54  Vt.  236;  Anderson  v.  Meri- 

for  forgery  was  canceled);    [followed  deth,  82  Kv.  564;  Harper  v.  Harjier, 

in  Foley  V.  Greene,  14  R.   I.    618;  51  85    Ky.    160;    7    Am,    St.    Rep.    579; 

Am.   Rep.  4J9;]    Davies  v.  Otty,   35  Davidson   v.    Carter,    55    Iowa,    117; 

Beav.  208  (a  conveyance  made  under  O'Conner  v.  Ward,  60  Miss.  1025  (aa 

fear  of  being  prosecuted  for  bigamy  illegal  conveyance  in  fraud  of  credi- 

was  set  aside  at  the  grantor's  suit);  tors,  made  to  and  at  the  solicitation 

Phalen    v.    Clark,    19    Conn.    421;    50  of  oue  occupying  a  fiduciary  relation 

Am.  Dec.  253;  Pinckston  v.  Brown,  3  with  the  grantor);  Williams  v.  Collins, 

Jones  Eq.   494;   see  Erie  R'y  Co.   v.  67   Iowa,    413   (a    similar   case).      In 

Vanderbilt,    5    Hun,    123.     Smith   v.  Haynes  v.   Rudd,   102  K  Y.  372,  55 

Bromley,  2  Doug.   696,  is  one  of  the  Am.   Rep.  815,  however,  it  was  held 

leading  cases.     The  limitations  which  when  the  element  of  Cf)nipounding  a 

should  be  placed  upon  this  and  kin-  felony  enters  into  a  contract,  the  p;ir- 

dred  cases  are  well   stated    in    Solin-  ties  are  necessarily  in  ■pari  delicto,  not- 

ger  v.  Earle,  82  N.  Y.  393,   397,  399.  withstanding  that  the  contract   may 


§  942 


EQUITY    JURISPRUDENCE. 


1356 


condition  also  exists  where,  in  the  absence  of  any  inci- 
dental and  collateral  circumstances,  the  contract  is  illegal, 
but  is  intrinsically  unequal;  is  of  such  a  nature  that  one 
party  is  necessarily  innocent  as  compared  with  the  other; 
the  stipulations,  undertakings,  and  position  of  one  are 
essentially  less  illegal  and  blameworthy  than  those  of  the 
others.* 


have  been  procured  by  fraud,  duress, 
or  undue  influence.  No  authorities 
are  cited  in  support  of  this  extreme 
position,  and  the  case  appears  to  be 
overruled  so  far  as  its  decision  was 
rested  on  this  ground:  Schoenerv.  Lis- 
Bauer,  107  N.  Y.  112;  Adams  v.  Nat. 
Bank,  116  N.  Y.  606;  15  Am.  St,  Rep. 
447.] 

*  Cases  of  this  class  must  largely  de- 
pend upon  their  own  particular  cir- 
cumstances. Relief  is  sometimes  given 
even  by  enforcing  the  contract  itself 
directly  or  indirectly:  Osborne  v.  Wil- 
liams,  18  Ves.  379;  W v.  B , 

32  Beav.  574;  Prescott  v.  Norris,  32 
N.  H.  101;  White  v.  Franklin  Bank, 
22  Pick.  181,  186;  Lowell  v.  Boston, 
etc.  R.  R.,  23  Pick.  24,  32;  34  Am. 
Dec.  33;  Bellamy  v.  Bellamy,  6  Fla. 
62,  103;  Poston  v.  Balch,  69  Mo.  115; 
Tracy  v.  Talmage,  14  N.  Y.  162,  167, 
67  Am.  Dec.  132,  per  Selden,  J.;  210, 
per  Comstock,  J.,  — in  whose  opinions 
the  subject  is  discussed  most  ably  fvnd 
exhaustively;  see  also  Curtis  v.  Leav- 
itt,  15  N.  Y.  9. 

Under  the  general  doctrine  of  the 
text,  a  few  more  specific  rules  have 
been  settled,  which  I  will  briefly  state. 
It  is  true,  these  rules  have  generally 
been  applied  in  actions  at  law;  but 
cases  involving  the.  same  questions, 
and  depending  upon  the  same  princi- 
ple, might  arise  in  equity,  and  these 
rules  and  decisions  would  then  fur- 
nish an  authoritative  guide  for  the 
courts  of  equity.  The  following  prop- 
ositions determine  when  an  action 
may  or  may  not  be  maintained  upon 
the  illegal  contract  itself:  1.  Wliere  a 
contract  of  sale  or  of  lending  is  made, 
or  any  other  contract  by  which  money 
or  other  property  is  transferred  or 
agreed  to  be  transferred,  the  mere 
knowledge  or  belief  oi  the  vendor  or  the 
lender,  that  the  purchaser  or  borrower 
intends  to  put  the  money  or  property 
thus  acquired  to  some  illegal  use,  does 


not  render  the  contract  void  as  against 
the  vendor  or  lender,  and  does  not 
prevent  him  from  maintaining  an 
action  upon  it  to  recover  the  purchase 
price  of  the  property  sold  or  agreed 
to  be  sold,  or  to  recover  back  the 
money  loaned.  Although  the  pur- 
chaser or  borrower  may  be  completely 
in  delicto,  and  his  own  illegal  purpose 
may  prevent  him  from  maintaining 
any  action  on  the  contract,  the  ven- 
dor or  lender  is  not  in  equal  delict. 
2.  But  if  the  illegal  purpose  of  the 
purchaser  or  borrower  enters  into  and 
forms  a  part  of  t/ie  very  contract  itself — 
in  other  words,  if  it  is  stipulated  as  a 
part  of  the  contract  that  the  money 
or  property  is  to  be  used  for  an  illegal 
purpose;  or  if  the  vendor  or  lender 
parts  with  the  property  or  money 
with  the  express  intention  on  his  own 
side  of  having  it  used  for  an  illegal 
purpose;  or  if  the  vendor  or  lender, 
knowing  of  the  unlawful  purpose  in- 
tended by  the  buyer  or  borrower, 
does  anything  in  addition  to  the  mere 
sale  or  loan  to  aid  or  carry  into  effect 
that  illegal  purpose,  — then  in  either  of 
these  cases  the  contract  is  illegal  as 
to  both  parties;  both  SlTQ  in  pari  delicto, 
and  neither  of  them  can  maintain  any 
action  upon  the  contract,  or  to  obtain 
relief  for  its  non-performance.  3. 
The  first  of  these  propositions  is  sub- 
ject, however,  to  the  following  excep- 
tions: If  the  vendor  or  lender  has 
simply  a  knowledge  that  the  pur- 
chaser or  borrower  intends  to  use 
the  property  or  money  for  the  pur- 
pose of  committing  some  positive 
crime,  such  mere  knowledge  will  pre- 
vent him  from  recovering  the  price  or 
maintaining  any  action:  Tracy  v. 
Talmage,  14  N.  Y.  162,  167,  210;  67 
Am.  Dec.  132;  Hohnan  v.  Johnson, 
Cowp.  341;  Biggs  v.  Lawrence,  3 
Term  Rep.  454;    Clugas  v.  Penaluna, 

4  Term    Rep.  466;  Waymell  v.  Reed, 

5  Term  Rep.  599;  Hodgson  v.  Temple, 


1357 


CONSTRUCTIVE    FRAUD. 


§  943 


§  943.  Second.  Constructive  Fraud  Inferred  from  the 
Condition  and  Relations  of  the  Immediate  Parties  to  the 
Transaction.  —  This  division  embraces  those  cases  in 
which  a  transaction,  although  it  may  be  perfectly  regular 


5  Taunt.  181;  Pellecatt  v.  Aiigell,  2 
Cronip.  M.  &  R.  311;  Bowry  v.  Bennet, 
1  Camp.  348;  Cheney  v.  Duke,  10  Gill 

6  J.  ]  1.  Another  group  of  author- 
ities sustains  the  doctrine  that  if  the 
vendor  or  lender  cdn  be  connected  in 
intention  with  the  illegal  purpose,  it  is 
enough  to  defeat  an  action  by  him, 
even  though  the  illegal  purpose  is  not 
expressly  specified  in  the  contract, 
and  although  he  does  not  do  any  act 
in  furtherance  of  the  illegal  purpose 
beyond  the  mere  entering  into  the 
agreement.  This  is  the  farthest  limit  to 
•vvliich  the  cases  go:  Lightfoot  v.  Ten- 
ant, 1  Bos.  &  P.  551 ;  Canuan  v.  Bryce,  3 
Barn.  &  Aid.  179;  McKinnell  v.  Robin- 
son,  3  Mees.  &  W,  434;  Gaslight  Co.  v. 
Turner,  5  Bing.  N.  C.  666;  6  Bing. 
N.  C.  324;  White  v.  Buss,  3  Cush. 
44S.  The  illegal  contract  may  also 
be  sometimes  enforced  indirectly,  at 
the  suit  of  the  more  innocent  party, 
by  an  action  not  brought  upon  the 
very  contract  itself.  It  is  a  well- 
eettled  doctrine  with  respect  to  im- 
plied contracts  that  where  an  express 
contract  does  not  involve  a  malum  in 
se,  but  is  made  illegal  solely  by  some 
statute,  and  the  parties  are  not,  from 
the  nature  of  their  respective  stipula- 
tions or  their  relations,  in  pari  delicto, 
the  more  innocent  one  may  maintain 
an  action  upon  implied  contract,  to 
recover  back  the  consideration,  or  the 
money  advanced,  or  the  value  of  the 
property,  etc.  In  such  a  case,  the  less 
guilty  party  is  entitled  to  relief, 
whether  the  agreement  has  been  exe- 
cuted on  both  sides,  or  whether  it  be 
executory  on  the  side  of  the  defend- 
ant. What  contracts  are  thus  un- 
equal in  their  illegality,  so  that  the 
doctrine  of  implied  promise  may  be 
invoked,  must  depend,  in  great  meas- 
ure, upon  the  language  of  the  statute 
creating  the  illegality.  It  may  be 
said,  in  general,  that  if  the  act  pro- 
hibited is  in  itself  innocent  or  indif- 
ferent, and  the  statute  imposes  a 
penalty  or  loss  on  one  party  only,  or 
addresses  its  prohibitions  and  sanc- 
tions in  consequence  of  a  violation  to 
one  party  only  of  the  contract,  theu 


the  illegality  of  the  two  parties  is 
unequal.  Although  the  doctrine  of 
implied  promises  and  actions  on  im- 
plied contracts  belongs  primarily  and 
peculiarly  to  the  law,  yet  this  is 
chiefly  so  as  it  affects  the  forms  of 
action  and  rules  of  pleading.  Ex- 
actly the  same  circumstances  arise  in 
equity,  and  the  granting  of  equitable 
relief  will  then  depend  upon  exactly 
the  same  principles,  although  under 
the  equitable  notions  of  remedies  the 
suit  may  not  be  regarded  or  repre- 
sented as  based  upon  an  implied 
promise:  See  Jaques  v.  Golightly,  2 
W^.  Black.  1073;  Browning  v.  Morris, 
2  Cowp.  790;  Jaques  v.  Withy,  1  H. 
Black.  65;  Williams  v.  Hedley,  8 
East,  461;  Worcester  v.  Eaton,  11 
Mass.  368;  White  v.  Franklin  Bank, 
2-2  Pick.  181;  Lowell  v.  Boston  etc. 
R.  R.,  23  Pick.  24;  34  Am.  Dec.  33; 
Atlas  Bank  v.  Nahant  Bank,  3  Met. 
581;  Mount  v.  Waite,  7  Johns.  434. 
The  doctrine  finds  one  of  its  most 
important  applications  in  the  case  of 
contracts  of  corporations  whicli  are 
made  illegal  by  their  charters,  or  by 
other  statutes,  and  a  fortiori  in  the 
case  of  their  contracts  which  are 
merely  ultra  vires:  Pratt  v.  Short,  79 
N.  Y.  437,  445-448;  35  Am.  Rep. 
531;  Tracy  v.  Talmage,  14  N.  Y.  162, 
167,  210;  67  Am.  Dec.  132  (overruling 
Leavitt  v.  Palmer,  3  N.  Y.  19,  51 
Am.  Dec.  333,  and  Talmage  v.  Pell, 
7  N.  Y.  328);  Curtis  v.  Leavitt,  15 
N.  Y.  9,  97,  per  Comstock,  J,,  and 
see  opinion  of  Selden,  J.;  Utica  Ins. 
Co.  v.  Scott,  19  Johns.  1;  Utica  Ins. 
Co.  V,  Cadwell,  3  Wend.  296;  Utica 
Ins.  Co.  V.  Bloodgood,  4  Wend.  652; 
Bufifalo  City  Bank  v.  Codd,  25  N.  Y. 
163-169;  Parker  v.  Rochester,  ,  4 
Johns.  Ch.  329,  332;  Robinson  v. 
Bland,  2  Burr.  1077.  As  to  agree- 
ments ultra  vires,  see  Bissell  v.  ivlich- 
igan  Southern  etc.  R.  R.  Co.,  22 
N.  Y.  258;  Buffett  v.  Troy  and  Bos- 
ton R.  R.  Co.,  40  K  Y.  168;  Whit- 
ney Arms  Co.  v.  Barlow,  63  N.  Y. 
62;  20  Am.  Rep.  504;  New  York 
State  L.  &  T.  Co.  v.  Helmer,  77  N.  Y. 
C4;  Oil  Cretk  etc.  R.  R.  Co.  v.  Penu- 


§  943  EQUITY    JURISPRUDENCE.  1358 

in  its  external  form,  and  valid  perhaps  by  the  original 
rules  of  the  common  law,  is  impeachable  in  equity 
because  it  lacks  that  absolute  consent  which  is  regarded  as 
essential  by  courts  of  equity.  The  equitable  conception 
of  true  consent  assumes  a  physical  power  of  the  party,  an 
intellectual  and  moral  power,  and  that  he  exercised  these 
powers  freely  and  deliberately.  While  the  execution  of  an 
instrument  in  the  regular  legal  manner  will  undoubtedly, 
in  the  absence  of  all  contrary  evidence,  raise  a  prima  facie 
presumption  that  the  consent  was  present,  the  real  con- 
sent may  be  prevented  or  destroyed  by  surrounding 
physical  circumstances,  by  the  want  of  intellectual  or 
moral  capacity  in  the  party  himself,  or  by  physical, 
intellectual,  or  moral  force  controlling  the  free  operations 
of  his  own  will.  This  phase  of  so-called  constructive 
fraud  necessarily  involves  a  great  variety  of  instances, 
and  several  degrees  of  invalidity.  It  includes  transac- 
tions absolutely  void  from  complete  incapacity,  others 
which  are  voidable,  and  others  which  are  only  presump- 
tively invalid,  and  which  throw  the  burden  of  proof  upon 
the  parties  claiming  their  benefit  to  overcome  this  pre- 
sumption.'    The  whole  subject  is  therefore  separated  into 

sylvania  Tran.  Co.,  83  Pa.  St.  160;  rior  knowledge  of  the  matter  derived 
Darst  V.  Gale,  83  111.  136;  Thompson  from  a  fiduciary  relation,  or  from 
V.  Lambert,  44  Iowa,  239;  Miners'  overmastering  influence,  or  on  the 
Ditch  Co.  V.  Zellerbach  and  Powers,  other  from  weakness,  dependence,  or 
37  Cal.  543;  99  Am.  Dec.  300;  Ex  parte  trust  justifiably  reposed,  unfair  ad- 
Chippendale,  4  De  Gex,  M.  &  G.  19;  vantage  in  a  transaction  is  rendered 
In  re  National  etc.  Soc,  L.  R.  5  Ch.  probable,  there  the  burden  is  shifted, 
309;  In  re  Cork  etc.  R'y,  L.  R.  4  Ch.  the  transaction  is  presumed  void,  and 
748;  Attorney-General  v.  Great  East-  it  is  incumbent  upon  the  stronger 
ern  Pi'y,  L.  R.  11  Ch.  Div.  449,  and  party  to  show  affirmatively  that  no 
cases  cited;  Mulliner  v.  Midland  R'y>  deception  was  practiced,  no  undue  in- 
L.  R.  11  Ch.  Div.  611.  fluence  was  used,  and  that  all  was 
'  This  last  group  was  described  in  fair,  open,  voluntary,  and  well  under- 
Cowee  V.  Cornell,  75  N.  Y.  99,  31  Am.  stood.  This  doctrine  is  well  settled. 
Rep.  428,  by  Hand,  J.:  "It  may  be  And  this  is,  I  think,  the  extent  to 
stated  as  universally  true  that  fraud  which  the  well-considered  cases  go, 
vitiates  all  contracts,  but  as  a  general  and  is  the  scope  of  constructive 
thing  it  is  not  presumed,  but  must  be  fraud."  The  learned  judge  is  clearly 
proved.  Whenever,  however,  the  re-  mistaken  in  the  last  statement,  that 
lations  between  the  contracting  par-  his  description  covers  all  instances  of 
ties  appear  to  be  of  such  a  character  "constructive  fraud";  and,  with  all 
as  to  render  it  certain  that  they  do  deference,  it  seems  to  me  that  he  has 
not  deal  on  terms  of  equality,  but  mingled  together  and  confused  two 
that  either  on  the  one  side  from  supe-  distinct   classes  of    cases,    which   are 


1359  CONSTRUCTIVE    FRAUD.  §§  944,  945 

two  branches:  1.  Transactions  void  or  voidable  with  per- 
sons totally,  or  partially  incapacitated ;  2.  Transactions 
presumptively  invalid  between  persons  in  fiduciary  rela- 
tions. 

§  944.  1.  Transactions  Void  or  Voidable  with  Persons 
Totally  or  Partially  Incapacitated. — The  incapacities  em- 
braced under  this  head  are  either  total  or  partial.  They 
may  be  created  by  the  policy  of  the  law,  such  as  coverture 
and  infancy;  they  may  be  intellectual,  such  as  insanity, 
mental  weakness,  intoxication;  they  may  result  from  ex- 
ternal forces,  physical  or  moral,  such  as  duress,  undue 
influence,  pecuniary  necessity;  or  they  may  inhere  in  the 
very  position  and  circumstances  of  the  parties,  such  as 
sailors,  expectant  heirs,  and  reversioners.  In  several  in- 
stances, which  are  placed  under  this  head  because  they 
are  governed  by  the  same  doctrine  and  rules,  it  must  be 
admitted  that  the  term  "  incapacity  "  can  be  used  only  by 
way  of  analogy.' 

§945.  Coverture.  —  At  the  common  law,  married 
women  were  without  the  capacity  to  bind  themselves  by 
contract,  and  their  agreements  were,  in  general,  void  in 
equity  as  well  as  at  law.  With  respect  to  their  equitable 
separate  .property,  however,  married  women  are  regarded 
by  equity,  independently  of  statutes,  in  many  respects  as 

governed    by    quite    different    rules,  subject  will  become  confused  and  in- 

namely,  those  in  which,  from  the  re-  accurate. 

lations   of    the   parties,   invalidity   is         '  In   other  words,  there  is  no  true 

merely  presumed,  and  the  burden  of  "incapacity  ";  the  term  is  applied  only 

proof  is  cast   upon  the  one  benefited  to  these  instances  because  the  condi- 

to    overcome    such    presumption    by  tion  of  the  parties  is  analogous  to  that 

showing    good    faith;     and    those    in  of  persons  who  are  affected  by  some 

which    the    voidable    character    is   in-  real  incapacity,  and  they  are  all  gov- 

ferred  as  a  conclusion  of  fact,  without  erned  by  the  same  rules.     The  nature 

any    presumption,    from    the    partial  and  extent  of  several  of  the  most  im- 

iucapacity  of  one  part}',  or  the  over-  portant  incapacities  mentioned  in  this 

mastering    influence    exerted   by   the  division  are  fully  discussed  in  treatises 

other.     In  the  latter  class,  if  the  evi-  upon  contracts  and  upon  persons.     I 

deuce  of   the  incapacity  or   unlawful  shall  describe  them  only  so  far  as  may 

influence  is  satisfactory,  the  voidable  be  necessary  to  indicate  the  equitable 

character  of  the  transaction  results  as  rules    concerning    them,  and  to  show 

a   necessary   conclusion;    there   is  no  the  mode  of  exercising  the  equitable 

mere  presumption  to  overcojne.     It  is  jurisdiction.     Among  these  are  cover- 

of  great  importance  to  keep  these  two  ture,    infancy,    insanity,    noti    coiniio* 

classes   distinct;  otherwise  the  whole  mentis,  intoxication,  duress,  etc. 


945 


EQUITY    JUKISPRUDENCE. 


1360 


though  they  were  single;  they  are  permitted  to  deal  with 
such  estate,  and  to  make  contracts  concerning  it;  and 
such  contracts  are  enforced  by  courts  of  equity  against 
the  property,  though  not  against  the  married  women  per- 
sonally.^ Coverture,  however,  is  no  excuse,  in  equity,  for 
fraud;  in  other  words,  the  fraud  of  a  married  woman  will 
furnish  an  occasion  for  appropriate  equitable  relief,  and 
the  fact  that  the  fraudulent  party  is  a  married  woman 
will  not  prevent  such  relief.'^  Infancy:  The  incapacity 
of  infants  to  enter  into  binding  contracts  is  the  same  in 
equity  as  in  law;  but  such  contracts  are  generally  void- 
able only,  and  may  therefore  be  ratified  after  the  infant 
attains  his  majority.  Fraud,  however,  will  prevent  the 
disability  of  infancy  from  being  made  available  in  equity. 
If  an  infant  procures  an  agreement  to  be  made  through 
false  and  fraudulent  representations  that  he  is  of  age,  a 
court  of  equity  will  enforce  his  liability  as  though  he 
were  adult,  and  may  cancel  a  conveyance  or  executed 
contract  obtained  by  fraud.' 


>  Hulme  V.  Tenant,  1  Brown  Ch.  16; 
1  Lead.  Cas.  Eq.,  4th  Am.  ed.,  679; 
Murray  v.  Barlee,  3  Mylne  &  K.  209, 
220;  Johnson  v.  Gallagher,  .3  De  Gex, 
F.  &  J.  494.  The  subject  of  married 
women's  contracts  in  equity  is  treated 
in  a  subsequent  chapter.  The  mod- 
ern legislation  concerning  married 
women's  property  and  contracts  has 
made  great  changes  in  the  rules  which 
originally  prevailed  at  law  and  in 
equity.  An  abstract  of  this  legisla- 
tion will  be  given  in  the  subsequent 
chapter  mentioned  above. 

^  Tlie  relief  may  be  defensive,  by 
defeating  a  suit  brought  by  the  mar- 
ried woMian;  or  it  may  be  affirmative, 
as  setting  aside  a  fraudulent  convey- 
ance or  agreement;  pecuniary  relief 
would  not  be  given  against  her,  per- 
sonally, on  account  of  her  fraud,  un- 
less permitted  by  the  modern  legisla- 
tion: Savage  v.  Foster,  9  Mod.  35; 
Vaughan  v.  Vanderstegen,  2  Drew. 
363,  379;  Sharpe  v.  Foy,  L.  R.  4  Ch. 
35;  In  re  Lush's  Trusts,  L.  R.  4  Ch. 
691;  McHenry  v.  Davies,  L.  R.  10  Eq. 
88;  Jones  v.  Kearney,  1  Dru.  &  War. 
134;  Hobday  v.  Peters,  28  Beav,  354; 


Schmitheimer  v.  Eiseman,  7  Bush, 
298;  Curd  v.  Dodds,  6  Bush,  681;  Sex- 
ton V.  Wheaton,  8  Wheat.  229.  The 
American  decisions  are  conflicting  on 
the  question,  how  far  a  married 
woman  is  estopped  by  fraud  from  al- 
leging her  coverture.  In  addition  to 
those  cited  ante,  in  the  section  on  es- 
toppel [§  814],  see  Keen  v.  Coleman,  39 
Pa.  St.  299;  80  Am.  Dec.  524;  Glidden 
V.  Strupler,  52  Pa.  St.  400;  Bank  of 
United  States  v.  Lee,  13  Pet.  107; 
Drake  v.  Glover,  30  Ala.  382. 

»  Ex  parte  Unity  Bank,  3  De  Gex  & 
J.  63;  Nelson  v.  Stocker,  4  De  Gex  & 
J.  458,  464;  Cory  v.  Gertcken,  2  Madd. 
40;  Wright  v.  Snowe,  2  De  Gex  &  S. 
321;  Hannah  v.  Hodgson,  30  Beav.  19, 
25;  Overton  v.  Banister,  3  Hare,  503; 
Clarke  v.  Cobley,  2  Cox,  173;  Lem- 
pri^re  v.  Lange,  L.  R.  12  Ch.  Div.  675 
(lease  obtained  by  fraud  set  aside); 
[Rice  V.  Boyer,  108  Ind.  472;  58  Am. 
Rep.  61;  Hayes  v.  Parker,  41  N.  J.  Eq. 
632.]  In  Martin  v.  Gale,  L.  R.  4  Ch. 
Div.  428,  a  deed  given  by  an  infant  to 
secure  the  repayment  of  money  ad- 
vanced for  necessaries  was  held  void- 
able, although  he  was   liable  for  th© 


1361 


CONSTRUCTIVE    FRAUD. 


946 


§  946,  Insanity.  —  In  general,  a  lunatic,  idiot,  or  per- 
son completely  non  compos  mentis  is  incapable  of  giving 
a  true  consent  in  equity,  as  at  law;  his  conveyance  or 
contract  is  invalid,  and  will  generally  be  set  aside.*  While 
this  rule  is  generally  true,  the  mere  fact  that  a  party  to  an 
agreement  was  a  lunatic  will  not  operate  as  a  defense  to 
its  enforcement,  or  as  ground  for  its  cancellation.  A 
contract  executed  or  executory  made  with  a  lunatic  in 
good  faith,  without  any  advantage  taken  of  his  position, 
and  for  his  oivn  benefit,  is  valid  both  in  equit}'-  and  at  law.' 
And  where  a  conveyance  or  contract  is  made  in  ignorance 
of  the  insanity,  with  no  advantage  taken,  and  with  perfect 
good  faith,  a  court  of  equity  will  not  set  it  aside,  if  the 
parties  cannot  be  restored  to  their  original  position,  and 
injustice  would  be  done.^  The  conveyance  or  agreement 
of  a  monomaniac  will  be  defeated  or  set  aside,  if  it  is  the 


money  actually  loaned;  and  see  Ex 
parte  Taylor,  8  De  Gex,  M.  &  G.  254. 
An  infant  may  be  estopped  from  as- 
serting his  title,  when  he  has  inten- 
tionally concealed  it:  Savage  v.  Foster, 
9  Mod.  35. 

1  Manning  v.  Gill,  L.  R.  13  Eq.  485; 
Price  V.  Berrington,  3  Macn.  &  G.  486; 
Gibson  v.  Soper,  6  Gray,  279;  66  Am. 
Dec.  414;  Arnold  v.  Richmond  Iron 
Works,  1  Gray,  434;  Allis  v.  Billings, 
6  Met.  415;  39  Am.  Dec.  744;  Howe 
V.  Howe,  99  Mass.  88;  Ingraham  v. 
Baldwin,  9  N.  Y.  45;  Beals  v.  See,  10 
Pa.  St.  56;  49  Am.  Dec.  573;  Ben- 
sell  V.  Chancellor,  5  Whart.  371,  376; 
34  Am.  Dec.  561 ;  Ballard  v.  McKenna, 
4  Rich.  Eq.  358;  Frazer  v.  Frazer,  2 
Del.  Ch.  260;  Breckenridge  v.  Ormsby, 
1  J.  J.  Marsh.  236;  19  Am.  Dec.  71; 
Ashcraft  v.  De  Armond,  44  Iowa,  229; 
Knelcamp  v.  Hidding,  31  W^is.  503; 
[Brigham  v.  Fayerweather,  144  Mass. 
50;  Crawford  v.  Scovell,  94  Pa.  St. 
40;  Penington  v.  Thompson,  5  Del. 
Ch.  328;  Ricketts  v.  Jolliff,  62  Miss. 
440;  Raynett  v.  Baluss,  54  Mich.  469; 
Warfield  v.  Warfield,  76  Iowa,  633.] 
As  to  defense  of  the  mortgagor's  lu- 
nacy set  up  in  a  foreclosure  suit,  and 
the  right  to  have  the  issue  tried  at 
law,  see  Jacobs  v.  Richards,  5  De  Gex, 
M.  &  G.  55.  A  conveyance  will  not 
be  set  aside,  on  the  ground  of  the 
2  Eq.  JuB.— M 


grantor's  lunacy,  as  against  a  bona  Jide 
purchaser:  Ashcraft  v.  De  Armond, 
44  Iowa,  229.  [But  see  Hull  v.  Louth, 
109  Ind.  315;  58  Am.  Rep.  405;  Gray 
V.  Turley,  110  Ind.  254.]  Several  of 
these  cases  hold  that  the  deeds  of  lu- 
natics are  voidable  only,  and  not  void: 
Freed  v.  Brown,  55  Ind.  310;  [Odom 
V.  Riddick,  104  N.  C.  515;  17  Am, 
St.  Rep.  686.  Held  void  in  Rogers  v. 
Blackwell,  49  Mich.  192;  Rannells  v, 
Gerner,  80  Mo.  474;  Harris  v.  Harris, 
64  Cal.  108.] 

2  Ex  parte  Hall,  7  Ves.  261,  264; 
Selby  v.  Jackson,  6  Beav.  192,  204; 
Nelson  V.  Duncombe,  9  Beav.  211; 
Snook  V.  Watts,  11  Beav.  105;  Sted- 
man  v.  Hart,  Kav,  607;  Fitzgerald  v. 
Reed,  9  Smedes  &  M.  94;  [Rhodes  v. 
Rhodes,  44  Ch.  Div.  94.] 

3  Niell  V.  Morley,  9  Ves.  478,  482;, 
Sergeson  v.  Sealy,  2  Atk.  412;  Price 
V.  Berrington,  3  Macn.  &  G.  486;. 
Manby  v.  Bewicke,  3  Kay  &  J.  342;. 
Campbell  v.  Hooper,  3  Smale  &  G. 
153;  Williams  v.  Wentworth,  5  Beav. 
325;  Jacobs  V.  Richards,  18  Beav.  .300; 
Yauger  v.  Skinner,  14  N.  J.  Eq.  3S9; 
Carr  v.  Holliday,  5  Ired.  Eq.  167;  [Ab- 
bott  v.  Creai,  56  Iowa,  175;  Gribbea 
v.  Maxwell,  34  Kan.  8;  55  Am.  Rep. 
233.]  For  an  exception,  see  Elliot  V. 
Ince,  7  De  Gex,  M.  &  G.  475. 


§947 


EQUITY    JURISPRUDENCE. 


1362 


result  of  his  insane  delusion.^  The  nature  and  extent  of 
mental  capacity  and  incapacity  are  the  same  at  law  and 
in  equity.^ 

§  947.  Mental  Weakness.  —  It  is  well  settled  that  there 
may  be  a  condition  of  extreme  mental  weakness  and  loss 
of  memory,  either  congenital,  or  resulting  from  old  age, 
sickness,  or  other  cause,  and  not  being  either  idiocy  or 
lunacy,  which  will,  without  any  other  incidents  or  accom- 
pamjing  circumstances,  of  itself  destroy  the  person's  testa- 
mentary capacity,  and  a  fortiori  be  ground  for  defeating 
or  setting  aside  his  agreements  and  conveyances.'     It  is 


'  There  has  been  some  discrepancy 
among  the  decisions  on  this  subject. 
A  few  English  cases,  adopting  a  sup- 
posed medical  theory  that  there  is  no 
such  condition  as  monomania,  hold 
that  a  person  laboring  under  any  sin- 
gle insane  delusion  is  to  be  regarded 
as  wholly  insane,  and  his  contracts  as 
therefore  voidable.  The  latest  decis- 
ions lay  down  the  rule  as  given  in  the 
text,  and  also  its  converse,  —  that  a 
conveyance  or  agreement  which  does 
not  appear  to  be  the  result  of  the  de- 
lusion is  valid  and  binding:  Jenkins  v. 
Morris,  L.  R.  14  Ch.  Div.  674,  follow- 
ing Banks  v.  Goodfellow,  L.  R.  5  Q. 
B  549,  and  Boughton  v.  Knight,  L.  R. 
::  P.  &  M.  64,  and  Smee  v.  Smee,  49 
L.  J.  P.  &  M.  8,  and  overruling  Waring 
V.  Waring,  6  Moore  P.  C.  C.  341,  and 
Smith  V.  Tebbetts,  L.  R.  1  P.  &  M.  398. 
The  case  of  Jenkins  v.  Morris,  L.  R.  14 
Ch.  Div.  674,  decided  by  the  vice-chan- 
cellor and  the  court  of  appeal,  is  a  full 
discussion  of  the  subject  and  very  re- 
markable in  its  facts.  See  also  Creagh 
V.  Blood,  2  Jones  &  L.  509;  Dew  v. 
Clarke,  5  Russ.  163,  167;  Steed  v, 
Calley,  1  Keen,  620;  Boyce  v.  Smith, 
9  Gratt.  704;  60  Am.  Dec.  313.  The 
same  rule  has  been  applied  in  this 
•country  to  wills:  Seamen's  F.  Soc.  v. 
Hopper,  33  N.  Y.  019;  Clapp  v.  Ful- 
lerton,  34  N,  Y.  190;  90  Am.  Dec. 
CSl;  Thompson  V.  Thompson,  21  Barb. 
107;  Stanton  v.  Wetherwax,  16  Barb. 
259;  Lathropv.  Am.  Bd.  of  For.  Miss., 
67  Barb.  590;  Mill's  Appeal,  44  Conn. 
484;  [Riggs  v.  Am.  Tract.  Soc,  95  N. 
Y.  503.] 

5  Bennett  v.  Vade,  2  Atk.  324,  327, 
per  Lord  Hardwicke;  Osmond  v.  Fitz- 


roy,  3  P.  Wms.    130;   Manby  v.  Be- 
wicke,  3  Kay  &  J.  342. 

'  It  is  undoubtedly  diflBcult  to  formu- 
late any  rule  for  determining  the 
amount  of  this  mental  weakness.  The 
following  has  been  adopted  by  the 
highest  authority,  and  is  clearly  just: 
"Had  the  testator  a  disposing  mem- 
ory? (.Was  he  able,  without  prompting, 
to  recollect  the  property  he  was  about 
to  bequeath,  the  manner  of  distribut- 
ing it,  and  the  objects  of  his  bounty? 
To  sum  up  the  whole  in  the  most  sim- 
ple and  intelligible  form.  Were  hla 
mind  and  memory  sufficiently  sound 
to  enable  him  to  know  and  to  under- 
stand the  business  in  which  he  was 
engaged  at  the  time  when  hi  executed 
the  will?"  If  any  of  these  questions 
must  be  answered  in  the  negative,  if 
such  an  amount  of  mind  and  memory 
does  not  exist,  then  there  is  no  testa- 
mentary capacity:  Den  ex  dem.  Ste- 
vens V,  Vancleve,  4  Wash.  C.  C.  262, 
267,  268;  Harrison  v.  Rowan,  3  Wash. 
C.  C.  580,  585,  586;  Parish  Will  Case, 
25  N.  Y.  9,  and  cases  cited;  [Camp- 
bell V.  Campbell,  130  111.  466.]  The 
same  rule  applies  to  conveyances  and 
other  agreements  ^nter  vivos:  Ball  v. 
Mannin,  3  Bligh,  N.  S.,  1;  Coleman  v. 
Frazer,  3  Bush,  300;  Shaw  v.  Dixon,  6 
Bush,  644;  Shakespeare  v.  Markham, 
72  N.  Y.  400;  [King  v.  Davis,  60  Vt. 
502.]  Undoubtedly  the  line  is  very 
difficult  to  draw  between  this  extreme 
condition  of  mental  weakness  and 
actual  lunacy  on  one  side,  and  mere 
weak-mindedness  on  the  other;  each 
case  must  largely  depend  upon  its  own 
facts;  and  some  of  the  early  cases  re- 
fused to  lay  down  any  rule:  Osmond 


1363 


CONSTRUCTIVE    FRAUD. 


§947 


equally  certain  that  mere  weak-mindedness,  whether  nat- 
ural or  produced  by  old  age,  sickness,  or  other  infirmity, 
unaccompanied  by  any  other  inequitable  incidents,  if  the 
person  has  sufficient  intelligence  to  understand  the  nature 
of  the  transaction,  and  is  left  to  act  upon  his  own  free 
will,  is  not  a  sufficient  ground  to  defeat  the  enforcement 
of  an  executory  contract,  or  to  set  aside  an  executed  agree- 
ment or  conveyance/  If,  as  is  frequently  if  not  generally 
the  case,  the  mental  weakness  and  failure  of  memory  are 
accompanied  by  other  inequitable  incidents,  and  are  taken 
undue  advantage  of  through  their  means,  equity  not  only 
may  but  will  interpose  with  defensive  or  affirmative  re- 
lief.^    Finally,  in  a  case  of  real  mental  weakness,  a  pre- 


V.  Fitzroy,  3  P.  Wms.  129;  Bennett  v. 
Vade,  9  Mod.  312,  315;  Bell  v.  Howard, 
9  Mod.  302;  Manby  v.  Bewicke,  3  Kay 
&  J.  342;  Harrod  v.  Harrod,  1  Kay  & 
J.  4,  7;  Hudson  v.  Beauchamp,  3  Bligh, 
20,  note;  Addis  v.  Campbell,  4  Beav. 
401;  Longmate  v.  Ledger,  2  GifiF.  157, 
163;  Jackson  v.  King,  4  Cow.  207;  15 
Am,  Dec.  354;  Clarke  v.  Sawyer,  3 
Sand.  Ch.  351,  357.  Notwithstanding 
the  difficulty,  there  is  certainly  such  a 
condition  of  mental  weakness  atid  want 
of  memory,  which  of  itself,  without 
any  undue  influence,  unfairness,  or 
other  incident,  will  be  ground  for  the 
interposition  of  equity  and  its  relief, 
either  defensive  or  affirmative:  See 
cases  in  next  two  notes. 

'  If  a  court  can  see  that  there  were 
no  inequitable  incidents,  such  as  un- 
due influence,  great  ignorance  and 
want  of  advice,  very  inadequate  price, 
and  the  like,  it  will  not  interfere 
merely  because  one  party  possessed 
very  much  less  intelligence  than  the 
other,  nor  because  the  transaction  is 
not  one  which  the  court  in  all  respects 
approves:  Ball  v.  Mannin,  3  Bligh,  N. 
S.,  1;  Osmond  v.  Fitzroy,  3  P.  Wms. 
129;  Lewis  v.  Pead,  1  Ves.  19;  Pratt 
V.  Barker,  1  Sim.  1;  4  Russ.  507; 
Clark  V.  Malpas,  31  Beav.  80;  Pri- 
deaux  v.  Lonsdale,  1  De  Gex,  J.  &  S. 
433;  Harrison  v.  Guest,  6  De  Gex,  M. 
&  G.  424;  8  H.  L,  Cas.  481;  Stone  v. 
Wilbern,  83  111.  105;  Pickerell  v. 
Morss,  97  111.  220;  Graham  v.  Castor, 
55  Ind.  559;  Mnlloy  v.  Ingalls,  4  Neb. 
115;   Cowee  v.  Cornell,  75  N.  Y.  91, 


99,  100;  31  Am.  Rep.  428;  Paine  v. 
Roberts,  82  N.  C.  451;  Wellemin  v. 
Dunn,  93  111.  511;  Beverley  v.  Walden, 
20  Gratt.  147;  Mann  v.  Betterly,  21 
Vt.  326;  Howe  v.  Howe,  90  ISIass.  88; 
Ex  parte  Allen,  15  Mass.  58;  Stiner  v. 
Stiner,  58  Barb.  643;  Hyer  v.  Little, 
20  N,  J.  Eq.  443;  Lozear  v.  Shields,  23 
N.  J.  Eq.  509;  Aiman  v.  Stout,  42 
Pa.  St.  114;  Dean  v.  Fuller,  40  Pa.  St. 
St.  474;  Graham  v.  Pancoast,  31  Pa.  St. 
89;  Nace  V.  Boyer,  31  Pa.  St.  99;  Greer 
v.  Greers,  9  Gratt.  330,  332;  Rippy  v. 
Gant,  4  Ired.  Eq.  543;  Thomas  v. 
Sheppard,  2  McCord  Eq.  36;  16  Am. 
Dec.  632;  Oldham  v,  Oldham,  5  Jones 
Eq.  89;  Graham  v.  Little,  3  Jones  Eq, 
152;  Long  v.  Long,  9  Md.  348;  Prewitt 
V.  Coopwood,  30  Miss.  369;  Killian  v. 
Badgett,  27  Ark.  166;  Darnell  v.  Row- 
land, 30  Ind.  342;  Wray  v.  V\'"ray,  32 
Ind.  126;  Gratz  v.  Cohen,  11  How.  1, 
19;  Hardinc;  v.  Handy,  11  Wheat.  103; 
[Dundee  Chemical  Works  v.  Connor, 
46  N.  J.  Eq.  576;  Reeve  v.  Bonwill, 
5  Del.  Ch.  1 ;  Wise  v.  Schwatzwelder, 
54  Md.  292;  Kimball  v.  Cuddy,  117 
111.  213;  Burt  v.  Quisenberry,  132  111. 
385;  McCoy  v.  Whitehonse,  30  Kan. 
433;  Beville  v.  Jones,  74  Tex.  148.] 

^  Where  mental  weakness,  not  of  it- 
self sufficient  to  destroy  capacity,  is 
accompanied  by  undue  influence,  in- 
adequacy of  price,  taking  advantage 
of  pecuniary  necessities,  ignorance  and 
want  of  advice,  misrepresentations  or 
concealments,  and  the  like,  a  contract 
or  conveyance  procured  by  their  com- 
bined means  will  be  defeated  or  set 


§  948 


EQUITY    JURISPRUDENCE. 


13G4 


sumption  arises  against  the  validity  of  the  transaction, 
and  the  burden  of  proof  rests  upon  the  party  claiming 
the  benefit  of  the  conveyance  or  contract  to  show  its 
perfect  fairness  and  the  capacity  of  the  other  party.' 

§  948.  Persons  in  Vinculis.  —  Analogous  to  the  condi- 
tion of  mental  weakness  is  that  of  pecuniary  or  other 
necessity  and  distress.  Whenever  one  person  is  in  the 
power  of  another,  so  that  a  free  exercise  of  his  judgment 
and  will  would  be  impossible,  or  even  difficult,  and 
whenever  a  person  is  in  pecuniary  necessity  and  dis- 
tress, so  that  he  would  be  likely  to  make  any  undue 
sacrifice,  and  advantage  is  taken  of  such  condition  ta 
obtain  from  him  a  conveyance  or  contract  which  is  un- 
fair, made  upon  an  inadequate  consideration,  and  the 
like,  even  though  there  be  no  actual   duress  or  threats. 


aside;  it  is  not  a  simple  presumption 
of  invalidity  which  thu3  arises,  but 
the  presumption  has  become  estab- 
lished. Of  course,  in  the  vast  major, 
ity  of  instances,  the  mental  weakness 
is  wrought  upon  through  such  inequi- 
table instrumentalities,  in  order  to  ob- 
tain a  contract  or  conveyance  for  an 
inadequate  consideration:  Huguenin 
V.  Baseley,  14  Ves.  273;  Boyse  v.  Rosa- 
borough,  6  H.  L.  Cas.  2;  Nottidge  v. 
Prince,  2  Giff.  246;  Baker  v.  Monk,  33 
Beav.  419;  Harrison  v.  Guest,  6  De 
Gex,  M.  &  G.  424;  8  H.  L.  Cas.  481; 
Moore  v.  Moore,  56  Cal.  89;  Poston  v. 
Balch,  69  Mo.  115;  White  v.  White, 
89  111.  460;  Waddell  v.  Lanier,  62  Ala. 
347;  Allore  v.  Jewell,  94  U.  S.  506;  Bo- 
gie V.  Bogie,  41  Wis.  209;  Bainter  v. 
Fults,  15  Kan.  323;  Harris  v.  Wams- 
ley,  41  Iowa,  671;  Mead  v.  Coombs, 
26  N.  J.  Eq.  173;  Lavette  v.  Sage,  29 
Conn.  577;  Whelan  v.  Whelan,  3  Cow. 
537;  Hutchinson  v.  Tindall,  3  N.  J. 
Eq.  357;  Hetrick's  Appeal,  58  Pa.  St. 
477;  Brady's  Appeal,  66  Pa.  St.  277; 
Hunt  V.  Moore,  2  Pa.  St.  105;  High- 
berger  v.  Stiffler,  21  Md.  338;  83  Am. 
Dec.  593;  Brogden  v.  Walker,  2  Har. 
<fe  J.  285;  Maddox  v.  Simmons,  31  Ga. 
512;  Rumph  v.  Abercrombie,  12  Ala. 
64;  Hill  V.  McLaurin,  28  Miss.  288; 
Tracey  v.  Sacket,  1  Ohio  St.  54;  59 
Am.  Dec.  610;  Harding  v.  Handy,  11 
Wheat.  103;  [Kilgore  v.  Cross,  I  Fed. 


Rep.  578;  Kelly  v.  Smith,  73  Wis.  191; 
Williams  v.  Williams,  63  Md.  371  (a 
remarkable  case);  Richards  v.  Donner, 
72  Cal.  207.] 

'  Longmate  v.  Ledger,  2  Giff.  157, 
164;  Kempson  v.  Ashbee,  L.  R.  10  Cli. 
15;  Harrison  v.  Guest,  6  De  Gex,  M. 
&  G.  424;  8  H.  L.  Cas.  481;  Shake- 
speare V.  Markham,  72  N.  Y.  400; 
Cowee  V.  Cornell,  75  N.  Y.  91.  99,  100; 
31  Am.  Rep.  428;  Graves  v.  White,  4 
Baxt.  38;  Bogie  v.  Bogie,  41  Wis.  2IJ9;- 
Galpin  v.  Wilson,  40  Iowa,  90;  War- 
teuiberg  v.  Spiegel,  31  Mich.  400; 
Whelan  V.  Whelan,  3  Cow.  537;  Brice 
v.  Brice,  5  Barb.  533,  549;  Highberger 
V.  Stiffler,  21  Md.  338;  83  Am.  Dec. 
593;  Marshall  v.  Billingsly,  7  Ind,  250;^ 
Martin  v.  Martin,  1  Heisk.  644,  653; 
Allore  V.  Jewell,  94  U.  S.  506;  [Wil- 
kinson V.  Sherman,  45  N.  J.  Eq.  421  -^ 
Jones  V.  Thompson,  5  Del.  Ch.  374; 
Crawford  v.  Hoeft,  58  Mich.  1;  Gates 
V.  Cornett,  72  Mich.  420;  Sands  v. 
Sands,  112  111.  225;  Dickson  v.  Kem- 
pinsky,  96  Mo.  252.]  The  whole  sub- 
ject  of  weakness  of  mind  is  practically 
involved  with  undue  influence.  See 
Huguenin  v.  Baseley,  2  Lead.  Cas.  Eq. , 
4th  Am.  ed.,  1156,  1174,  1192,  1242, 
for  a  discussion  in  the  editor's  notes. 
Many  cases  partly  turning  upon  men- 
tal weakness  will  be  found  under  the 
succeeding  paragraphs  of  this  subdivis' 
ion. 


1365 


CONSTRUCTIVE    FRAUD. 


§948 


equity  may  relieve  defensively  or  affirmatively.^  Persons 
illiterate  or  ignorant:  By  the  same  antilogy,  where  a 
person  is  illiterate  or  Ignorant  of  the  nature  and  extent 
of  his  own  rights,  or  ignorant  of  the  nature  of  the  trans- 
action in  which  he  is  engaging,  and  acts  without  pro- 
fessional or  other  advice,  and  advantage  is  taken  of  his 
condition  to  obtain  a  conveyance  or  contract  upon  an 
inadequate  consideration,  or  otherwise  unfair,  equity  will 
relieve  by  setting  it  aside  or  defeating  its  enforcement. 
The  relief  is  granted  on  the  ground  that  there  was  not 
an  intelligent  and  free  consent;  if  the  circumstances 
show  such  consent,  equity  will  not  interfere.^ 


^  Relief  will  be  granted  in  such 
cases  with  great  caution.  If  it  ap- 
pears that,  notwithstanding  his  ne- 
cessitous condition,  the  party  acted 
knowingly  and  intelligently,  with  a 
full  comprehension  of  the  situation, 
of  his  own  acts,  and  of  their  conse- 
quences, and  no  undue  pressure  was 
used,  equity  will  not  interpose,  even 
though  the  consideration  is  inade- 
quate: See  ante,  paragraphs  on  in- 
adequancy  of  consideration.  A  pre- 
sumption of  invalidity  arises  from  the 
circumstances,  but  that  presumption 
may  be  overcome:  Johnson  v.  Nott, 
1  Vern.  271;  Kemeys  v.  Hansard, 
Coop.  125;  W^illiams  v.  Bayley,  L.  R. 
1  H.  L.  200,  218;  Gould  v.  Okeden,  4 
Browi>  Pari.  C.-198;  Farmer  v.  Farmer, 
1  H.  L.  Cas.  724;  Boyse  v.  Rossbor- 
ough,  6  H.  L.  Cas.  2;  Hetrick's  Ap- 
peal, 58  Pa.  St,  477;  Blackwilder  v. 
Loveless,  21  Ala.  371;  Neilson  v.  Mc- 
Donald, 6  Johns.  Ch.  201;  French  v. 
Shoemaker,  14  Wall.  .314;  and  see  2 
Lead.  Cas.  Eq.,  4th  Am.  ed.,  1230; 
[also  Buford  v.  Louisville  etc.  R.  R. 
Co.,  82  Ky.  286;  Brown  v.  Hall,  14 
R.  L  249;  51  Am.  Rep.  375.] 

*  Stanley  v.  Robinson,  1  Russ.  &  M. 
527;  Helsham  v.  Langley,  1  Younge 
&  C.  Ch.  175;  Baker  v.  Monk,  4  De 
Gex,  J.  &  S.  388;  Clark  v.  Malpas,  4 
De  Gex,  F.  &  J.  401;  Harrison  v. 
Guest,  6  De  Gex,  M.  &  G.  424;  8 
H.  L.  Cas.  481;  Lyons  v.  Van  Riper, 
2ti  N.  J.  Eq.  337;  Connelly  v.  Fisher, 
:i  Tenn.  Ch.  382;  Hawkins  v.  Haw- 
kins, 50  Cal.  558;  Fish  v.  Leser,  69  111. 
294;  Gasque  v.   Small,  2   Strob.  Eq. 


72;  [Whittet  v.  Bush,  40  Ch.  Div.  312 
(purchase  of  reversion  from  poor  and 
ignorant  man;  see  poxt,  §  953).]  Re- 
lief is  granted  in  this  case  also  with 
the  greatest  caution.  Courts  of  equity 
have  not  in  England,  and  much  less  in 
this  country,  adopted  a  rule  that  a  con- 
veyance or  contract  cannot  be  valid 
unless  made  with  professional  advice: 
Lightfoot  V.  Heron,  3  Younge  &  C. 
586;  Haberdashers'  Co.  v.  Isaac,  3 
Jur.,  N.  S.,  611.  In  applying  the 
rules  contained  in  the  above  para- 
graph and  in  the  preceding  one,  it 
should  be  remembered  that  in  all  of 
them  the  special  circumstances — men- 
tal weakness,  necessities,  ignorance, 
etc.  —  are  assumed  to  show  the  ab- 
sence of  a  free  consent,  a  free  act  of 
the  will.  The  mere  fact,  therefore, 
that  a  party  was  very  old,  or  illiter- 
ate, or  sick,  or  in  pecuniary  necessity, 
will  not  invalidate  a  transaction,  or  be 
a  ground  for  setting  aside  or  defeating 
a  contract,  even  though  made  upon  an 
inadequate  consideration  and  without 
advice,  provided  the  evidence  shows 
that  he  was  competent  to  form  an  in- 
dependent judgment,  that  he  really 
knew  the  nature  and  effect  of  the 
transaction  in  which  he  was  engaged, 
and  acted  in  it  intelligently  and  delib- 
erately. To  impeacli  such  a  transac- 
tion requires  proof  of  actual  fraud  or 
coercion.  Courts  do  not  set  aside  con- 
veyances and  contracts  simply  because 
the  judges  may  regard  them  unfavor- 
ably: Lewis  V.  Pead,  1  Ves.  19;  Har- 
rison V.  Guest,  6  De  Gex,  M.  &.  G. 
424;    8   H.  L.    Cas.  481;   McNeill  v. 


\ 


§  949  EQUITY  JURISPRUDENCE.  1366 

§949.  Intoxication.  —  Intoxication  which  merely  ex- 
hilarates, and  does  not  materially  affect  the  understand- 
ing and  the  will,  does  not  constitute  a  defense  to  the 
enforcement  of  an  executory  agreement,  and  much  less 
is  it  any  ground  for  affirmative  relief.^  An  intoxication 
which  is  absolute  and  complete,  so  that  the  party  is  for 
the  time  entirely  deprived  of  the  use  of  his  reason,  and 
is  wholly  unable  to  comprehend  the  nature  of  the  trans- 
action and  of  his  own  acts,  is  a  sufficient  ground  for  set- 
ting aside  or  granting  other  appropriate  affirmative  relief 
against  a  conveyance  or  contract  made  while  in  that  con- 
dition, even  in  the  absence  of  any  fraud,  procurement,  or 
undue  advantage  by  the  other  party .^  Where  the  intoxi- 
cation is  not  thus  absolute  and  complete,  but  is  still  suffi- 
cient to  materially  affect  and  interfere  with  the  person's 
reason,  judgment,  and  will,  but  is  not  procured  nor  taken 
advantage  of  unfairly  by  the  other  party,  the  doctrine  is 
settled  that  a  court  of  equity  will  not  interfere  in  behtilf 
of  either  of  the  parties  to  a  contract  which  is  made  while 
one  of  them  is  in  such  a  condition.'     Finally,  although 

Cahill,  2  Bligh,  228;  Curson  v.  Bel-  unless  it  was  accompanied  by  conduct 
worthy,  3  H.  L.  Cas.  742;  Hunter  v.  positively  inequitable  of  the  other 
Atkins,  3  Mylne  &  K.  113;  Pratt  v.  party.  The  rule  seems  now  to  be  set- 
Barker,  1  Sim.  1;  Price  v.  Price,  1  De  tied,  however,  as  stated  in  the  text: 
Gex,  M.  &.  G.  308;  Hovenden  V.  Lord  Cooke  v.  Clayworth,  18  Ves.  12; 
Annesley,  2  Schoales  &  L.  607,  639;  Shackelton  v.  Sebree,  86  111.  6I(i; 
Murray  v.  Palmer,  2  Schoales  &  L.  Johnson  v.  Phifer,  6  Neb.  401;  Bates  v. 
474,  486;  Cooke  v.  Lamotte,  15  Beav.  Ball,  72  111.  108;  Prentice  v.  Achorn, 
234;  Ramsbottom  v.  Parker,  6  Madd.  2  Paige,  30;  Hutchinson  v.  Brown,  1 
6;  Cowee  v.  Cornell,  75  N.  Y.  91,  99,  Clarke  Ch.  408;  Crane  v.  Conklin,  1  N. 
100;  31  Am.  Rep.  428.  J.  Eq.  346;  22  Am.  Dec.  619;  Wiggles- 

'  Lightfoot  v.  Heron,  S  Younge  &  C.  worth  v.    Steers,    1    Hen.    &    M.    70; 

586;  Shaw  v.  Thackrah,  1  Smale  &  G.  3  Am.  Dec.    602;   French  v.  French, 

637;  Cavender  v.  Waddingham,  5  Mo.  8  Ohio,  214;   31  Am.  Dec.  441;  Phil- 

App.    457;   Shackelton    v.   Sebree,   86  lips  v.  Moore,  11  Mo.  600.    If  a  person 

111.  616;  [Thackerah  v.  Haas,  1 19  U.  S.  is  thus  completely  intoxicated,  a  party 

601;  Watson  v.  Doyle,   130   111.    415.  openly   dealing    with    hira    must,    of 

An   habitual  drunkard   is   not  neces-  course,    perceive     his     condition;     it 

sarily   an   incompetent   person:     Van  would  seem  that  tlie  party  knowingly 

Wyck    V.    Brasher,    81    N.     Y.    260;  taking    the    convej'ance   or    contract 

Wright    V.    Fisher,    65   Mich.    275;    8  under  these  circumstancas  was  neces- 

Am.  St.  Rep.  8S6;  Ralston  v.  Turpin,  sarily  chargeable  with  inequitable  con- 

25  Fed.  Rep.  18.]  duct. 

'  There  are  some  early  dicta  that  *  The  court  will  not  specifically  en- 
equity  would  never  grant  affirmative  force  an  executory  contract  against 
relief  to  a  party  on  the  ground  of  his  the  intoxicated  party  at  the  suit  of 
own  intoxication,  however  complete,  the  other,  nor  will  it  set  aside  a  con- 


1367 


CONSTRUCTIVE    FRAUD. 


§  950 


the  intoxication  was  only  partial,  if  the  otlier  party  pro- 
duced it  by  his  contrivance,  and  then  took  advantage  of 
it,  or  made  it  the  opportunity  for  acts  of  imposition,  un- 
fairness,  and  a  fortiori  fraud,  equity  will  grant  full  af- 
firmative thereof.' 

§  950.  Duress.  —  Whenever  a  conveyance  or  contract 
is  obtained  by  actual  duress,  equity  will  grant  relief,  de- 
fensively or  affirmatively,  by  cancellation,  injunction,  or 
otherwise,  as  the  circumstances  may  require.  In  deter- 
mining what  constitutes  duress,  —  what  force  or  threats, 
—  equity  follows  the  law.  Courts  of  equity  undoubtedly 
grant  relief  in  many  classes  of  instances  where  there  is  no 
legal  duress,  and  where  the  wronged  party  would  perhaps 
be  remediless  at  the  common  law,  but  these  cases  prop- 
erly belong  to  the  head  of  "undue  influence.'"' 


veyance  or  contract  at  the  suit  of  the 
intoxicated  party  or  his  representa- 
tives; the  parties  are  left  to  their 
remedies  at  law.  This  rule  is  an  ap- 
plication of  the  maxim  in  fnri  delicto, 
etc.:  Johnson  v.  Medlicott.  3  P.  Wms. 
131,  note;  Cory  v.  Cory,  1  Ves.  Sr.  19; 
Cooke  V.  Clay  worth,  18  Ves.  12; 
Say  V.  Barwick,  1  Ves.  &  B.  195; 
Shackeltoa  v.  Sebree,  86  111.  616; 
Schramm  v.  O'Connor,  98  111.  539; 
Johnson  v.  Phifer,  6  Neb.  401;  Bates 
V.  Ball,  72  111.  lOS;  Lavette  v.  Sage, 
29  Conn.  577;  ^faxwell  v.  Pittenger, 
3  N.  J.  Eq.  156;  Selah  v.  Selah,  23 
N.  J.  Eq.  185;  Clifton  v.  Davis,  1  Pars. 
Gas.  31;  Fu trill  v.  Futrill,  5  Jones  Eq. 
61;  Morrison  v.  McLeod,  2  Dev.  &  B. 
Eq.  221;  Harbison  v.  Lemon,  3  Black f. 
51;  23  Am.  Dec.  376;  Dunn  v.  Amos, 
14  Wis.  106,  and  cases  in  next  note. 

1  Cory  V.  Cory,  1  Ves.  Sr.  19;  Cooke 
V.  Clayworth,  18  Ves.  12;  Say  v.  Bar- 
wick,  1  Ves.  &  B.  195;  Butler  v.  Mul- 
vihill,  1  Bligh,  137;  Lightfoot  v. 
Heron,  3  Younge  &  C.  586;  Shaw  v. 
Thackray,  1  Smale  &  G.  5.37;  Nagle 
V.  Baylor,  3  Dm.  &  War.  60;  Addis 
V.  Campbell,  4  Beav.  401;  Martin  v. 
Pycroft,  2  De  Gex,  M.  &  G.  785,  800; 
O'Connor  v.  Rempt,  29  N.  J.  Eq.  156; 
Crane  v.  Conklin,  1  N.  J.  Eq.  346;  22 
Am.  Dec.  519;  Prentice  v.  Achorn, 
2  Paige,  30:  Lavette  v.  Sage,  29  Conn. 
677;  Calloway  v.  Witherspoon,  5  Ired. 


Eq.  128;  Freeman  v.  Dwigc'ins,  2 
Jones  Eq.  162;  GritJith  v.  Fred.  Co. 
Bank,  6  Gil!  &  J.  4-J4;  Phillips  v. 
Moore,  11  Mo.  600.  The  case  of  Pit- 
tenger  v.  Pittenger,  3  N.  J.  Eq.  156, 
contains  dicta  conflicting  with  the 
course  of  authority.  Courts  of  equity 
are  extremely  cautious  in  granting 
any  relief  on  the  ground  of  intoxica- 
tion, and  they  will  seldom  give  the 
remedy  of  cancellation,  unless  there 
was  conduct  plainly  inequitable  by 
the  other  party;  to  do  so  would  re- 
quire a  very  strong  case  in  which  the 
evidence  was  most  convincing.  Ex- 
perience shows  that  a  man  may  be 
very  much  intoxicated  and  still  be 
shrewd,  hard  in  driving  a  bargain,  and 
in  every  way  competent  to  manage  hia 
own  business:  See  Schramm  v.  O'Con- 
nor. 98  111.  539. 

^  Nicholls  V.  Nicholls,  1  Atk.  409; 
Roy  V.  Duke  of  Beau  ford,  2  Atk.  190; 
Thornhill  v.  Evans,  2  Atk.  330;  Hawes 
V.  Wyatt,  3  Browne  Ch.  156;  Evans  v. 
Llewellin,  1  Cox,  333,  340;  Lamplugh 
V.  Lumplugh,  1  iJick.  41  J;  Talleyrand 
V.  Boulanger,  3  Ves.  447;  Underbill  v. 
Horwood,  10  Ves.  209,  219;  Pickett  v. 

Loggon,   14  Ves.    215;    Peel    v.  , 

16  Ves.  157;  Middleton  v.  Middleton, 
1  Jacob  &  W.  94;  Guhbins  v.  Creed,  2 
Schnales  &  L.  214;  Williams  v.  Bayley, 
L.  R.  1  H.  L.  200;  Reed  v.  Exum,  84 
N.  C.  430;  Sharon  v.  Gager,  46  Conn. 


951 


EQUITY    JURISPRUDENCE. 


1368 


§  951.     Undue  Influence.  — Where  there  is  no  coercion 
amounting  to  duress,  but  a  transaction  is  the  result  of  a 


189;  Singer  Mfg.  Co.  v.  Rawson,  50 
Iowa,  634;  Thurman  v.   Burt,  53  111. 
129;    Harshaw  v.    Dobson,   64   N.    C. 
384;  Jones  v.  Bridge,  2  Sweeny,   431; 
[Patterson  v.  Gibson,   81  Ga.  802;  12 
Am.  St.  Rep.  356;  Goodrich  v.  Shaw, 
72  Mich.  109;   Hullhorst  v.  Scharner, 
14    Neb.    57.]     Acknowledgments    of 
deeds  by  married  woman  obtained  by 
duress:  Louden  v.  Blythe,  16   Pa.   St. 
532;   55  Am.   Dec.  527;    Michener  v. 
Cavender,  3S  Pa.  St.  334,  337;  SO  Am. 
Dec.  486;  McCandless  v.  Engle,  51  Pa. 
St.   309.     It  is  sometimes  difficult  to 
determine  whether  the  controlling  in- 
fluence amounts  to  actual,  physical,  or 
moral    coercion:  See   Ramsbottom   v. 
Parker,  6  Madd.  5;  Middleton  v.  Sher- 
burne,   4    Younge    &    C.     358,    389; 
Rhodes  v.  Bate,  L.  R.  1  Ch.  252.     In 
determining  what  constitutes  duress, 
equity  adopts  the  legal  definition  and 
rules:  Miller  v.  Miller,  68  Pa.  St.  486; 
McLin    V.    Marshall,    1     Heisk.    678. 
Lawful    arrest    or    imprisonment,    or 
prosecution  of   the   party  himself,   or 
threats  of  such  lawful  arrest,  impris- 
onment,   prosecution,     or     litigation 
directed  against  the  party  himself,  do 
not  constitute  duress;  the  same  is  true 
of    many    others    species    of    threats. 
Threats  of  prosecution,  etc.,  against  a 
near  relative  of  the  party  who  executes 
a  contract  in  consequence  thereof  may 
be  duress:  [Schoener  v.  Lissauer,  107 
N.  Y.  112;  Adams  v.  Irving  National 
Bank,  116  N.  Y.  606;  15  Am.  St.  Rep. 
447:  Foley  v.  Greene,  14  R.  I.  618;  51 
Am.  Rep.  419;  Swint  v.  Carr,  76  Ga. 
322;  2  Am.   St.   Rep.   44;  Cofifman  v. 
Lookout   Bank,  5   Lea,  232;   40  Am. 
Rep.     31;    First     National    Bank    v. 
Bryan,  62  Iowa,  42.]     In  the  following 
cases  there  was  held  to  be  no  duress: 
Wright  v.  Remington,  41  N.  J.  L.  48; 
32  Am.  Rep.   180  (threats  of    a  hus- 
band to  kill  himself  if  his  wife  did  not 
sign  his  note  as  a  surety);  Heaps  v. 
Dunham.    95    111.    583;    Compton   v. 
Bunker  Hill  Bank,  96  111.  301;  36  Am. 
Rep.    147;  Smillie  v.  Titus,  32  N.  J. 
Eq.  51;  State  v.  Harney,  57  Miss.  863; 
Tooker  v.  Sloan,  .30   N.  J.    Eq.  394; 
Fogg   V.    Union  Bank,    4    Baxt.   530; 
Landa   v.  Obert,  45  Tex.  539;  Davis 
V.  Luster,  64  Mo.  43;  Plant  v.  Gunn, 
2  Woods,  372;    Smith  v,  Rowley,  66 


Barb.  502;  Mayhew  v,  Phcenix  Ins. 
Co.,  23  Mich.  105;  Dixon  v.  Dixon, 
22  N.  J.  Eq.  91;  Seymour  v.  Pres- 
cott,  69  Me.  376;  Fulton  v.  Loftis, 
63  N.  C.  393  (duress  after  a  contract  is 
made  is  not  ground  for  relief);  [Bar- 
rett V.  Weber,  125  N.  Y.  18;  Wann  v, 
Coe,  31  Fed.  Rep.  369;  Prichard  v. 
Sharp,  51  Mich.  432;  Sanford  v.  Sorn- 
borger,  26  Neb.  295;  Cooper  v.  Cham- 
berlin,  78  Cal.  450,  and  cases  cited 
(threats  of  tax  collector  to  sell  prop- 
erty for  a  void  tax  do  not  constitute 
duress);  Dear  v.  Varnum,  SO  Cal.  86. 
Relief  not  granted  against  a  bona  fide 
purchaser:  Fairbanks  v.  Snow,  145 
Mass.  153;  1  Am.  St.  Rep.  446;  Moog 
V.  Strang,  69  Ala.  98;  Vancleave  v. 
Wilson,  73  Ala.  387;  Wood  v.  Craft, 
85  Ala.  260;  Gardner  v.  Case,  119  Ind. 
494.] 

In  the  proposed  Civil  Code  of  New 
York  the  following  definitions  are 
given  of  duress  and  menace,  which 
have  been  adopted  by  the  Civil  Code 
of  California: 

N.  Y.  Civ.  Code,  sec.  754;  Cal.  Civ. 
Code,  sec.  1569:  "Duress  consists  in, 
—  1.  Unlawful  confinement  of  the 
person  of  the  party,  or  of  the  husband 
or  wife  of  such  party,  or  of  an  ances- 
tor, descendant,  or  adopted  child  of 
such  party,  husband,  or  wife  ";  citing 
Foshay  v.  Ferguson,  5  Hill,  154;  Bates 
V.  Butler,  46  Me.  387;  Eadie  v.  Slim- 
mon,  26  N.  Y.  9;  82  Am.  Dec.  395; 
McClintick  v.  Cummins,  3  McLean, 
158.  "2.  Unlawful  detention  of  the 
property  of  any  such  person "  (con- 
ceded to  be  contrary  to  the  weight  of 
authority).  "3.  Confinement  of  such 
person,  lawful  in  form,  but  fraudu- 
lently obtained,  or  fraudulently  made, 
unjustly  harassing  or  oppressive";  cit- 
ing Strong  v.  Grannis,  26  Barb.  122; 
Richardson  v.  Duncan,  3  N.  H.  508; 
Watkins  v.  Baird,  6  Mass.  511;  4  Am. 
Dec.  170;  Severance  v.  Kimball,  8 
N.  H.  386. 

N.  Y.  Civ.  Code,  sec.  755;  C<d.  Civ. 
Code,  sec.  1570:  "Menace  consists  in 
a  threat, — 1.  Of  such  duress  as  is 
specified  in  subdivisions  one  and 
three  of  the  last  section";  citing 
Eadie  v.  Slimmon,  26  N.  Y.  9;  82  Am. 
Dec.  395;  Whitefield  v.  Longfellow, 
13  Me.  146.     "2.    Or  of  unlawful  aad 


1369  CONSTRUCTIVE    FRAUD.  §  951 

moral,  social,  or  domestic  force  exerted  upon  a  party, 
controlling  .the  free  action  of  his  will  and  preventing  any 
true  consent,  equity  may  relieve  against  the  transaction, 
on  the  ground  of  undue  influence,  even  though  there  may 
be  no  invalidit}'  at  law.  In  the  vast  majority  of  instances, 
undue  influence  naturally  has  a  field  to  work  upon  in  the 
condition  or  circumstances  of  the  person  influenced,  which 
render  him  peculiarly  susceptible  and  yielding,  —  his  de- 
pendent or  fiduciary  relation  towards  the  one  exerting  the 
influence,  his  mental  or  physical  weakness,  his  pecuniary 
necessities,  his  ignorance,  lack  of  advice,  and  the  like. 
All  these  circumstances,  however,  are  incidental,  and  not 
essential.  Where  an  antecedent  fiduciary  relation  exists, 
a  court  of  equity  will  presume  confidence  placed  and  in- 
fluence exerted;  where  there  is  no  such  fiduciary  relation, 
the  confidence  and  influence  must  be  proved  by  satis- 
factory extrinsic  evidence;  the  rules  of  equity  and  the 
remedies  which  it  bestows  are  exactly  the  same  in  each 
of  these  two  cases.  The  doctrine  of  equity  concerning 
undue  influence  is  very  broad,  and  is  based  upon  prin- 
ciples of  the  highest  morality.  It  reaches  every  case,  and 
grants  reliof  "where  influence  is  acquired  and  abused,  or 
where  confidence  is  reposed  and  betrayed."  ^     It  is  spe- 

violent  injury  to  the  person  or  prop-  conveyance  or  agreement  must  be  that 
erty  of  any  such  person  as  is  specified  of  the  party  himself;  his  own  volun- 
in  the  last  section;  or  3.  Of  injury  to  tary  disposition.  If  such  influence 
the  character  of  any  such  person."  be  exerted  upon  him,  such  mental. 
This  last  subdivision  is  conceded  to  be  moral,  or  physical  coercion  employed 
new  legislation.  towards  him,  that  the  act  is  not  really 
'  Smith  V.  Kay,  7  H.  L.  Cas.  750,  his  own,  but  is  another's,  then  it  is 
779.  per  Lord  Kingsdown;  Huguenin  voidable.  But  within  this  limit  there 
V.  Baseley,  14  Yes.  273;  2  Lead.  Cas.  is  no  objection  to  argument,  persua- 
Eq.,  note  of  Eng.  ed.,  1156,  1174-  sion,  or  even  influence,  brought  to 
1176,  1189-1191;  note  of  Am.  ed.,  1192-  bear  upon  a  party,  provided  his  mind 
1215.  The  subject  of  undue  influence  is  able  to  act  and  is  left  free  to  decide 
is  intimately  connected  with  that  of  and  act  upon  the  considerations  which 
fiduciary  relations;  particular  illus-  are  addressed  to  it,  so  that  the  agree- 
tratious  will  be  given  in  the  next  sue-  ment  is  really  his  own  voluntary  act. 
ceeding  subdivision.  It  is  impossible  Still,  persuasions  and  other  such  con- 
to  formulate  a  single  definition  which  duct  by  the  one  benefited  are  always 
shall  embrace  all  forms  and  phases  looked  upon  as  suspicious;  they  thnnv 
of  undue  influence;  each  case  umst  upon  him  the  burden  of  showing  tliat 
largely  depend  upon  its  own  circuin-  the  other  party  acted  freely.  Tiio 
stances.  The  following  propositions,  question  fre(iuently  arises  on  the  pro- 
however,  embody  the  doctrine.     The  bate   of   wills.     lu   Hall   v.  Hall,    37 


§951 


EQUITY    JURISPRUDENCE. 


1370 


cially  active  and  searching  in  dealing  with  gifts,  but  is 
applied,  when  necessary,  to  conveyances,  contracts  exec- 
utory and  executed,  and  wills. 


L.  J.  P.  &  M.  40;  L.  R.  1  P.  &  M.  4S1, 

Mr.  Justice  Wilde  laid  down  the  rules 
in  a  most  admirable  manner  which  ap- 
ply to  the  execution  of  instruments 
inter  invos  as  well  as  to  wills:  "To  make 
a  good  will,  a  man  must  be  a  free  agent, 
but  all  influences  are  not  unlawful. 
Persuasion  appeals  to  the  affections 
or  ties  of  kindred,  to  a  sentiment  of 
gratitude  for  past  services  or  pity  for 
future  destitution,  or  the  like.  These 
are  all  legitimate,  and  may  be  fairly 
pressed  on  a  testator.  On  the  other 
hand,  pressure  of  whatever  character, 
whether  acting  on  the  fears  or  the 
hopes,  if  so  exerted  as  to  overpower 
the  'volition  without  convincing  the 
judgment,  is  a  species  of  restraint 
under  which  no  valid  will  can  be 
made.  Importunity  or  threats  such 
as  the  testator  has  not  the  courage  to 
resist;  moral  command  asserted,  and 
yielded  to  for  the  sake  of  peace  and 
quiet,  or  of  escaping  from  distress  of 
mind  or  social  discomfort,  —  these,  if 
carried  to  a  degree  in  which  the  free 
play  of  the  testator's  judgment,  dis- 
cretion, or  wishes  is  overborne,  will 
constitute  undue  influence,  though  no 
force  is  either  used  or  threatened. 
In  a  word,  a  testator  may  be  led,  not 
driven,  and  his  will  must  be  the  oS"- 
spring  of  his  own  volition,  and  not 
that  of  another."  See  also,  illustrat- 
ing undue  influence  in  obtaining  wills, 
where  the  will  was  held  invalid. 
Parish  Will  Case,  25  N.  Y.  9;  Tyler 
V.  Gardiner,  35  N.  Y.  559;  Christy  v. 
Clarke,  45  Barb.  529;  [Cherbonnier  v, 
Evitts,  56  Md.  276;  Hartnicin  v.  Strick- 
ler,  82  Va.  225];  where  the  will  was 
sustained:  Gardiner  v.  Gardiner,  34 
N.  Y.  155;  Horn  v.  PuUmann,  72 
N.  Y.  268;  Meeker  v.  Meeker,  75  111. 
260;  Barnes  v.  Barnes,  66  Me.  286; 
[Mackall  v.  Mackall,  135  U.  S.  171; 
Herster  v.  Herster,  122  Pa.  St.  239;  9 
Am.  St.  Rep.  95;  Carter  v.  Carter,  82 
Va.  624.] 

The  following  cases  are  illustrations 
of  undue  influence  in  other  transac- 
tions: Dent  V.  Bennett,  4  Mylne  &  C. 
269;  Billage  v.  Southee,  9  Hare,  534, 
640;  Beanland  v.  Bradley,  2  Smale  & 
G.  339;  Wrictht  v.  Vanderplank,  8  De 
Gex,  M.   &  G.  133,  137;  Prideaux  v. 


Lonsdale,  1  De  Gex,  J.  &  S.  433;  In  re 

Metcalfe's  Trusts,  2  De  Gex,  J.  &  S. 
122;  Toker  v.  Toker,  3  De  Gex,  J.  & 
S.  487;  Skottowe  v.  Williams,  3  De 
Gex,  F.  &  J.  535;  Tomson  v.  Judge,  3 
Drew.  386;  Broun  v.  Kennedy,  33 
Beav.  133;  Hoghton  v.  Hoghton,  15 
Beav.  278;  Cooke  v.  Lamotte,  15  Beav. 
234;  Casborne  v.  Barsham,  2  Beav.  7(j; 
Lyon  V.  Home,  L.  R,  6  Eq.  655  (a 
striking  case);  Baker  v.  Loader,  L.  R. 
16  Eq.  49:  Everitt  v.  Everitt,  L.  R.  10 
Eq.  405;  Rhodes  v.  Bate,  L.  R.  1  Ch. 
252;  Turner  v.  Collins,  L.  R.  7  Ch.  329; 
Ellis  V.  Barker,  L.  R.  7  Ch.  104;  Moxom 
V.  Payne,  L.  R.  8  Ch.  881;  Kempson 
V.  Ashbee,  L.  R.  10  Ch.  15;  Fulham  v. 
McCarthy,  1  H.  L.  Cas.  703;  Savory  v. 
King.  5  H.  L.  Cas.  627;  Smith  v.  Kay, 

7  H.  L.  Cas.  750;  Dalton  v.  Dal  ton,  14 
Nev.  419;  Moore  v.  Moore,  56  Cal.  89; 
Biglow  V.  Leabo,  8  Or.  147;  Waddell 
V.  Lanier,  62  Ala.  347;  Mulock  v. 
Mulock,  31  N.  J.  Eq.  594;  Thornton 
V.  Ogden,  32  N.  J.  Eq.  723;  Miller  v. 
Simonds,  5  Mo.  App.  33;  Graves  v. 
White,  4  Baxt.  38;  Leighton  v.  Orr, 
44  Iowa,  679  (a  very  instructive  case); 
Davis  v.  Dunne,  46  Iowa,  684;  Ran- 
ken  V.  Patton,  65  Mo.  378;  Bivins  v. 
Jarnigan,  3  Baxt.  282;  Bailey  v. 
Woodbury,  50  Vt.  166;  Yard  v. 
Yard,  27  N.  J.  Eq.  114;  Ross  v.  Ross, 
6  Hun,  80;  Bailey  v.  Litten,  52  Ala. 
282;  Mead  v.  Coombs,  26  N.  J.  Eq. 
173;  Lyons  v.  Van  Riper,  26  N.  J.  Eq. 
337;  Brock  v.  Barnes,  40  Barb.  521; 
Wistar's  Appeal,  54  Pa.  St.  60;  Green- 
field's Estate,  14  Pa.  St.  489,  507; 
Todd  V.  Grove,  33  Md.  188;  Turner  v. 
Turner,  44  Mo.  535;  Taylor  v.  Taylor, 

8  How.  183;  [Aldridgev.  Aldridge,  120 
N.  Y.  614;  Ran  v.  Von  Zedlitz,  132 
Mass.  164;  Haydock  v.  Haydock,  33 
N.  J.  Eq.  494;  Graham  v.  Burch,  44 
Minn.  33;  Fitch  v.  Reiser,  79  Iowa, 
34;  Munson  v.  Carter,  19  Neb.  293; 
Hansen  v.  Berthelsen,  19  Neb.  433; 
Williams  V.  Williams,  63  Md.  371.] 
In  the  following  cases  it  was  held 
there  was  no  undue  influence:  Paine 
v.  Roberts,  82  N.  C.  451 ;  McClure  v. 
Lewis,  4  Mo.  App.  554;  Crowe  v. 
Peters,  63  Mo.  429;  HoUocher  v.  Hoi- 
locher,  62  Mo.  267  (an  instructive 
case,  showing  what  kind  of  lullueuce 


1371  CONSTRUCTIVE    FRAUD.  §§  952,  953 

§  952.  Sailors.  —  From  the  peculiar  qualities  which, 
as  is  well  known,  belong  to  sailors  as  a  class,  from  the 
circumstances  in  which  they  are  placed,  and  the  tempta- 
tions to  which  they  are  exposed,  courts  and  legislatures 
have  long  treated  them  as  almost  non  sui  juris,  as  anal- 
ogous to  infants  or  expectant  heirs,  and  therefore  as,  in 
some  respects,  wards  of  court.  It  seems  to  be  settled 
that  equity  has  jurisdiction  over  contracts  by  sailors  con- 
cerning wages  made  with  their  employers,  and  concern- 
ing the  disposition  of  their  prize  money  made  with  third 
persons,  and  will  scrutinize  such  agreements  with  the 
utmost  vigilance,  and  will  cancel  them  if  they  are  at  all 
unfair,  one-sided,  or  otherwise  inequitable.' 

§  953,  Expectants,  Heirs,  and  Reversioners.  —  Ex- 
pectant heirs,  reversioners,  and  holders  of  other  expect- 
ant interests  stand  in  a  position  diflferent  from  that  of 
all  other  persons  sui  juris,  and  a  special  jurisdiction  for 
their  protection  has  long  been  well  established.  This 
jurisdiction  rests  upon  two  distinct  foundations.  In  the 
first  place,  heirs,  reversioners,  and  other  expectants,  dur- 
ing the  lifetime  of  their  ancestors  and  life  tenants,  are 
considered  as  peculiarly  liable  to  imposition,  and  exposed 
to  the  temptation  and  danger  of  sacrificing  their  future 
interests,  in  order  to  meet  their  present  wants.  Being 
sometimes  in  actual,  but  more  often  in  imaginary,  dis- 
tress, they  do  not  stand  upon  an  equal  footing  with  those 
who  deal  with  them  concerning  their  expectant  estates, 
and  such  persons  are  in  a  position  to  take  advantage  of 
their  condition,  and  to  dictate  inequitable  and  even  ex- 
travagantly hard  terms  in  any  contract  of  loan  or  pur- 
is  not  undue);  [Earle  v.  N.  &  N.  B.  H.  by  the  American  courts  of  equitj',  — 
Co.,  36  N.  J.  Eq.  188;  Wise  v.  which  I  think  is  very  doubttul  from 
Schwartzwelder,  54  Md.  292;  Hale  v.  the  absence  of  reported  cases,  and 
Cole,  31  W.  Va.  576;  Kimball  v.  from  the  fact  that  matters  of  foreign 
Cuddy,  117  III.  213;  Guild  v.  Hull,  commerce  belong  exclusively  to  the 
127  HI.  523;  Burt  v.  Quisenberry,  132  cognizance  of  the  national  govern- 
Ill.  385.]  ment,  —  it  has  been  made  obsolete  by 

'  How  V.  Weldon,  2  Ves.  Sr.  516,  518;  the  stringent  legislation  of  Congress 
Taylour  v.  Kochfort,  2  Ves.  Sr.  281;  for  the  protection  of  sailors  which 
Baldwin  v.  Rochford,  1  Wils.  229.  If  may  be  enloiced  by  the  United  States 
this    jurisdiction   was    ever    exercised     courts. 


§  953  EQUITY  JURISPRUDENCE.  1372 

chase  which  may  be  made.  In  the  second  place,  the 
dealings  of  heirs  and  reversioners  with  their  expectant 
interests  are  often  a  gross  violation  of  the  moral  if  not 
legal  duties  which  they  owe  to  their  ancestors  and  life 
tenants  who  are  the  present  owners  of  the  property,  and 
from  or  through  whom  their  future  estates  will  come,  and 
may  be  a  virtual  fraud  upon  the  rights  of  those  parties. 
Equity,  therefore,  treats  such  dealings  with  expectant 
interests  as  a  possible  fraud  upon  the  heirs  and  rever- 
sioners who  are  immediate  parties  to  the  transaction, 
and  as  a  virtual  fraud  upon  their  ancestors,  life  tenants, 
and  other  present  owners.  Upon  these  two  considera- 
tions the  equitable  jurisdiction  is  founded.  The  rule  is 
well  settled  that  all  conveyances,  sales,  and  charges,  and 
contracts  of  sale  or  charge,  of  their  future  and  expectant 
interest  made  by  heirs,  reversioners,  and  other  expectants 
during  the  lifetime  of  their  ancestors  or  life  tenants,  upon 
an  inadequate  consider ationy  will  be  relieved  against  in 
equity,  and  either  wholly  or  partially  set  aside.  In  this 
instance,  fraud  is  inferred  from  mere  inadequacy  of  con- 
sideration. All  dealings  by  such  expectants  are  not 
necessarily  and  absolutely  voidable.  But  in  every  such 
conveyance  or  contract  with  an  heir,  reversioner,  or 
expectant,  a  presumption  of  invalidity  arises  from  the 
transaction  itself,  and  the  burden  of  proof  rests  upon  the 
purchaser  or  other  party  claiming  the  benefit  of  the  con- 
tract to  show  affirmatively  its  perfect  fairness,  and  that  a 
full  and  adequate  consideration  was  paid,  —  that  is,  the 
fair  market  value  of  the  property,  and  not  necessarily  the 
value  as  shown  by  the  life-tables.  If  he  succeeds  in  over- 
coming the  presumption  by  showing  these  facts,  the 
transaction  will  stand;  otherwise  it  will  be  set  aside.  It 
is  not  necessary  to  show  as  a  condition  of  relief  that  the 
heir  or  reversioner  was  an  infant,  or  that  he  was  in  a 
condition  of  actual  distress  when  the  bargain  was  made, 
A  court  of  equity  presumes  distress.  The  very  fact  of  the 
sale  or  charge  shows  prima  Jacie  that  he  was  not  in  a 


1373 


CONSTRUCTIVE    FRAUD. 


§  953 


position  to  make  his  own  terms,  and  that  lie  submitted 
to  have  them  dictated  to  him  by  the  other  party.  The 
foregoing  rules  assume,  simply,  that  there  was  an  inade- 
quacy of.  consideration,  without  any  further  element  of 
fraud.  If,  in  addition,  the  circumstances  show  actual 
fraud,  misrepresentations,  or  concealments,  oppression, 
taking  undue  advantage  of  real  necessities,  or  other  un- 
fair, inequitable  dealing  by  the  party  who  acquires  the 
expectant  interest,  a  court  of  equity  will  grant  full  relief 
without  regard  to  any  presumption.'     Whenever  a  con- 


^  Earl  of  Chesterfield  v.  Janssen,  2 
Ves.  Sr.  125;  1  Lead.  Cas.  Eq.,  Eng. 
ed.  note,  773,  809-825;  Am.  ed.  note, 
825-836.  The  subject  is  fully  dis- 
cussed and  the  authorities  examined 
in  these  notes.  The  American  editor 
cites  and  comments  upon  the  Ameri- 
can decisions,  especially  those  which 
have  departed  from  the  doctrine  as 
generally  settled.  Although  the  sub- 
ject is  of  great  importance  in  England, 
it  has  comparatively  little  practical 
interest  in  the  United  States.  I  have 
not  deemed  it  necessary,  therefore,  to 
enter  into  any  extended  discussion  of 
the  more  special  rules  and  limitations; 
it  seemed  sufficient  to  state  the  general 
conclusions,  and  to  cite  the  important 
authorities.  The  following  cases  il- 
lustrate the  doctrine,  and  show  how 
it  has  been  applied  by  the  American 
courts:  Earl  of  Aylesford  v.  Morris, 
L.  R.  8  Ch.  484;  Tyler  v.  Yates,  L.  R. 
11  Eq.  265;  6  Ch.  665;  Miller  v. 
Cook,  L.  R.  10  Eq.  641;  In  re  Slater's 
Trusts,  L.  R.  11  Ch.  Div.  227;  Perfect 
V.  Lane,  3  De  Gex,  F.  &  J.  3(39;  Web- 
ster V.  Cook,  L.  R.  2  Ch.  542,  546; 
Edwards  v.  Burt,  2  De  Gex,  M.  &  G. 
55;  O'Rorke  v.  Bolingbroke,  L.  R.  2 
App.  C.  814-834;  Savery  v.  King,  5 
H.  L.  Cas.  627;  Aldborough  v.  Trye, 
7  Clark  &  F.  436;  Shelly  v.  Nash,  3 
Madd.  232,  235;  Fox  v.  Wright,  6 
Madd.  Ill;  Gowland  v.  De  Faria,  17 
Ves.  20,  24;  Peacock  v.  Evans,  16 
Ves.  512;  Davis  v.  Marlborough,  2 
Swanst.  108,  154;  Edwards  v.  Browne, 

2  Coll.  C.  C.  100;  Hmcksiimn  v.  Smith, 

3  Russ.  433,  435;  King  v.  Hamlet,  4 
Sim.  223;  2  Mylne  &  K.  456;  3  Clark 
&  F.  218;  Newton  v.  Hunt,  5  Sim. 
511;  Roberts  v.  Tunstall,  4  Hare,  257; 
Bromley  r.  Smith,  26  Beav.  644;  Jeu- 


kins  V.  Pye,  12  Pet.  241;  Larrabee  v. 
Larrabee,  34  Me.  477;  Poor  v.  Hazle- 
ton.  15  N.  H.  564;  Boynton  v.  Hub- 
bard, 7  Mass.  112;  Trull  v.  Eastman, 
3  Met.  121;  37  Am.  Dec.  126;  Fitch 
V.  Fitch,  8  Pick.  480;  Varick  v.  Ed- 
wards. 1  Hoff.  Ch.  382;  Power's  Ap- 
peal, 63  Pa.  St.  443;  Davidson  v. 
Little,  -22  Pa.  St.  245,  252;  60  Am. 
Dec.  81;  Mastin  v.  Mario w,  65  N.  C. 
695;  Butler  v.  Haskell,  4  Desaus.  Eq. 
651;  Nimmo  v.  Davis,  7  Tex.  26; 
Needles  v.  Needles,  7  Ohio  St.  432; 
70  Am.  Dec.  85;  Lowry  v.  Spear,  7 
Bush,  451;  Meri weather  v.  Herran,  S 
B.  Mon.  162;  [Whittet  v.  Bush,  40 
Ch.  Div.  312.]  In  some  cases  the 
doctrine  seems  to  have  been  rejected 
or  only  partially  adopted:  See  Mayo 
V.  Carrington,  19  Gratt.  74;  Cribbins 
V.  Markwood,  13  Gratt.  495;  67  Am. 
Dec.  775.  In  Parmelee  v.  Cameron, 
41  N.  Y.  392,  a  sale  of  a  legacy  pay- 
able in  future  made  by  an  improvident 
and  dissipated  legatee  was  sustained. 
Since  the  relief  is  based  in  part  upon 
the  ground  that  the  sale  by  an  heir 
or  reversioner  is  a  constructive  fraud 
upon  the  ancestor,  it  has  been  held 
that  if  a  father  knew  of  hia  son's  de- 
sign to  dispose  of  his  expectancy,  and 
did  not  dissent,  the  transaction  would 
not  come  within  the  general  rule,  and 
would  be  upheld:  King  v.  Hamlet,  4 
Sim.  223;  2  Mylne  &  K.  456,  473.  In 
this  case  Lord  Brougham  expresses  a 
very  strong  opinion  in  favor  of  the  ex- 
ception. But,  as  in  many  other  in- 
stances. Lord  Brougham's  opinion  has 
not  been  sustained.  It  is  settled,  at 
least  in  England,  that  the  mere  fact  of 
tlie  ancestor's  assent,  approval,  or  even 
assistance  will  not  prevent  the  court 
from  giving  relief.      The  doctrine  is 


§  953 


EQUITY    JURISPRUDENCE. 


1374 


veyance,  sale,  or  contract  for  sale  is  set  aside  in  this 
manner  on  the  sole  ground  of  inadequacy  of  considera- 
tion, the  relief  is  granted  only  upon  condition  that  the 
sura  actually  paid  or  loaned,  with  interest  thereon,  is 
refunded;  and  the  court  will  so  frame  its  decree,  if  neces- 
sary, that  the  conveyance  or  sale,  instead  of  being  imme- 
diately and  absolutely  canceled,  shall  stand  as  security 
for  the  amount  which,  it  is  adjudged,  should  be  repaid.^ 
In  analogy  with  this  general  doctrine  concerning  dealings 
with  expectant  interests,  courts  of  equity  have  extended 
a  protection  to  young,  inexperienced,  and  improvident 
heirs,  by  relieving  against  other  kinds  of  unconscionable 
bargains  which  they  may  have  made,  and  by  reducing 
the  claims  against  them  to  a  reasonable  amount.' 


established  to  secure  the  rights  of  heirs 
and  reversioners,  and  their  rights  can- 
not be  defeated  by  the  action  of  the 
ancestor.  This  view  seems  to  be  in 
strict  accordance  with  principle:  Earl 
of  Aylesford  v.  Morris,  L.  R.  8  Ch, 
484,  491,  per  Lord  Selborne;  see  also 
Kingv.  Savery,  1  Smale  &  G.  271;  5 
H.  L.  Cas.  627;  Talbot  v.  Staniforth,  I 
Johns.  &  H.  484;  Jenkins  v.  Stetson, 
9  Allen,  128;  McBee  v.  Myers,  4  Bush, 
356.  If,  however,  the  transaction  is  a 
fair  family  or  other  arrangement  for 
the  benefit  of  all  parties  interested,  in 
which  the  ancestor  or  life  tenant  joins, 
and  in  which  there  is  no  undue  influ- 
ence, it  will  not  be  set  aside  on  the 
ground  of  inadequacy:  Tweddell  v. 
Tweddell,  Turn.  &  R.  13;  Lord  v. 
Jeffkins,  35  Beav.  7;  Shelly  v.  Nash, 
3  Madd.  232;  [and  see  Hovt  v.  Hoyt, 
(il  Vt.  413.] 

'  This  particular  rule  is  a  fine  illus- 
tration of  the  maxim.  He  who  seeks 
equity  must  do  equity,  and  is  based 
upon  the  plainest  principles  of  right 
and  justice.  Those  few  American  de- 
cisions which  have  departed  from  it 
have  so  far  failed  to  appreciate  the  es- 
sential conceptions  of  equity:  In  re 
Slater's  Trusts,  L.  R.  11  Ch.  Div.  227; 
Tyler  v.  Yates,  L.  R.  11  Eq.  205; 
6  Ch.  665;  Miller  v.  Cook,  L.  R.  10 
Eq.  641;  Bawtree  v.  Watson,  3  Mylne 
&  K.  339;  Wharton  v.  May,  5  Ves.  27, 
68;  Peacock  v.  Evans,  16  Ves.  512; 
Croft  V.  Graham,  2  De  Gex,  J.  &  S. 


155;  Boynton  v.  Hubbard,  7  Mass. 
112;  Boyd  V.  Dunlap,  1  Johns.  Ch. 
478;  Williams  v.  Savage  Mfg.  Co.,  1 
Md.  Ch.  306;  3  Md.  Ch.  418;  but  see 
Small  V.  Jones,  6  Watts  &  S.  122; 
Seylar  v.  Carson,  69  Pa.  St.  81. 

A  modern  English  statute  enacts 
that  no  purchase,  made  bona  fide,  of  a 
reversionary  interest  shall  be  set  aside 
merely  on  the  ground  of  under-value: 
31  &  32  Vict.,  c.  4.  It  is  held  that  as 
this  statute  is  confined  to  fair  pur- 
chases, the  equitable  doctrine  con- 
cerning unfair  transactions,  and  the 
jurisdiction  to  relieve  heirs  and  rever- 
sioners who  have  been  actually  im- 
posed upon,  is  left  unaltered:  In  re 
Slater's  Trusts,  L.  R.  11  Ch.  Div. 
227;  Earl  of  Aylesford  v.  Morris, 
L.  R.  8  Ch.  484;  Tyler  v.  Yates,  L.  R. 
11  Eq.  265;  6  Ch.  665;  Miller  v. 
Cook,  L.  R.  10  Eq.  641;  [Whittet  v. 
Bush,  40  Ch.  Div.  312;]  nor  are  the 
doctrine  and  jurisdiction  affected  by 
the  repeal  of  the  usury  laws:  Id.; 
and  Croft  v.  Graham,  2  De  Gex,  J.  & 
S.  155. 

^  Thus  where  unscrupulous  persons, 
taking  advantage  of  such  expectants, 
and  furnishing  them  means  for  ex- 
travagance and  dissipation,  have  sold 
them  goods  at  outrageous  prices,  or 
loaned  them  money  at  outrageous 
rates  of  interest,  even  when  there  are 
no  statutes  against  usury,  courts  of 
equity  have  reduced  the  securities 
given  for  such  claims  to  a  fair  amount: 


1375  CONSTRUCTIVE    FRAUD.  §  954 

§  954.  Post  Obit  Contracts.  —  In  strict  analogy  to  the 
equitable  relief  against  sales  of  expectancies,  and  depend- 
ing upon  the  same  reasons,  is  that  against  post  obit  con- 
tracts. A  post  obit  contract  is  an  agreement  made  by  an 
expectant  heir,  successor,  devisee,  or  legatee,  whereby,  in 
consideration  of  a  smaller  sum  loaned,  he  promises  to  pay 
to  the  creditor  a  much  larger  sum,  exceeding  in  amount 
the  principal  and  lawful  interest,  upon  the  death  of  the 
person  from  whom  he  expects  the  inheritance,  succession, 
or  bequest,  provided  he  himself  should  survive  such  per- 
son. Such  an'instrument  is  clearly  an  imposition  upon 
the  debtor,  since  it  necessarily  takes  advantage  of  his 
actual  or  supposed  necessities.  It  is  also  a  gross  fraud 
upon  the  ancestor  or  testator;  it  offers  a  premium  upon 
his  death;  being  a  wagering  contract,  it  renders  the  credi- 
tor's interests  dependent  upon  his  speedy  death.  Post 
obit  contracts,  and  all  other  instruments  essentially  the 
same  though  differing  in  form,  will  be  set  aside.  In 
granting  this  relief,  as  in  the  similar  case  of  dealings 
with  expectancies,  where  there  are  no  special  circum- 
stances of  unfairness  or  imposition,  and  the  inadequacy 
of  consideration  is  the  sole  ground  of  interference,  the 
court  will  require  a  repayment  to  the  lender  of  what  is 
justly  due,  and  may  permit  the  security  to  stand  for  such 
amount  until  it  is  repaid.* 

Croft  V.  Graham,  2  De  Gex,  J.  &  S.  Ballard,     3    Brown    Ch.     117,     120; 

155;  Bill  V.  Price,  1  Vern.  467;  Lam-  Gwj'nne  v.  Heaton,  1  Brown  Ch.  1,  9; 

plugh  V.  Smith,  2  Vern.  77;  Whitley  Earl  of  Aldhorough  v.  Trye,  7  Clark 

V.  Price.  2  Vern.  78;  Brooke  v.  Gal-  &  F.  436,  462,  464;  Bernal  v.  Donegal, 

ley,  2  Atk.  .34,  35;  Freemaij  v.  Bishop,  3  Dow,  133;  1  Bligh,  N.  S.,  594;  In  ro 

2  Atk.  39.    I  venture  to  doubt  whether  Slater's  Trusts,  L.  R.  1 1  Ch.  Div.  227; 

this  relief  would  be  given  by  the  courts  Earl  of   Aylesford   v.    Morris,  L.    R. 

of  the  American  states  unless  the  cir-  8    Ch.     484;    Pennell    v.     Millar,    23 

cumstances  of   a  case   showed  actual  Beav.  172;  Benyon  v.  Fitch,  35  Beav. 

fraud.     The  English  policy  of  protect-  570;  Boynton  v.  Hubbard,  7  Mass.  112 

ing  ancestral  estates  has  never  pre-  (the  opinion  of  Parsons,  C.  J.,  contains 

vailed  in  this  country.  a  full  and  admirable  discussion  of  the 

'  Chesterfield    v.    Janssen,    2  Ves.  doctrine  conceniing  this  class  of  con- 

Sr.   125,   157;    1  Lead.  Cas.    Eq.,  4th  tracts);  and  see  Freme  v.  Brade,  2  De 

Am.  ed.,  773,  809,  825;    Wharton  v.  G ex  &  J.  582. 

May,  5  Ves.  27;   Curling   v.    Towns-  Where   an  expectant  heir  or   suc- 

hend,  19  Ves.  628;  Fox  v.  Wright,  6  cessor,  upon  a  present  consideration, 

Madd.    Ill;    Davis  v,   Duke  of   Marl-  makes  a  secret    agreement  to  convey 

borough,   2    Swaust.    174;    Crowe   v.  or   pay  to  the  creditor  a  large   but 


§  955  EQUITY    JURISPRUDENCE.  1376 

§  955.  II.  Transactions  Presumptively  Invalid  between 
Persons  in  Fiduciary  Relations.  —  It  is  of  the  utmost  im- 
portance to  obtain  an  accurate  conception  of  the  exact 
circumstances  under  which  the  equitable  principle  now  to 
be  examined  applies;  otherwise  the  entire  discussion  of 
the  doctrine  will  be  confused  and  imperfect.  In  the 
various  instances  described  in  the  preceding  paragraphs 
there  has  been  an  actual  undue  influence  consciously  and 
designedly  exerted  upon  a  party  who  was  peculiarly  sus- 
ceptible to  external  pressure  on  account  of  his  mental 
weakness,  old  age,  ignorance,  necessitous  condition,  and 
the  like.  The  existence  of  any  fiduciary  relation  was  un- 
necessary and  immaterial.  The  undue  influence  being 
established  as  a  fact,  any  contract  obtained  or  other 
transaction  accomplished  by  its  means  is  voidable,  and 
is  set  aside  without  the  necessary  aid  of  any  presumption. 
The  single  circumstance  now  to  be  considered  is  the 
existence  of  some  fiduciary  relation,  some  relation  of 
confidence  subsisting  betw^een  two  parties.  No  mental 
w^eakness,  old  age,  ignorance,  pecuniary  distress,  and  the 
like,  is  assumed  as  an  element  of  the  transaction;  if  any 
such  fact  be  present,  it  is  incidental,  not  necessary,  —  im- 
material, not  essential.  Nor  does  undue  influence  form 
a  necessary  part  of  the  circumstances,  except  so  far  as 
undue  influence,  or  rather  the  ability  to  exercise  undue 
influence,  is  implied  in  the  very  conception  of  a  fiduciary 
relation,  in  the  position  of  superiority  occupied  by  one  of 
the  parties  over  the  other,  contained  in  the  very  defini- 

Tincertain  portion  of  the  estate  which  successors  to  share  the  property  which 

he  may  inherit  or  succeed  to  in  case  he  may  come  to  them,  see  Hyde  v.  White, 

survives  his  parent  or  other  ancestor,  5  Sim.  524;  Wethered  v.  Wethered,  2 

such  contract  is  equally  obnoxious  to  Sim.  183;  Harwood  v.  Tooke.  2  Sim. 

the  equitable  doctrine,  and  will  be  set  192;  Beckley  v.  Newland,  2  P.  Wms. 

aside:  Boynton  v.  Hubbard,  7   Mass.  182;  Trull  v,    Eastman,   3  Met.   121, 

112;  but  an  agreement  by  such  an  heir  123;  37  Am.  Dec.  126.     How  far  the 

or  successor,  made  with  the  consent  various     classes    of     agreements     de- 

of  his  ancestor,  and  for  a  fair  consid-  scribed   in   the   foregoing   paragraphs 

eration,  to  convey  the  property  which  may  be  ratified,  confirmed,  and  thue 

may  afterwards  come  to   him  by  de-  made  valid,  is  considered  at  the  close 

scent  or  succession,  is  valid:    Fitch  v.  of  the  next  subdivisioa  upon  fiduciary 

Fitch,  8  Pick.  480;  as  to  fair  and  valid  relations, 
agreements  among  expectant  heirs  or 


1377  CONSTRUCTIVE    FRAUD.  §  956 

tion  of  that  relation.  This  is  a  most  important  state- 
ment, not  a  mere  verbal  criticism.  Nothing  can  tend 
more  to  produce  confusion  and  inaccuracy  in  the  discus- 
sion of  the  subject  than  the  treatment  of  actual  undue 
influence  and  fiduciary  relations  as  though  they  consti- 
tuted one  and  the  same  doctrine. 

§956.  The  General  Principle.  —  It  was  shown  in  the 
preceding  section  that  if  one  person  is  placed  in  such  a 
fiduciary  relation  towards  another  that  the  duty  rests 
upon  him  to  disclose,  and  he  intentionally  conceals  a 
material  fact  with  the  purpose  of  inducing  the  other  to 
enter  into  an  agreement,  such  concealment  is  an  actual 
fraud,  and  the  agreement  is  voidable  without  the  aid  of 
any  presumption.  We  are  now  to  view  fiduciary  rela- 
tions under  an  entirely  different  aspect;  there  is  no  in- 
tentional concealment,  no  misrepresentation,  no  actual 
fraud.  The  doctrine  to  be  examined  arises  from  the  very 
conception  and  existence  of  a  fiduciary  relation.  While 
equity  does  not  deny  the  possibility  of  valid  transactions 
between  the  two  parties,  yet  because  every  fiduciary  rela- 
tion implies  a  condition  of  superiority  held  by  one  of  the 
parties  over  the  other,  in  every  transaction  between  them 
by  which  the  superior  party  obtains  a  possible  benefit, 
equity  raises  a  presumption  against  its  validity,  and  casts 
upon  that  party  the  burden  of  proving  affirmatively  its 
compliance  with  equitable  requisites,  and  of  thereby 
overcoming  the  presumption.  One  principle  underlies 
the  whole  subject  in  all  its  applications;  and  this  prin- 
ciple may  be  stated  in  a  negative  and  in  an  affirmative 
form.  Its  negative  aspect  cannot  be  better  expressed 
than  in  the  following  language  of  a  most  able  judge  in 
a  recent  decision:  "The  broad  principle  on  which  the 
court  acts  in  cases  of  this  description  is,  that  wherever 
there  exists  such  a  confidence,  of  whatever  character  that 
confidence  may  be,  as  enables  the  person  in  whom  con- 
fidence or  trust  is  reposed  to  exert  influence  over  the 
person  trusting  him,  the  court  will  not  allow  any  trans- 

2  Ea  Jua.— 87 


§  956  EQUITY    JURISPRUDENCE.  1378 

action  between  the  parties  to  stand,  unless  there  has 
been  the  fullest  and  fairest  explanation  and  communica- 
tion of  every  particular  resting  in  the  breast  of  the  one 
who  seeks  to  establish  a  contract  with  the  person  so  trust- 
ing him."'  The  principle  was  afhrmatively  stated  with 
equal  accuracy  in  the  same  case  on  appeal,  as  follows: 
"The  jurisdiction  exercised  by  courts  of  equity  over  the 
dealings  of  persons  standing  in  certain  fiduciary  rela- 
tions has  always  been  regarded  as  one  of  a  most  salutary 
description.  The  principles  applicable  to  the  more 
familiar  relations  of  this  character  have  been  long  settled 
by  many  well-known  decisions,  but  the  courts  have  al- 
ways been  careful  not  to  fetter  this  useful  jurisdiction  by 
defining  the  exact  limits  of  its  exercise.  Wherever  two 
persons  stand  in  such  a  relation  that,  while  it  continues, 
confidence  is  necessarily  reposed  by  one,  and  the  influ- 
ence which  naturally  grows  out  of  that  confidence  is 
possessed  by  the  other,  and  this  confidence  is  abused,  or 
the  influence  is  exerted  to  obtain  an  advantage  at  the 
expense  of  the  confiding  party,  the  person  so  availing 
himself  of  his  position  will  not  be  permitted  to  retain 
the  advantage,  although  the  transaction  could  not  have  been 
impeached   if  no  such  confidential  relation    had   existed."^ 

'  Tate  V.  Williamson,  L.  R.  1  Eq.  themselves    to    hold    benefits    which 

528,  536,  per  Page  Wood,  V.  C.  (Lord  those  others  may  have  conferred  upon 

Hatherley);  and  see  Cowee  v.  Cornell,  them,  unless   they   can   show   to   the 

75   N.  Y.  91,  99,   100;  31  Am.   Rep.  satisfaction  of  the  court  that  the  per- 

428,  per  Hand,  J.    In  the  passage  last  sous  by  whom  the  benefits  have  been 

cited  the  learned  judge  has  mingled  conferred   had    competent   and    inde- 

up    the   doctrine    concerning    simple  pendent   advice   in   conferring   them, 

fiduciary  relations  with  that  concern-  This,  in  my  opinion,  is  a  settled  gen- 

ing  actual  undue  influence  or  oppres-  eral  principle  of  the  court,  and  I  do 

eion.  not  think  that  either  the  age  or  the 

*  Tate  V.  Williamson,  L.  R.  2  Ch.  capacity  of  the  person  conferring  the 
55,  60,  61,  per  Lord  Chelmsford.  In  benefit,  or  the  nature  of  the  benefit  con- 
Rhodes  V.  Bate,  L.  R.  1  Ch.  252,  257,  ferred,  afi"ects  the  principle.  Age  and 
Turner,  L.  J.,  laid  down  some  most  capacity  are  considerations  which  may 
important  corollaries  of  the  general  be  of  great  importance  in  cases  in  which 
principle,  and  distinguished  it  from  the  ■principle  does  not  apply;  but  I  think 
the  doctrine  concerning  undue  influ-  they  are  but  of  little,  if  any,  impor- 
ence  exerted  upon  persons  weak-  tance  in  cases  to  which  the  principle  is 
minded,  etc. :  "  I  take  it  to  be  a  well-  applicable.  They  may  aflford  a  sufB- 
established  principle  of  this  court  that  cient  protection  in  ordinary  cases,  but 
persons  standing  in  confidential  rela-  they  can  aff'ord  but  little  protection  in 
tioa   towarda    others    cannot    entitle  cases  of   influence  founded  upon  con- 


1379 


CONSTRUCTIVE    FRAUD. 


§957 


Courts  of  equity  have  carefully  refrained  from  defining 
the  particular  instances  of  fiduciary  relations  in  such 
a  manner  that  other  and  perhaps  new  cases  might  be 
excluded.  It  is  settled  by  an  overwhelming  weight  of 
authority  that  the  principle  extends  to  every  possible 
case  in  which  a  fiduciary  relation  exists  as  a  fact^  in 
which  there  is  confidence  reposed  on  one  side,  and  the 
resulting  superiority  and  influence  on  the  other.  The 
relation  and  the  duties  involved  in  it  need  not  be  legal; 
it  may  be  moral,  social,  domestic,  or  merely  personal. 

§  957.     Two  Classes  of  Cases.  —  There  are  two  classes 
of  cases  to  be  considered,  which  are  somewhat  diff'erent 


Jidence.  And,  as  to  the  nature  of  the 
benefit,  the  injury  to  the  party  by 
whom  the  benefit  is  conferred  cannot 
depend  upon  its  nature."  Also,  at  p. 
260:  "  I  think  that  where  a  relation  of 
confidence  is  once  established,  either 
some  positive  act  or  some  complete 
case  of  abandonment  must  be  shown 
in  order  to  determine  it.  The  mere 
fact  that  the  relation  is  not  called 
into  action  is  not,  I  think,  suflScient 
of  itself  to  determine  it,  for  this  may 
well  have  arisen  from  there  having 
been  no  occasion  to  resort  to  it.  ' 
In  Billage  v.  Southee,  9  Hare,  534, 
.540,  it  was  said:  "No part  of  the  juris- 
diction of  the  court  is  more  useful  than 
that  which  it  exercises  in  watching 
and  controlling  transactions  between 
persons  standing  in  a  relation  of  con- 
fidence to  each  other;  and,  in  my 
opinion,  this  part  of  the  jurisdiction 
of  the  court  cannot  be  too  freely  ap- 
plied, either  as  to  the  persons  between 
whom,  or  the  circumstances  in  which, 
it  is  applied.  The  jurisdiction  is 
founded  on  the  principle  of  correcting 
abuses  of  confidence,  and  I  shall  have 
no  hesitation  in  saying  it  ought  to  be 
applied,  whatever  be  the  nature  of  the 
confidence  reposed,  or  the  relation  of 
the  parties  between  whom  it  has  sub- 
sisted. I  take  the  principle  to  be  one 
of  universal  application,  and  the  cases 
in  which  the  jurisdiction  has  been  ex- 
ercised, —  those  of  trustee  and  cestui 
que  trust,  guardian  and  ward,  attor- 
ney and  client,  surgeon  and  patient,  — 
to  be  merely  instances  of  the  applica- 
tion of  the  principle.  ....  It  is  said 


that  the  plaintiflF  intended  to  be  lib- 
eral, and  that  this  court  would  not 
prevent  him  from  being  so;  and  no 
doubt  it  would  not  if  such  were  his  in- 
tention. But  intention  imports  knowl- 
edge, and  liberality  imports  the  ab- 
sence of  influence;  and  where  a  gift  is 
set  up  between  parties  standing  in  a 
confidential  relation,  the  onus  of  estab- 
lishing it  by  proof  rests  upon  the  party 
who  has  received  the  gift."  In  the 
frequently  quoted  case  of  Hatch  v. 
Hatch,  9  Ves.  292,  Lord  Eldon  said: 
"This  case  proves  the  wisdom  of  the 
court  in  saying  that  it  is  almost  im- 
possible, in  the  course  of  the  connec- 
tion of  guardian  and  ward,  attorney 
and  client,  trustee  and  cestui  que  trust, 
that  a  transaction  shall  stand,  purport- 
ing to  be  bounty  for  the  execution  of 
an  antecedent  duty."  In  Smith  v. 
Kay,  7  H.  L.  Cas.  750,  Lord  Kings- 
downe  said,  the  equitable  principle 
applied  in  all  transactions  where  "  in- 
fluence has  been  acquired  and  abused, 
in  which  confidence  has  been  reposed 
and  betrayed."  Lord  Cran worth  also 
said  that  the  familiar  cases  of  parent 
and  child,  guardian  and  ward,  attor- 
ney and  client,  are  only  instances  of 
a  broad  and  widely  applicable  princi- 
ple. See  also  Bennett  v.  Austin,  81 
N.  Y.  308,  332,  333,  per  Rapallo,  J., 
Young  V.  Hughes,  32  N.  J.  Eq.  372; 
Emigrant  Co.  v.  County  of  Wright, 
97  U.  S.  3.39;  Huguenin  v.  Baseley,  14 
Ves.  273;  2  Lead.  Cas.  Eq.,  4th  Am. 
ed.,  1156,  1174,  1192;  [Noble's  Adm'r 
V.  Moses,  81  Ala.  530;  60  Am.  Rep. 
175,  per  Stone,  C.  J.] 


§  957  EQUITY    JURISPKUDENCB.  1880 

in  their  external  forms,  and  are  governed  by  different 
special  rules,  and  which  still  depend  upon  the  single  gen- 
eral principle.  The  first  class  includes  all  those  instances 
in  which  the  two  parties  consciously  and  intentionally 
deal  and  negotiate  with  each  other,  each  knowingly  taking 
a  part  in  the  transaction,  and  there  results  from  their 
dealing  some  conveyance,  or  contract,  or  gift.  To  such 
cases  the  principle  literally  and  directly  applies.  The 
transaction  is  not  necessarily  voidable,  it  may  be  valid; 
but  a  presumption  of  its  invalidity  arises,  which  can  only 
be  overcome,  if  at  all,  by  clear  evidence  of  good  faith,  of 
full  knowledge,  and  of  independent  consent  and  action. 
The  second  class  includes  all  those  instances  in  which 
one  party,  purporting  to  act  in  his  fiduciary  character, 
deals  with  himself  in  his  private  and  personal  character, 
without  the  knowledge  of  his  beneficiary,  as  where  a 
trustee  or  agent  to  sell  sells  the  property  to  himself. 
Such  transactions  are  voidable  at  the  suit  of  the  bene- 
ficiary, and  not  merely  presumptively  or  prima  facie  in- 
valid. Nevertheless  this  particular  rule  is  only  a  neces- 
sary application  of  the  single  general  principle.  The 
circumstances  show  that  there  could  not  possibly  be  the 
good  faith,  knowledge,  and  free  consent  required  by  the 
principle,  and  therefore  the  result  which  is  a  rebuttable 
presumption  in  the  first  class  of  transactions  becomes  a 
conclusive  presumption  in  the  second.  The  transactions 
belonging  to  the  first  class  may  be  gifts,  or  agreements 
and  conveyances  upon  valuable  consideration.  The  prin- 
ciple is  applied  with  great  emphasis  and  rigor  to  gifts, 
whether  they  are  simple  bounties,  or  purport  to  be  the 
effects  of  liberality  based  upon  antecedent  favors  and 
obligations.^     Contracts,    executory   or    executed,   made 

'  Hucuenin  v.  Baseley,  14  Ves.  273;  Hoghton,  15  Beav.  278;  Bronn  v.  Kea- 

2  Lead.    Ca3.    Eq.    1156,   1174,   1192;  nedy,  33  Beav.  133;  4  De  Gex,  J.  &  S. 

Fnlham   v.    McCarthy,   1    H.  L.  Cas.  217;  Tomson  v.  Judge,  3  Drew.  30(5; 

703;    Savery  v.  King,    5   H.  L.    Ca3.  Morgan  v.  Minett,  L.  K   6  Ch.  Div. 

627;  Prideaux  v.  Lonsdale,  1  De  Gex,  638,  and  cases  cited;  Lyon  v.  Home, 

J.  &  S.  433;  Wright  v.  Vanderplaiik,  L.  R.  6   Eq.   655;  Everitt   v.  Everitt, 

8   De  Gex,  M.  &  G.  133;  Hoghton  v.  L.  R.  10   Eq.  405;  Turner  v.  Collins, 


1381  CONSTRUCTIVE    FRAUD.  §  958 

upon  a  valuable  consideration  are  not,  perliaps,  scruti- 
nized with  quite  so  much  severity  as  gifts,  but  they  are 
subjected  to  the  operation  of  the  same  principle,  and 
must  conform  to  its  requirements.*  Having  thus  ex- 
plained the  general  nature  and  scope  of  the  principle,  I 
shall  now  describe  its  application  to  the  most  important 
and  familiar  forms  of  fiduciary  relations,  and  its  effects 
upon  the  rights  and  liabilities  of  the  parties  thereto. 

§  958.  Trustee  and  Beneficiary.  —  As  the  general  pow- 
ers, duties,  and  liabilities  of  trustees  will  be  more  fully 
discussed  in  a  subsequent  chapter,  I  shall  at  present  sim- 
ply state  in  the  briefest  manner  those  rules  growing  out 
of  the  fiduciary  relation  which  regulate  their  dealings 
with  their  beneficiaries.'^  In  the  first  place,  when  the 
trustee  deals  with  the  trust  property,  but  not  directly  with 
the  cestui  que  trust,  and  without  the  latter's  intervention: 
The  rule  is  inflexibly  established  that  where,  in  the  man- 
agement and  performance  of  the  trust,  trust  property  of 
any  description,  real  or  personal  property,  or  mercantile 
assets  is  sold,  the  trustee  cannot,  without  the  knowledge 
and  consent  of  the  cestui  que  trust,  directly  or  indirectly 

L.  R.  7  Ch.  329;  Rhodes  v.  Bate,  L.  R.         '  Huguenin  v.  Baseley,  2  Lead.  Cas. 

1  Ch.  252;  Brock  v.  Barnes,  40  Barb.  Eq.   1156,    1174,   1192;  Fox  v.  Mack- 

521;  Wistar's  Appeal,   54  Pa.  St.  60;  reth,  2  Brown  Ch.  400;  2  Cox,  320;  1 

Greenfield's  Estate,  ]4  Pa.  St.  4S9,  507;  Lead.  Cas.  Eq.    188,   212,  237;  Gibson 

Todd  V.  Grove,  33  Md.  188;  Turner  v.  v.  Jeyes,  6  Ves.  266;  Hatch  v.  Hatch, 

Turner,  44  Mo.  535;  Taylor  v.  Taylor,  9    Ves.    292;    Griffiths   v.    Robins,    3 

8  How.  183;  Jenkins  v.  Pye,  12  Pet.  Madd.  191;   Revett  v.  Harvey,  1  Sim. 

241,  253;  and  see  Talk  v.  Turner,  101  &  St.  502;  Carey  v.  Carey,  2  Schoalea 

Mass.  494;   [also  the   recent  and  im-  &  L.  173;  Gresley  v.  Mousley,  4  Da 

portant  case  of  AUcard  v.  Skinner,  36  Gex  &  J.  78;  3  De   Gex,  F.  &  J.  433; 

Ch.  Div.  145;  and  see  Caspari  v.  First  Edwards  v.  Meyrick,  2  Hare,  60;  Tate 

German  Church,  12  Mo.  App.  293;  af-  v.  Williamson,  L.  R.  2  Ch.  55;  1  Eq. 

firmed    82    Mo.  C49.]     Testamentary  528;  Young  v.   Hughes,  32  N,  J.  Eq. 

gifts  stand  upon  a  somewhat  different  372;  Kline  v.  Kline,  57  Pa.  St.  120;  98 

footing;  that  is,  they  may   be  valid,  Am.  Dec.    206;  Norris  v.   Tayloe,  49 

while  a  gift   inter  vivos   between   the  111.  17;  95  Am.  Dec.  568;  Rockafellow 

same  parties  might   be  void:  Hindson  v.  Newcomb,  57    111.    186;  Turner  v. 

v.  Weatherill.  5  De  Gex,  M.  &  G.  301.  Turner,  44   Mo.    535;  Bayliss  v.  Wil- 

[See  also  Matter  of  Will  of  Smith,  95  liams,    6    Cold.     440;    McCormick  v. 

N.  Y.  516;  Montague  v.  Allan's  Ex'r,  Malin,   5    Blackf.    509;    Harkuesa   v. 

78  Va.  592;  49   Am.    Rep.  384.     Nu-  Fraser,  12  Fla.  336,  341. 
merous  instances  of  testamentary  gifts         *  See  Huguenin  v.  Baseley,  2  Lead. 

to  persons  holding  relations  of  confi-  Cas.    Eq.    1156,    1180,    1228;    Fox    v. 

dence  are  collected  in  note  to  Rich-  Mackreth,  1  Lead.  Cas.  Eq.,  4th  Am. 

mond's  Appeal,  21  Am.   St   Rep.  85;  ed.,  188,  212,  237. 
69  Conn.  226.] 


§  958  EQUITY   JURISPRUDENCE.  1382 

become  the  purchaser.  Such  a  purchase  is  always  Yoid- 
able,  and  will  be  set  aside  on  behalf  of  the  beneficiary^ 
unless  he  has  affirmed  it,  being  sui  juris,  after  obtaining 
full  knowledge  of  all  the  facts.  It  is  entirely  immaterial 
to  the  existence  and  operation  of  this  rule  that  the  sale  is 
intrinsically  a  fair  one,  that  no  undue  advantage  is  ob- 
tained, or  that  a  full  consideration  is  paid,  or  even  that 
the  price  is  the  highest  which  could  be  obtained.  The 
policy  of  equity  is  to  remove  every  possible  temptation 
from  the  trustee.  The  rule  also  applies  alike  where  the 
sale  is  private,  or  at  auction,  where  the  purchase  is  made 
directly  by  the  trustee  himself,  or  indirectly  through  an 
agent,  where  the  trustee  acts  simply  as  agent  for  another 
person,  and  where  the  purchase  is  made  from  a  co-trustee. 
Finally,  the  rule  extends  with  equal  force  to  a  purchase 
made  under  like  circumstances  by  a  trustee  from  himself. 
A  trustee  acting  in  his  fiduciary  character,  and  without 
the  intervention  of  the  beneficiary,  cannot  sell  the  trust 
property  to  himself,  nor  buy  his  own  property  from  him- 
self for  the  purposes  of  the  trust.'     In  the  second  place, 

»  Fox  V.  Mackreth,  1  Lead.  Cas.  Eq.,  Stephen  v.  Beall,  22  Wall.  329;  Worm- 

4th  Am.  ed.,  188,  212,  237;  Lewis  v.  ley  v.  Wormley,  8  Wheat.  421;  Cald- 

Hillman,  3  H.  L.  Cas.  607;  Hamilton  well  v.  Taggart,  4  Pet.  190;  Freeman 

V.  Wright,  9  Clark  &  F.   Ill;  Aber-  v.    Harwood,    44   Me.     195;    Dyer  v. 

deen  R'y  Co.  v.  Blaikie,  1  Macq,  461;  Shurtleff,  112  Mass.  165;  17  Am.  Rep. 

In  re  Bloye's  Trust,  1  Macn.  &  G.  488;  77;  Brown  v.  Cowell,  116  Mass.  461; 

Knight  V.  Majoribanks,  2  Macn.  &  G.  Smith  v.  Frost,  70  N.  Y.   65;  Fulton 

10;  Parkinson  v.  Hanbury,  2  De  Gex,  v.  Whitney,  66  N.    Y.  548;  Star  Fire 

J.  &  S.  450;  Ingle  v.  Richards,  6  Jur.,  Ins.  Co.  v.  Palmer,  41  N.  Y.  Sup.  Ct. 

N.  S.,  1178;  Ridley  v.  Ridley,  34  L.  267;  Woodruff  v,    Boyden,  3  Abb.  K 

J.  Ch.  462;  Franks  v.  BoUans,  37  L.  C.  29;  De  Caters  v.  Le  Ray  de  Chau- 

J.  Ch.  148,   155;  Grover  v.   Hugell,  3  mont,  3  Paige,  178;  Child  v.  Brace,  4 

Russ.  428;  Gregory  v.  Gregory,  Coop.  Paige,   309;  Campbell  v.   Johnston,  1 

201;  Baker  v.  Carter,  1  Younge  &  C.  Sand.    Ch.   148;    Cram  v.  Mitchell,   1 

250;  Woodhouse  v.  Meredith,  1  Jacob  Sand.  Ch.  251;  Cumberland  Coal  Co. 

&  W.  204,  222;  Ex  parte  Lacey,  6  Ves.  v.  Sherman,  30  Barb.  553;  Johnson  v. 

625;  Ex  parte  James,  8  Ves.  337,  34S;  Bennett,  39   Barb.    237;    Romaine   v. 

Ex   parte  Bennett,   10  Ves.  381,  394;  Hendrickson,    27  N.   J.  Eq.   162  (see 

Randall   v.    Errington.   10   Ves.   423;  this  case  for  an  accurate  statement  of 

Attorney-General  v.   Earl    of  Claren-  the  rule  and  its  reasons);  Wakeman  v. 

don,  17  Ves.  491,  500;  Tracy  v.  Col-  Dodd,  27  N.  J.   Eq.  564;  McGinn  v. 

by,  55    Cal.  67;    Tracy   v.    Craig,  55  Shaeffer,  7  Watts,  412;  Mason  v.  Mar- 

Cal.   91;  Scott   v.  Umbarger,  41  Cal.  tin,  4  Md.  124;  Wasson  v.  English,  13 

410;     Union     Slate     Co.     v.    Tilton,  Mo.  176;  Ringgold  v.  Ringgold,  1  Har. 

69  Me.  244;  Connolly   v.    Hammond,  &  G.  11;  Brothers  v.  Brothers,  7  Ired. 

51  Tex.  635;  Paine  v.  Irwin,  16  Hun,  Eq.  150;McCants  v.  Bee,  1  McCordEq. 

390;  Michoud  v.  Girod,  4  How.  503;  383;  16  Am,  Dec.  610;  James  v,  James, 


1383 


CONSTRUCTIVE    FRAUD. 


g  958 


where  the  trustee  deals,  with  respect  to  the  trust,  directly 
with  his  beneficiary:  A  purchase  by  a  trustee  from  his 


55  Ala.  525;  Narcissa  v.  Wathan,  2  B. 
Mon.  241;  Higgins  v.  Curtiss,  82  111. 
28;    Bush   v.    Sherman,    80   111.    160; 
Munn  V.  Burges,  70  111.  604;  Roberta 
V.  Moseley,  64  Mo.  507;  Schwarz  v. 
Wendell,  Walker  Ch.  267;  [People  v. 
Open   Board   etc.    Co.,    92   N.  Y.  98; 
Dodge  V.  Stevens,  94  N.  Y.  215;  Har- 
rington V.  Erie  Co.  Savings  Bank,  101 
N.  Y.  257;    Munson  v.  S.  G.  &  C.  R. 
R.  Co.,   103  N.   Y.  58;  Creveling  v. 
Fritts,    34   N.    J.   Eq.  1.S4;  Dugan  v. 
Capner,  44   N.  J.  Eq.  839;  Knight  v. 
Watts,  26  W.  Va.  175;  Gibson  v.  Bar- 
bour, 100  N.  C.  192;  Johnson  v.  Giles, 
69  Ga.  652;  McGaughey  v.  Brown,  46 
Ark.  25;  Price  v.  Thompson,  84  Ky. 
219;  Carrier  v.  Heather,  62  Mich.  441; 
O'Connor  V.  Flynn,  57  Cal.  293;  Scott  v. 
Sierra  Lumber  Co.,  67  Cal.  71.]    Pur- 
chase at  auction:  Adams  v,  Sworder,  2 
De  Gex,  J.  &  S.  44;  Grover  v.  Hugell,  3 
Russ.  428;  Lawi  ance  v.  Galsworthy,  3 
Jur.,N.  S.,  1049;  Sanderson  V.Walker, 
13  Ves.  601 ;  Ex  parte  Bennett,  10  Ves. 
381,  393;  Campbell  v.  Walker,  5  Ves. 
678;    Ex   parte    James,    8   Ves.    337, 
348;  Michoud  v.  Girod,  4  How.  503; 
Davoue  v.  Fanning,  2  Johns.  Ch.  252; 
Bellamy  v.  Bellamy,  6  Fla.  62.     [But 
that  trustee,  in  a  special   case,  may 
bid  by  permission   of  the   court,   see 
Scholle   V.    Scholle,    101   N.  Y.   172.] 
At  judicial  sale:  Ex  parte  Bennett,  10 
Ves.  381,  393;  Roberts  v.  Moseley,  64 
Mo.  507;  Tracy  v.  Colby,  55  Cal.  67; 
Tracy  v.  Craig,  55  Cal.  91  (purchase 
by   a  probate    judge    by   whom    the 
sale  had  been  ordered,  and  by  whom 
the   sale  would   in   regular  course  of 
proceedings   be   confirmed,  —  a   most 
extraordinary  case);  Jewett  v.  Miller, 
ION.  Y.  402;  61  Am.  Dec.  751;  Van 
Epps  V.  Van  Epps,  9  Paige,  237;  Fisk 
V.  Sarber,  6  Watts  &  S.  18;  [Powell  v. 
Powell,  80  Ala.  11;  Carson  v.  Marshall, 
37  N.  J.  Eq.  213;  Crawford  v.  Tribble, 
69   Ga.    519;    Welch   v.  McGrath,  59 
Iowa,  519;  Winans  v.  Winans,  22  W. 
Va.    678   (purchase   by   commissioner 
appointed  by  decree  to  sell  the  land). 
See,  however,  Allen   v.  Gillette,   127 
U.  S.  596,  for  the  rule  in  Texas;  and 
Anderson   v.    Butler,    31    S.  C.   183.] 
Purchase  made  indirectly  through  a  third 
person:  Adams  v.  Sworder,  2  De  Gex, 
J.  &  S.  44;  Sanderson  v.  Walker,  13 


Ves.  601 ;  Scott  v.  Umbarger,  41  Cal. 
410;   James   v.   James,    55    Ala.    525; 
Higgins  V.  Curtiss,  82  111.  28;  Davoue 
V.  Fanning,  2  Johns.  Ch.  252;  Beesoa 
V.  Beeson,  9  Pa.  St.  279;   Dorsey  v. 
Dorsey,  3  Har.  &  J.  410;  [Winans  v. 
Winans,  22  W.  Va.  678;  Houston  v. 
Bryan,  78  Ga.   181;   6  Am.   St.  Rep. 
252;  Bassett  v.  Shoemaker,  46  N.  J. 
Eq.  538;  19  Am.   St.   Rep.  435.     But 
see  Wayland  v.  Crank's  Ex'r,  79  Va. 
602;  Nichols  v.  Otto,  132  111.  91.     It 
is  said  that  an  executor  may  purchase 
from  his  own  vendee  after  a  fair  sale 
to  the  latter,  but  the  transaction  will 
be   closely   scrutinized:    Foxworth   v. 
White,    72   Ala.    224.]      Purchase   hy 
trustee  as  agent  for  a  third  person:  Ex 
parte  Bennett,  10  Ves.  381;  Gregory 
v.    Gregory,    Coop.  201;   North  Bait, 
etc.  Ass'n  v.  Caldwell,  25   Md.   420; 
90  Am.  Dec.  67.     Piaxhase  from  a  co- 
trustee: Whichcote  v.  Lawrence,  3  Ves. 
740;  Cumberland   Coal   Co.    v.    Sher» 
man,  30  Barb.  653;  Ringgold  v.  Ring- 
gold, 1  Har.  &  G.  11.     The  rule  is  also 
settled,  where  not  abrogated  by  stat- 
ute,   that    an    encumbrancer   with   a 
power   of   sale   in   selling   under    the 
power  becomes  a  trustee  for  the  sale, 
and,  as  such,  cannot  directly  or  through 
an     agent     purchase     the     property: 
Downes   v.  Grazebrook,  3   Mer.  200, 
per  Lord  Eldon;  In  re  Bloye's  Trust, 
1  Macn.  &  G.  488,  494,  495;  Waters 
V.  Groom,  11  Clark  &  F.  684;  Hynd- 
man  v.  Hyndman,   19  Vt.  9;  46  Am. 
Dec.  171;  Slee  v.  The  Manhattan  Co., 
1  Paige,  48;  Hendricks  v.  Robinson,  2 
Johns.  Ch.  283,  311;  Dobson  v.  Racey, 
3  Sand.  Ch.  60;  Campbell  v.  McLain, 
51  Pa.  St.  200;  Tennant  v.  Trenchard, 
L.  R.  4  Ch.  537;  [Martinson  v.  Clowes, 
21  Ch.  Div.  857;  Dawkinsv.  Patterson^ 
87  N.  C.  384;  Howell  v.  Pool,  92  N.  C. 
450;  Askew  v.   Sanders,  84  Ala.   356; 
Nichols  V.  Otto,  132  111.  91;  Bohn  v. 
Davis,  75  Tex.  24  (rule  otherwise  ia 
Texas).      But    authority    so   to    pur- 
chase may  be  conferred  upon  the  mort- 
gagee in  the  mortgage:  Knox  v.   Ar- 
mistead,  87  Ala.  511;  13  Am.  St.  Rep. 
65.     And   a  cestui  que   trust   under  a 
trust  deed  to  secure  debts  may  pur- 
chase at  the  trustee's  sale,  there  being 
in  that  case  no  such  conflict  of  duty 
and    interest    as   when   a  mortgages 


§  958  EQUITY    JURISPRUDENCE.  1384 

cestui  que  trust,  even  for  a  fair  price  and  without  any  un- 
due advantage,  or  any  other  transaction  between  them  by 
which  the  trustee  obtains  a  benefit,  is  generally  voidable, 
and  will  be  set  aside  on  behalf  of  the  beneficiary;  it  is  at 
]easi  prima  facie  voidable  upon  the  mere  facts  thus  stated.' 
There  is,  however,  no  imperative  rule  of  equity  that  a 
transaction  between  the  parties  is  necessarily,  in  every 
instance,  voidable.  It  is  possible  for  the  trustee  to  over- 
come the  presumption  of  invalidity.  If  the  trustee  can 
show,  by  unimpeachable  and  convincing  evidence,  that 
the  beneficiary,  being  sui  juris,  had  full  information  and 
complete  understanding  of  all  the  facts  concerning  the 
property  and  the  transaction  itself,  and  the  person  with 
whom  he  was  dealing,  and  gave  a  perfectly  free  consent, 
and  that  the  price  paid  was  fair  and  adequate,  and  that 
he  made  to  the  beneficiary  a  perfectly  honest  and  com- 
plete disclosure  of  all  the  knowledge  or  information  con- 
cerning the  property  possessed  by  himself,  or  which  he 
might,  with  reasonable  diligence,  have  possessed,  and 
that  he  has  obtained  no  undue  or  inequitable  advantage, 

purchases  at  his  own  sale:  Stocks  v.  in  a  particular  case  that  the  trustee 
Young,  67  Ala.  341.]  Although  the  has  not  made  advantage,  it  is  utterly 
purchase  be  set  aside,  still,  if  it  was  impossible  to  examine,  upon  satis- 
lair,  the  court  may  allow  the  trustee  factory  evidence  in  the  power  of  the 
for  his  payments  and  advances  and  court  (by  which  I  mean  in  the  power 
improvements  when  he  acted  in  good  of  the  parties),  in  ninety-nine  cases 
faith:  Mulford  v.  Minch,  11  N.  J.  Eq.  out  of  a  hundred,  whether  he  has 
16;  64  Am.  Dec.  472;  Mason  v.  Mar-  made  advantage  or  not":  Lloyd  v. 
tin,  4  Md.  124;  and  see  Paine  v.  Attwood,  3  De  Gex  &  J.  614;  Camp- 
Irwin,  16  Hun,  390.  After  the  trust  bell  v.  Walker,  5  Ves.  678,  682;  13 
has  been  completely  ended,  the  former  Ves.  601;  Randall  v.  Errington,  10 
trustee  may  purchase:  Munn  v.  Bur-  Ves.  423;  Hamilton  v.  Wright,  9 
ges,  70111.  604;  Bush  v.  Sherman,  80  Clark  &  F.  Ill,  123,  125;  Ingle  ▼. 
111.  160.  [And  a  sale  is  not  voidable  Richards,  28  Beav.  361;  Tatum  v. 
merely  because,  when  entered  upon,  McLellan,  50  Miss.  1;  Clarke  v.  De- 
the  purchaser  had  the  power  to  be-  veaux,  1  S.  C.  172,  184;  Smith  v. 
eome  trustee  of  the  property  pur-  Townshend,  27  Md.  368;  92  Am.  Dec. 
chased, — as  when  he  is  an  executor  637;  Spencer  and  Newbold's  Appeal,  80 
who  has  not  proved  the  will  which  Pa.  St.  317,  332;  Parshall's  Appeal,  65 
relates  to  the  property,  —  when  in  fact  Pa.  St.  224;  Wistar's  Appeal,  54  Pa. 
he  never  does  become  trustee:  Clark  St.  60;  Diller  v.  Brubacker,  52  Pa.  St. 
V.  Clark,  9  App.  Cas.  (Priv.  Coun.)  498;  91  Am.  Dee.  177;  [Nichols  v. 
733;  Bowden  v.  Pierce,  73  Cal.  459.]  McCarthy,  53  Conn.  299;  55  Am.  Rep. 
» In  Ex  parte  Lacey,  6  Ves.  625,  627,  105;  Morris  v.  Willard,  84  K.  C.  293; 
Lord  Eldon  gave  the  practical  reason  Hickman  v.  Stewart,  69  Tex.  255; 
for  this  stringent  rule:  "It  is  founded  Pollard  v.  Lathrop,  12  Col.  171j  Gol- 
upon  this,  that  though  you  may  see  son  v.  Dunlap,  73  Cal.  157.] 


1385 


CONSTRUCTIVE    FKAUD. 


§  959 


and  especially  if  it  appears  that  the  beneficiary  acted  in 
the  transaction  upon  the  independent  information  and 
advice  of  some  intelligent  third  person,  competent  to  give 
such  advice,  then  the  transaction  will  be  sustained  by  a 
court  of  equity.*  The  doctrine  is  enforced  with  the  ut- 
most stringency  when  the  transaction  is  in  the  nature  of 
a  bounty  conferred  upon  the  trustee,  —  a  gift  or  benefit 
without  full  consideration.  Such  a  transaction  will  not 
be  sustained,  unless  the  trust  relation  was  for  the  time 
being  completely  suspended,  and  the  beneficiary  acted 
throughout  upon  independent  advice,  and  upon  the  fullest 
information  and  knowledge. 

§  959.  Principal  and  Agent.  —  Equity  regards  and 
treats  this  relation  in  the  same  general  manner,  and  with 
nearly  the  same  strictness,  as  that  of  trustee  and  ben- 
eficiary.     The    underlying    thought   is,   that    an    agent 


*  The  independent  advice  of  a  third 
person  does  not  seem  to  be  an  essen- 
tial feature  in  purchases  for  a  fair 
consideration;  but  it  does  seem  to  be 
indispensable  in  transactions  having 
the  nature  of  gifts.whereby  the  trustee 
obtains  some  benefit,  —  as,  for  exam- 
ple, a  release  of  claims  against  the 
trustee  given  by  the  cestui  que  ti-ust  as 
a  bounty:  Lloyd  v.  Attwood,  3  De 
Gex  &  J.  614.  [See  also  Caspar!  v. 
First  German  Church,  12  Mo.  App. 
649.]  Some  of  the  cases  speak  of 
"terminating  the  trust,"  "ceasing  to 
be  trustee,"  "shaking  off  the  charac- 
ter of  trustee,"  and  the  like.  These 
expressions  plainly  do  not  mean  that 
the  trust  relation  should  have  been 
finally  ended  and  dissolved.  They 
are  especially  applicable  to  transac- 
tions in  the  nature  of  gifts,  and  then 
refer  to  the  independent  advice  of  a 
third  person,  upon  which  the  bene- 
ficiary acts,  so  that  the  trustee  is  not 
p7-o  hac  vice  dealing  in  his  capacity 
of  trustee.  When  applied  to  pur- 
chases, the  expressions  simply  mean 
that  the  beneficiary  must  have  com- 
plete information  and  unbiased  judg- 
ment, and  must  give  a  free  and  full 
consent.  The  rule  given  in  the  text 
was  well  stated  in  the  important  case 
of   Colea   V.   Trecothick,  9   Yes.  234, 


246:  "A  trustee  may  buy  from  the 
cestui  que  trust,  provided  there  is  a  clear 
and  distinct  contract,  ascertained  to 
be  such  after  a  jealous  and  scrupulous 
examination  of  all  the  circumstances, 
that  the  cestui  que  trust  intended  the 
trustee  should  buy;  and  there  is  no 
fraud,  no  concealment,  no  advantage 
taken  by  the  trustee  of  information 
acquired  by  him  in  the  character  of 
trustee":  Ex  parte  Bennett,  JO  Ves. 
381,  394;  Ex  parte  Lacey,  6  Ves.  625; 
Ex  parte  James,  8  Ves.  337,  348;  Morse 
V.  Koyal,  12  Ves.  355;  Randall  v.  Er- 
rington,  10  Ves,  423;  Downes  v.  Graze- 
brook,  3  Mer.  200,  208;  Knight  v. 
Majoribanks,  2  Macn.  &  G.  10;  Luif 
V.  Lord,  11  Jur.,  N.  S.,  50;  Denton  v. 
Donner,  23  Beav.  285;  Ayliffe  v.  Mur- 
ray, 2  Atk.  58;  Clarke  v.  Swaile,  2 
Eden,  134;  Spencer  and  Newbold'a 
Appeal's  80  Pa.  St.  317;  Vil lines  v. 
Norfleet,  2  Dev.  Eq.  167;  Bryan  v. 
Duncan,  11  Ga.  67;  Kennedy  v,  Ken- 
nedy, 2  Ala.  571;  Richardson  v.  Spen- 
cer, 18  B.  Mon.  450;  Marshall  v. 
Stephens,  8  Humph.  159;  47  Am. 
Dec.  601;  Sallee  v.  Chandler,  26  Mo. 
124;  fMiggett's  Appeal,  109  Pa.  St. 
5l'0;  WaUlrop  v.  Leaman,  30  S.  C. 
428;  Williams  v.  Powell,  66  Ala.  20; 
41  Am.  Rep.  742;  Colton  v.  Stanford, 
82  Cal.  351;  16  Am.  St.  Rep.  137.] 


§  959 


EQUITY    JURISPRUDENCE. 


1386 


should  not  unite  his  personal  and  his  representative 
characters  in  the  same  transaction;  and  equity  will  not 
permit  him  to  he  exposed  to  the  temptation,  or  brought 
into  a  situation  where  his  own  personal  interests  conflict 
with  the  interests  of  his  principal,  and  with  the  duties 
which  he  owes  to  his  principal.^  In  dealings  without  the 
intervention  of  his  principal,  if  an  agent  for  the  purpose 
of  selling  property  of  the  principal  purchases  it  himself, 
or  an  agent  for  the  purpose  of  buying  property  for  the 
principal  buys  it  from  himself,  either  directly  or  through 
the  instrumentality  of  a  third  person,  the  sale  or  pur- 
chase is  voidable;  it  will  always  be  set  aside  at  the  option 
of  the  principal;  the  amount  of  consideration,  the  ab- 
sence of  undue  advantage,  and  other  similar  features  are 
wholly  immaterial;  nothing  will  defeat  the  principal's 
right  of  remedy  except  his  own  confirmation  after  full 
knowledge  of  all  the  facts.^      Passing  to  dealings  con- 


^  Neuendorff  V.  World  etc.  Ins.  Co., 
69  N.  Y.  3S9;  Wilbur  v.  Lynde,  49 
Cal.  290;  19  Am.  Rep.  645;  Tynes  v. 
Grimstead,  1  Tenn.  Ch.  508;  Dodd  v. 
Wakeman,  26  N.  J.  Ex.  484;  Knitz  v. 
Fisher,  8  Kan.  90;  Fisher  v.  Krutz, 
9  Kan.  501;  Grumley  v.  Webb,  44 
Mo.  444;  100  Am.  Dec.  304.  For  the 
eame  reason,  an  agent  cannot,  unless 
expressly  aiitliorized  by  both,  act  as 
such  for  two  principals  whose  interests 
are  conflicting;  a  contract  thus  made 
without  the  knowledge  and  consent 
of  each  would  not  be  enforced,  and 
might  be  canceled:  New  York  Cent. 
Ins.  Co.  V.  Nat.  Protect.  Ins.  Co.,  14 
N.  Y.  85;  Greenwood  v.  Spring,  54 
Barb.  375;  Lloyd  v.  Colston,  5  Bush, 
587;  Draughon  v.  Quillen,  23  La.  Ann. 
237;  Seribner  v.  Collar,  40  Mich.  375; 
29  Am.  Rep.  541.  [See  also  Murray  v. 
Beard,  102  N.  Y.  508.] 

*  As  in  the  case  of  trustees,  this  rule 
applies  alike  to  priv^ate  sales,  auction 
sales,  and  judicial  sales;  In  re  Bloye's 
Trust,  1  Macn.  &  G.  488,  495;  Wals- 
ham  V.  Stainton,  1  De  Gex,  J.  &  S. 
678;  Kimber  v.  Barber,  L.  R.  8  Ch. 
56;  Lewis  v.  Hillman,  3  H.  L.  Cas. 
607;  Tyrrell  v.  Bank  of  London,  10 
H.  L.  Cas.  26;  Charter  v.  Trevelyan. 
11  Clark  &  F.  714;  Ex  parte  Gore,  6 


Jur.  1118;  7  Jur.  136;  Hichens  v. 
Congreve,  4  Russ.  562,  577;  Taylor 
V.  Salmon,  4  Mylne  &  C.  134;  Gillett 
V.  Peppercorne,  3  Beav.  78;  Lowther 
V.  Lowther,  13  Ves.  95,  103;  Murphy 
V.  O'Shea,  2  Jones  &  L.  422;  East  In- 
dia  Co.  V.  Henchman,  1  Ves.  287; 
Massey  v.  Davies,  2  Ves.  317;  Bent- 
ley  V.  Craven,  18  Beav.  75;  Barker  v. 
Harrison,  2  Coll.  C.  C.  546;  Lees  v. 
Nuttal,  2  Mylne  &  K.  819;  also,  agent 
to  settle  a  debt  of  his  principal  cannot 
purchase  it,  or  any  security  of  it,  for 
his  own  benefit:  Carter  v.  Palmer,  8 
Clark  &  F.  657;  11  Bligh,  N.  S.,  397; 
Cane  v.  Lord  Allen,  2  Dow,  289,  294; 
Reed  v.  Norris,  2  Mylne  &  C.  .361; 
Hobday  v.  Peters,  28  Beav.  349;  Neu- 
endorff v.  Vk'orld  etc.  Ins.  Co.,  69  N.  Y. 
389;  Bain  v.  Brown,  56  N.  Y.  285; 
Taussig  v.  Hart,  49  N.  Y.  301;  Ben- 
nett v.  Austin,  81  N.  Y.  308;  Conkey 
V.  Bond,  36  N.  Y.  427;  34  Barb.  276; 
Gardner  v.  Ogden,  22  Barb.  327;  78 
Am.  Dec.  192  (subagent);  Moore  v. 
Moore,  5  Barb.  256;  Dobson  v.  Racey, 
8  Barb,  216  (ratified);  Bank  of  Or- 
leans V.  Torrey,  7  Hill,  260;  9  Paige, 
649,  662;  Bridenbacker  v.  Lowell,  32 
Barb.  9;  Davoue  v.  Fanning,  2  Johns. 
Ch.  253;  Van  Epps  v.  Van  Epps,  9 
Paige,    237;   Hughes   v.  Washington, 


1387 


CONSTRUCTIVE    FRAUD. 


§  959 


nected  with  the  principal's  intervention,  in  any  contract 
of  purchase  or  sale  with  the  principal,  or  other  transac- 
tion by  which  the  agent  obtains  a  benefit,  a  presumption 
arises  against  its  validity  which  the  agent  must  overcome; 
although  this  presumption  is  undoubtedly  not  so  weighty 
and  strong  as  in  the  case  of  a  trustee.  The  mere  fact 
that  a  reasonable  consideration  is  paid,  and  that  no  un- 
due advantage  is  taken,  is  not  of  itself  sufficient.  Any 
unfairness,  any  underhanded  dealing,  any  use  of  knowl- 
edge not  communicated  to  the  principal,  any  lack  of  the 
perfect  good  faith  which  equity  requires,  renders  the 
transaction  voidable,  so  that  it  will  be  set  aside  at  the  op- 
tion of  the  principal.^     If,  on  the  other  hand,  the  agent 


72  111.  84;  Tewksbury  v.  Spruance,  75 
111.  187;  Eldridge  v.  Walker,  60  III. 
2.30;  JefiFriea  v.  Wiester,  2  Saw.  135; 
Wilbur  V.  Lynde,  49  Cal.  290;  19  Am. 
Rep,  645;  Rubidoex  v.  Parks,  48  Cal, 
215;  Hardenbergh  v.  Bacon,  33  Cal, 
356,  377;  Hunsacker  v,  Stnrgis,  29 
Cal.  142,  145;  Armstrong  v.  Elliott,  29 
Mich.  485;  Ruckman  v.  Bergholz,  37 
N.  J.  L.  437;  Tynes  v.  Grimstead,  1 
Tenn.  Ch,  508;  Barziza  v.  Story,  39 
Tex.  354;  Rogers  v,  Lockett,  28  Ark. 
290;  Grumley  v,  Webb,  44  Mo.  444; 
100  Am.  Dec.  304:  Baker  v.  Whiting, 
1  Story,  218.  241  (by  a  subagent); 
Caldwell  v.  Sigourney,  19  Conn.  37; 
Banks  v.  Judah,  8  Conn.  145;  Mar- 
shall V.  Joy,  17  Vt.  546;  Ingle  v.  Hart- 
man,  37  Iowa,  274:  Scott  v,  Freeland, 
7  Smedes  &  M,  409;  45  Am.  Dec.  310; 
[Porter  v.  Woodruff.  36  N.  J.  Eq.  174; 
Tyler  v.  Sanborn,  128  111.  136;  15  Am. 
St.  Rep.  97  (agent's  wife);  Landis  v. 
Saxton.  89  Mo.  382;  Fry  v.  Piatt,  32 
Kan.  62  (sale  to  agent's  partner);  De 
Mallagh  v,  De  Mallagh,  77  Cal,  126;] 
and  see  many  of  the  American  casea 
cited  under  the  preceding  paragraph, 
concerning  similar  purchases  by  trus- 
tees. In  Scott  V,  Mann,  36  Tex.  157, 
it  seems  to  be  held  that  an  agent  to 
sell  property  at  auction  may  bid  for  it 
on  behalf  of  a  third  person.  This 
conclusion  is  directly  opposed  to  the 
English  decisions,  and  seems  to  be 
plainly  opposed  to  the  rule  that  a  per- 
son cannot  act  as  agent  for  two  prin- 
cipals whose  interests  are  antagonistic. 


*  Walsham  v.  Stainton,  1  De  Gex, 
J.  &  S.  678;  Hay  garth  v.  Wearing, 
L.  R.  1-2  Eq.  320;  Donaldson  v.  Gil  lot, 
L.  R.  3  Eq.  274;  Panama  etc.  Tel.  Co, 
V.  India  Rubber  etc.  Co..  L.  R.  10  Ch, 
515,  526;  Tyrrell  v.  Bank  of  London, 

10  H.  L.  Cas.  26;  Charter  v.  Trevelyan, 

11  Clark  &  F,  714;  Murphy  v.  O'Shea, 
2   Jones  &  L.  422;  Wilson  v.  Short, 

6  Hare,  366,  383;  Gillett  v.  Pepper- 
corne,  3  Beav.  78;  Clarke  v.  Tipping, 
9  Beav.  282;  Hobday  v,  Peters,  28 
Beav.  349;  Wentworth  v,  Lloyd,  32 
Beav,  467;  Byrd  v.  Hughes,  84  111, 
174;  25  Am.  Rep,  442;  Jeffries  v. 
Wiester,  2  Saw.  1.S5;  Wilbur  v.  Lynde, 
49  Cal.  290;  19  Am,  Rep.  645;  Ingle 
V,  Hartman,  37  Iowa,  274;  Rubidoex 
V,  Parks,  48  Cal,  215;  Weeks  v. 
Downing,  30  Mich,  4;  Uhlich  v. 
Muhlke,  61  111,  499;  Wilson  v,  Wil- 
son, 4  Abb.  App.  621;  Young  v. 
Hughes,  32  N.  J.  Eq.  372;  Condit  v, 
Blackwell,  22  N,  J.  Eq.  481;  Comstock 
V,  Comstock,  57  Barb.  453;  Norris  v. 
Tayloe,  49  111,  17;  95  Am.  Dec.  568; 
Green  v.  Winter,  1  Johns.  Ch,  26,  60; 

7  Am.  Dec.  475;  Brown  v.  Post,  1  Hun, 
303;  Cleveland  Ins.  Co.  v.  Reed,  1 
Biss.  180;  McMahon  v.  McGraw,  26 
Wis.  614;  White  v.  Ward,  26  Ark. 
445;  Gillenwaters  v.  Miller,  49  Miss, 
150;  [Keith  v.  Kellam,  35  Fed.  Rep. 
243;  Le  Gendre  v.  Byrnes,  44  N,  J, 
Eq.  372;  Hegenmeyer  v.  Marks,  37 
Minn.  6;  5  Am,  St.  Rep,  808.]  In  the 
recent  case  of  Panama  etc,  Tel.  Co.  v. 
India  Rubber  etc,  Co.,  L,  R,  10  Ch. 


§   959  EQUITY    JURISPEUDENCE.  1388 

imparted  all  his  own  knowledge  concerning  the  matter, 
and  advised  his  principal  with  candor  and  disinterested- 
ness, as  though  he  himself  were  a  stranger  to  the  bargain, 
and  paid  a  fair  price,  and  the  principal  on  his  side  acted 
with  full  knowledge  of  the  subject-matter  of  the  transac- 
tion and  of  the  person  with  whom  he  was  dealing,  and 
gave  a  full  and  free  consent,  —  if  all  these  are  affirma- 
tively proved,  the  presumption  is  overcome,  and  the  trans- 
action is  valid.^  These  general  doctrines  are  applied  under 
every  variety  of  circumstances,  and  to  every  kind  of  trans- 
action. As  illustrations,  when  an  agent  has,  during  his 
employment,  discovered  a  defect  in  his  principal's  title, 
he  cannot,  after  the  agency  is  ended,  use  such  knowledge 
for  his  own  benefit;  much  less  can  he  do  so  while  the 
agency  exists.'  Nor  is  an  agent  employed  to  purchase  or 
to  sell,  or  in  any  other  business,  permitted  to  make  profits 
for  himself  in  the  transaction,  unless  by  the  plain  con- 
sent of  his  emploj'er;  for  all  such  profits  wrongfully  made 
he  must  account  to  his  principal;^  and  if  he  has  taken  the 

515,  James,  L.  J.,  laid  down  the  fol-  Coll.  C.  C.  546;  In  re  Bloye's  Trust.  1 

lowing  general  rule:  "I  take  it  to  be  Macn.  &  G.  488;  Walker  v.  Carring- 

clear   that   any  surreptitious   dealing  ton,  74  111.  446;  Young  v,  Hughes,  32 

between  one  principal  and  the  agent  N.  J.  Eq.  372;   Wilson  v,  Wilson,  4 

of   the  other  principal  is  a  fraud  on  Abb.  App.  621;  Brown  v.  Post,  1  Hun, 

such  other  principal,  cognizable  in  this  303;  Farnam  v.  Brooks,  9  Pick.  212; 

court.      That  I  believe  to  be  a  clear  Marshall  v.  Joy,  17  Vt.  546;  Moore  v. 

proposition,  and  I  take  it  to  be  equally  Mandlebaum,   8   Mich.    433;   Fisher's 

clear  that  the  defrauded  principal,  if  Appeal,    34   Pa.    St.    29;    [Kerby   v, 

he  come  in  time,  is  entitled,  at  his  op-  Kerby,  57  Md.  345;  Rochester  v.  Lev- 

tion,  to  have  the  contract  rescinded,  ering,  104  Ind.  562;]  and  see  cases  in 

or  if  he  elects  not  to  have  it  rescinded,  last  preceding  note, 
to  have  such  other  adequate  relief  as         *  One  of  the  most  common  instances 

the  court  may  think  right  to  give  him."  of  such  conduct  is  the  agent's  acquir- 

'  Lewis  V.    Hillman,  3  H.   L.  Cas.  ing  a  tax  title  to  his  principal's  prop- 

607;   Charter  v.  Trevelyau,   11  Clark  erty  for  his  own  benefit;  this  proceed- 

&  F.  714,  732;  Rothschild  v.  Brook-  ing  is  always  invalid:  Ringo  v.  Binns, 

man,  5  Bligh,N.  S.,  165;  Cane  v.  Lord  10   Pet.  269;   Rogers   v.    Lockett,  28 

Allen,  2  Dow,  289,  294;  Lord  Selseyv.  Ark.   290;   Krutz  v.    Fisher,    8   Kan. 

Rhoades,  1  Bligh,  N.  S.,  1;  2  Sim.  &  90;  Fisher  v.  Krutz,  9  Kan.  501;  Mc- 

St.  41;    Clarke   v.  Tipping,   9    Beav;  Mahon  v.  McGraw,  26  Wis,  614. 
282;  Dally  v.  Wonham,  33  Beav.  154;         *  De  Bussche  v.  Alt,  L.  R.    8   Ch. 

Lowther  v.  Lowther,  13  Ves.  95,  103;  Div.  286;  Imperial  etc.  Association  v. 

Woodhouse  v.  Meredith,  1  Jacob  &  W.  Coleman,  L.  R.  6  H.  L.  189;  Tyrrell  v. 

204;  Watt  v.  Grove,  2  Schoales  &  L.  Bank  of  London,  10  H.  L.  Cas.  26,  39; 

492;  Molony  v.  Kernan,  2  Dru.  &  War.  Walsham  v.  Stainton,  1  De  Gex,  J.  & 

31;   Mulhallen   v.  Marum,  3   Dru.  &  S.  678;  East  India  Co.  v.  Henchman, 

War.  317;  Murphy  v.  O'Shea,  2  Jones  1  Ves.  287;  Massey  v.  Davis,  2  Ves. 

&  L.  422,  425;  Barker  v.  Harrison,  2  317;  Ex  parte  Hughes,  6  Ves.  617;  Ben- 


1389 


CONSTRUCTIVE    FRAUD. 


iJGO 


legal  title  to  property  in  violation  of  his  fiduciary  duty, 
equity  will  treat  him  as  a  trustee  thereof  for  his  princi- 
pal.^ A  gift  by  a  principal  to  his  agent  may  be  valid  and 
be  sustained,  if  the  absolute  good  faith,  knowledge,  and 
intent  of  both  the  parties  is  clearly  established.^  After 
the  agency  has  been  ended,  and  the  fiduciary  relation  has 
ceased,  the  foregoing  rules  no  longer  operate;  the  parties 
may  deal  with  each  other  in  the  same  manner  as  any 
other  persons.' 

§  960.  Attorney  and  Client.  —  The  courts  of  England 
have  uniformly  watched  all  the  dealings  between  attor- 
neys or  barristers  and  their  clients  with  the  closest  scru- 
tiny, and  have  established  very  rigorous  rules  concerning 
them.     It  must  be  conceded  that  this  equitable  doctrine 


Bon  V.  Heathern,  1  Younge  &  C.  326, 
342;  Beck  v,  Kantorowicz,  3  Kay  &  J. 
230;  Bentley  v.  Craven,  18  Beav.  75; 
Maxwell  v.  Port  Tenant  etc.  Co.,  24 
Bear.  495;  Ritchie  v.  Conper,  28  Beav. 
344;  Moinett  v.  Days,  1  Baxt.  431; 
Dodd  V.  Wakeman,  26  N.  J.  Eq.  484; 
Coursin's  Appeal,  79  Pa.  St.  220;  Wil- 
son v.  Wilson,  4  Abb.  App.  621;  Gil- 
lenwaters  v.  Miller,  49  Miss.  150; 
Taussig  V.  Hart,  49  N.  Y.  301;  Crum- 
ley V.  Webb,  44  Mo.  444;  100  Am.  Dec. 
304;  Leake  V.  Sutherland,  25  Ark.  219; 
Bunker  v.  Miles,  30  Me.  431;  50  Am. 
Dec.  632;  Church  v.  Sterling,  16  Conn. 
388;  Reed  v.  Warner,  5  Paige,  650; 
Bruce  v.  Davenport,  36  Barb.  349; 
Gardner  v.  Ogden,  22  N.  Y.  327;  78 
Am.  Dec.  192;  Myer's  Appeal,  2  Pa. 
St.  463;  Keighler  v.  Savage  Mfg. 
Co.,  12  Md.  383;  71  Am.  Dec.  600; 
Kanada  v.  North,  14  Mo.  615;  Knabe 
V.  Ternot,  16  La.  Ann.  13;  [Hegen- 
meyer  v.  Marks,  37  Minn.  6;  5  Am. 
St.  Rep.  808;  Weaver  v,  Fisher,  110 
ni.  146.1 

1  Reitz  v.  Reitz,  80  N.  Y.  538;  Ben- 
nett  V.  Austin,  81  N.  Y.  308;  Gardner 
V.  Ogden,  22  N.  Y.  327;  78  Am.  Dec. 
192;  Smith  v.  Stephenson,  45  Iowa, 
645;  Barziza  v.  Story,  39  Tex.  354; 
Krutz  V.  Fisher,  8  Kan.  90;  Fisher  v. 
Krutz,  9  Ran.  501;  McMahon  v.  Mc- 
Graw,  26  Wis.  614;  Matthews  v.  Light, 
32  Me.  305;  Pillsbury  v.  Pillsbury,  17 
Me.  107;  Church  v.  Sterling,  16  Conn. 
388;   Parkist  v.  Alexander,  1  Johns. 


Ch.  394;  Burrell  v.  Bull,  3  Sand.  Ch. 
15;  Blount  v.  Robeson,  3  Jones  Eq.  73; 
Hargrave  v.  King,  5  Ired.  Eq.  4.S0; 
Wellford  v.  Chancellor,  5  Gratt.  39; 
McKinley  v.  Irvine,  13  Ala.  681; 
Moore  v.  Mandlebaum,  8  Mich.  433; 
Massie  v.  Watts,  6  Cranch,  148.  [See 
also  Davis  v.  Hamlin,  108  111.  .^9;  48 
Am.  Rep.  541;  Stewart  v.  Duffy,  116 
111.  47;  and  especially  Rose  v.  Hay- 
den,  35  Kan.  106;  57  Am.  Rep.  145 
(an  agent  to  negotiate  for  the  purchase 
of  land  buys  the  same  with  his  own 
money;  he  is  treated  as  trustee  for  the 
principal);  Bryan  v.  McNaughton,  38 
Kan.  98  (same).]  See  post.  Construc- 
tive Trusts. 

*  The  equitable  rule  concerning  gifts 
between  principal  and  agent  does  not 
seem  to  be  as  stringent  as  that  which 
regulates  the  similar  dealings  of  tru3» 
tees  and  their  beneficiaries:  Hunter  v. 
Atkins,  3  Mylne  &  K.  113;  Nicol  v. 
Vaughan,  1  Clark  &  F.  495;  Hobday 
v.  Peters,  28  Beav.  349;  [Ralston  v. 
Turpin,  25  Fed.  Rep.  18;  affirmed  129 
U.  S.  663.] 

»  Scott  V.  Dunbar,  1  Molloy,  442; 
Trevelyan  v.  Charter,  4  L.  J.  Ch.  209; 
Bucher  v.  Bucher,  86  111.  377.  Even 
then,  however,  a  former  agent  is  not 
permitted  to  use  special  knowledge, 
which  he  acquired  by  means  of  hia 
agency,  to  benefit  himself  at  the  ex- 
pense of  the  former  principal:  Carter 
V.  Palmer,  8  Clark  &  F.  657;  Hoi  man 
V.  Loynes,  4  De  Gex,  M.  &  G.  270. 


§  960  EQUITY    JURISPRUDENCE.  1390 

has  been  to  a  considerable  extent  ignored,  and  these 
rules  have  been  greatly  modified  in  their  application,  by 
the  courts  in  several  of  the  American  states.  "While  the 
fact  must  be  admitted,  it  cannot  be  too  much  deplored.'  In 
regard  to  gifts,  the  rule  is  definitely  settled,  although  it 
may  not  always  have  been  followed  by  American  courts, 
that  no  gift  from  a  client  to  his  attorney,  made  while  the 
relation  is  still  subsisting,  is  valid.  In  order  that  a  gift 
from  a  client  to  his  own  attorney  may  be  sustained,  the 
donee  must  not  only  show  affirmatively  the  perfect  good 
faith  of  the  transaction,  the  absence  of  any  pressure  or 
influence  on  his  own  part,  the  complete  knowledge,  inten- 
tion, consent,  and  freedom  of  action  on  the  donor's  part, 
but  it  must  also  appear  that,  pro  hac  re,  —  that  is,  in  all  the 
dealings  connected  with  the  gift  itself,  —  the  relation  of 
attorney  and  client  between  the  two  parties  had  been  sus- 
pended, by  means  of  independent  advice  furnished  to  the 
client  by  some  disinterested  and  competent  third  person, 
through  which  the  client  was  instructed  and  upon  which 
he  acted.  Whatever  may  be  the  other  circumstances, 
unless  it  be  shown  that  the  client,  in  conferring  his 
bounty,  had  the  benefit  of  such  independent  counsel  and 
advice,  the  gift  must  fail.'     In  regard  to  purchases,  sales, 

*  I  venture  the  suggestion  that  no  of  the  cases.  This  does  not  mean 
single  circumstance  has  done  more  to  that  the  business  connection  between 
debase  the  practice  of  the  law  in  the  the  donor  and  the  donee  must  have 
popular  estimation,  and  even  to  lower  been  fully  and  finally  ended,  and  the 
the  lofty  standard  of  professional  attorney  discharged  entirely  from  his 
ethics  and  self-respect  among  mem-  employment.  It  simply  means,  as 
bers  of  the  legal  profession  itself,  in  stated  in  the  text,  that  in  the  dealing 
large  portions  of  our  country,  than  concerning  the  gift  itself,  the  attorney 
the  nature  of  the  transactions,  often  must  not  be  acting  as  attorney  for 
in  the  highest  degree  champertous,  the  client,  but  some  other  attorney 
between  attorney  and  client,  which  or  competent  adviser  must  be  called 
are  permitted,  and  which  have  re-  in.  The  rule  as  given  in  the  text  ia 
ceived  judicial  sanction.  It  sometimes  firmly  established  in  England.  The 
would  seem  that  the  fiduciary  relation  latest  decision  ia  Morgan  v.  Minett, 
and  the  opportunity  for  undue  in-  L.  R.  6  Ch.  Div.  638.  A  client  had 
fluence,  instead  of  being  the  grounds  given  three  releases  and  conveyances 
for  invalidating  such  agreements,  are  to  Minett,  who  had  long  been  his  con- 
practically  regarded  rather  as  their  fidential  attorney  and  friend.  The 
excuse  and  justification.  evidence  showed,  beyond  a  question, 

*  The  language,  "the  relation  must  that  the  donor  fully  knew  and  com- 
have  terminated,"  or  "must  have  prehended  the  nature  of  the  transac- 
ceased  to  exist,"  etc.,  is  found  in  some  tion,    and    intended    to    confer    the 


1391 


CONSTRUCTIVE   FRAUD. 


§  960 


and  other  similar  contracts  between  the  attorney  and 
client,  the  rule  is  not  so  stringent.  Such  species  of  con- 
tract made  while  the  relation  is  still  subsisting  may  be 
valid,  and  independent  advice  to  the  client  from  a  third 
person  is  never  essential,  although  very  proper.  The  pre- 
sumption always  arises  against  the  validity  of  a  purchase 
or  sale  between  the  client  and  attorney  made  during  the 
existence  of  the  relation.     The  attorney  must  remove  that 


boanty.  The  donor,  however,  had 
no  other  adviser  ia  the  transaction, 
and  counseled  with  no  one  except  the 
donee,  Minett.  The  gift  was  de- 
clared invalid  and  the  instruments 
canceled.  The  court  said  (p.  645): 
"The  law  I  take  to  be  as  plainly  set- 
tled on  the  subject  as  any  law  existing 
in  this  country,  that  while  the  rela- 
tion of  solicitor  and  client  subsists, 
the  solicitor  cannot  take  a  gift  from 

his  client [p.  646:]     It  is  not 

said  that  the  relation  prevents  a  cli- 
ent bestowing  his  bounty  upon  his 
solicitor,  but  what  the  law  requires 
is,  that,  considering  the  enormous  in- 
tluence  which  a  solicitor  in  many  cases 
must  have  over  his  client,  in  order  to 
give  validity  and  effect  to  a  donation 
from  a  client  to  his  solicitor,  tliat  re- 
lation must  be  severed.  The  parties 
must  be,  as  one  of  the  cases  says,  at 
arms-length.  The  relation  must  have 
ceased  to  exist.  If  that  can  once  be 
established,  there  is  an  end  to  the 
influence;  whatever  the  influence  may 
have  been  before  need  not  be  inquired 
into;  the  influence  does  not  exist  where 
that  state  of  circumstances  is  brought 
about,  and  then  the  client  may  as 
well  give  to  the  solicitor  as  give  to 
any  other  person.  The  degree  of  in- 
fluence need  not  be  inquired  into.  The 
fact  of  the  influence  is  enough,  if  it  be 
established.  You  cannot  inquire  how 
much  influence  there  was;  it  is  enough, 
in  the  contemplation  of  the  law,  that 
the  influence  existed,  that  there  is  a 
possibility  that  it  may  be  abused;  and 
the  rule  is  not  a  hard  one  upon  a  so- 
licitor. A  client  inclined  to  bestow 
bounty  upon  his  solicitor  is  at  perfect 
liberty  to  do  it,  and  the  solicitor  is  at 
perfect  liberty  to  accept  it,  but  both 
of  them  must  act  under  circumstances 
which  preclude  the  possibility  of  sus- 
picion, for  suspicion  is  enough."    The 


court  reviewed  the  prior  cases,  and 
especially  the  often  quoted  case  of 
Hunter  v.  Atkins,  3  Mylne  &  K.  113, 
in  which  Lord  Brougham  argued  that 
a  gift  to  an  attorney  stood  on  the  same 
footing  as  a  purchase  by  him.  These 
views  of  Lord  Brougham  were  mere 
dicta,  and  had  been  often  criticised  and 
repudiated,  and  were  opposed  to  the 
whole  current  of  authority.  The  cor- 
rectness of  the  rule  laid  down  in  Tom- 
son  V.  Judge,  3  Drew.  306,  M'as 
expressly  affirmed.  See  also  Broun  v. 
Kennedy,  4  De  Gex,  J.  &  S.  217;  Mid- 
dleton  V.  Welles,  1  Cox,  112;  4  IJrown 
Pari.  C.  245;  Hatch  v.  Hatch,  9  Ves. 
292;  Lady  Ormond  v.  Hutchinson,  13 
Ves.  47;  Wright  v.  Proud,  13  Ves.  136; 
Montesquieu  v.  Sandys,  18  Ves.  302; 
In  re  Holmes's  Estate,  3  Giff.  337,  345; 
Gibbs  v.  Daniel,  4  Giff.  1 ;  O'Brien  v. 
Lewis,  4  Giff.  221;  Wood  v.  Downes, 
18  Ves.  120;  Goddard  v.  Carlisle,  9 
Price.  169;  Greenfield's  Estate,  14  Pa. 
St.  489,  506;  and  see  Berrien  v.  Mc- 
Lane,  1  Hoff.  Cli.  421;  Brock  v.  Barnes, 
40  Barb.  521.  In  Nesbit  v.  Lockman, 
34  N.  Y.  167,  while  the  general  rule 
was  admitted,  a  gift  to  a  managing 
clerk  of  the  donor's  attorney  was  sus- 
tained upon  the  particular  circum- 
stances. A  distinction  exists  between 
gifts  inter  vivos  aad  testamentary  gifts. 
A  bequest  to  the  testator's  attorney 
will  be  held  valid,  even  where  the 
attorney  himself  drew  up  the  will, 
if  the  testator's  capacity  and  freedom 
of  action  and  intent  be  shown:  Hind- 
son  V.  Weatherill,  5  De  Gex,  M.  &  G. 
301;  Walker  v.  Smith,  29  Beav.  394; 
Raworth  v.  Marriott,  1  Mylne  &  K. 
643.  [It  is  even  said  tliat  no  presump- 
tion arises  against  the  validity  of  tiie 
bequest  in  such  a  case:  Matter  of 
Will  of  Smith,  95  N.  Y.  516;  Post  v. 
Mason,  91  N.  Y.  539;  43  Am.  Rep. 
689.] 


960 


EQUITY    JURISPRUDENCE. 


1392 


presumption  by  showing  aflfirmatively  the  most  perfect 
good  faith,  the  absence  of  undue  influence,  a  fair  price, 
knowledge,  intention,  and  freedom  of  action  by  the  client, 
and  also  that  he  gave  his  client  full  information  and 
disinterested  advice;  in  the  language  of  Lord  Eldon,  *'the 
attorney  must  prove  that  his  diligence  to  do  the  best  for 
his  vendor  has  been  as  great  as  if  he  was  only  an  attorney 
dealing  for  that  vendor  with  a  stranger.'"  If  all  these 
circumstances  are  proved,  the  contract  will  stand;  if  not,  it 
will  be  defeated  or  set  aside.^     In  the  conduct  of  his  em- 


^  Gibson  v.  Jeyea,  6  Ves.  266,  271. 

*  In  Edwards  v.  Meyrick,  2  Hare, 
60,  the  doctrine  waa  fully  discussed 
in  all  its  bearings  by  Wigram,  V.  C, 
and  a  purchase  by  an  attorney  was 
sustained,  although  it  turned  out  to 
be  much  more  profitable  than  was 
anticipated.  The  following  recent 
English  decisions  furnish  striking  il- 
lustrations of  the  rule:  Cases  in  winch 
the  transaction  was  held  invalid:  Hol- 
man  v.  Loynes,  4  De  Gex,  M.  &  G. 
270;  Hesse  v.  Briant,  6  De  Gex,  M. 
&  G.  623;  Broun  v.  Kennedy,  4  De 
Gex,  J.  &  S.  217;  Gresley  v.  Mousley, 
4  De  Gex  &  J.  78,  91,  94,  95,  98,  99;  3 
De  Gex,  F.  &  J.  433  (a  very  remaik- 
able  case;  a  purchase  set  aside  after 
death  of  both  parties,  on  ground  of 
under-value,  and  by  application  of  the 
presumption,  there  being  no  afiirmative 
evidence  to  sustain  the  validity);  Lyd- 
don  V.  Moss,  4  De  Gex  &  J.  104;  Baker 
V.  Loader,  L.  R.  16  Eq.  49;  Frees  v. 
Coke,  L.  R.  6  Ch.  645  (conveyance  by 
a  mortgagor  to  the  mortgagee,  who  was 
also  his  attorney,  set  aside  merely  from 
absence  of  evidence  overcoming  the 
presumption);  [Luddy's  Trustee  v. 
Peard,  33  Ch.  Div.  500;]  Lee  v.  An- 
gas,  L.  R.  7  Ch.  79,  note.  Transac- 
tions held  valid:  Moss  v.  Bainbrigge, 
6  De  Gex,  M.  &  G.  292;  Johnson  v. 
Fesemeyer,  3  De  Gex  &  J.  13,  22  (the 
doctrine  does  not  apply  when  the  at- 
torney is  in  the  hostile  attitude  of  an 
urgent  creditor  seeking  payment  or 
security);  Lyddon  v.  Moss,  4  De  Gex 
&  J.  104  (delay  and  acquiescence); 
Blagrave  v.  Routh,  2  Kay  &  J.  509; 
Clanricarde  v.  Henning,  30  Beav.  175. 
See  also,  on  the  general  rule,  Gibson  v. 
Jeyes,  6  Ves.  266,  277;  Montesquieu 
V.  Sandys,   18  Ves.  302;  Newman  v. 


Payne,  2  Ves.  200;  Hatch  v.  Hatch,  9 
Ves.  292;  Walmeslev  v.  Booth,  2  Atk. 
25;  Welles  v.  Middleton,  1  Cox,  112; 
Savery  v.  King,  5  H.  L.  Cas.  627; 
Cane  v.  Lord  Allen,  2  Dow,  289;  Mor- 
gan V.  Lewes.  4  Dow,  29,  47;  Upping- 
ton  V.  Bullen,  2  Dru.  &  War.  185; 
Higgins  V.  Joyce,  2  Jones  &  L.  282; 
Spencer  v.  Topham,  22  Beav.  573; 
Pearson  v.  Benson,  28  Beav.  598; 
Adams  v.  Sworder,  2  De  Gex,  J.  &  S.44. 
The  American  cases  do  not  exhibit  so 
much  uniformity.  While  all  recognize 
the  general  rule,  theoretically  at  least, 
and  while  some  apply  it  with  firmness 
and  rigor,  others  have  virtually  emas- 
culated it  in  its  application.  Transac- 
tions have  been  sustained  which  an 
English  court  would  hardly  suffer  to 
be  discussed,  and  would  visit  the  at- 
torneys engaged  in  them  with  the 
severest  censure.  Cases  applying  the 
rides:  Ryan  v.  Ash  ton,  42  Iowa,  365; 
Broyles  v.  Arnold,  11  Heisk.  484; 
Baker  v.  Humphrey,  101  U.  S.  494; 
Poison  v.  Young,  37  Iowa,  196;  Dunn 
V.  Record,  63  Me.  17  (rule  fully 
adopted);  Roman  v.  Mali,  42  Md.  513 
(ditto);  Kisling  v.  Shaw,  33  Cal.  425; 
91  Am.  Dec.  644  (ditto);  Haight  v, 
Moore, 37 N.  Y.  Sup.Ct.  161;  McMahan 
V.  Smith, 6  Heisk.  167;  Trotter  v.Smith, 
59  111.  240;  Mason  v.  Ring,  3  Abb.  App. 
210;  Zeigler  v.  Hughes,  55  111.  288; 
Payne  v.  Avery,  21  Mich.  524;  White 
V.  Whaley,  3  Lans.  327;  40  How.  Pr. 
353;  Mott  v.  Harrington,  12  Vt.  199; 
Merritt  v.  Lambert,  10  Paige,  352; 
2  Denio,  607;  Howell  v.  Ransom, 
11  Paige,  538;  Wendell  v.  Van  Rens- 
selaer, 1  Johns.  Ch.  344;  Brock  v. 
Barnes,  49  Barb.  521;  Smith  v.  Broth- 
erlme,  62  Pa.  St.  401;  Miles  v.  Ervin, 
1  McCord  Eq.  524;  16  Am.  Dec.  623; 


1393 


CONSTRUCTIVE    FRAUD. 


960 


ployment,  the  attorney  must  consult  his  client's  interests 
in  preference  to  his  own.  He  is  not  permitted,  therefore, 
to  make  any  profit  out  of  the  employment,  other  than  his 
due  compensation,  except  with  the  knowledge  and  con- 
sent of  his  client;  for  all  such  profits  he  must  account, 
and  if  necessary,  will  be  treated  as  a  trustee.*  When  an 
attorney  has  the  charge  of  or  is  employed  to  conduct  a 
judicial  sale  of  property,  he  cannot  become  the  purchaser 
without  full  explanation  and  information  given  to  his 
client  of  his  intention.^     The  English  rules  concerning 


Brown  v.  Bulkley,  14  N.  J.  Eq.  451; 
[Duun  V.  Dunn,  42  N.  J.  Eq.  431;  Mer- 
ryinan  v.  Euler,  59  Md.  588;  43  Am. 
Rep.  564;  Cooper  v.  Lee,  75  Tex.  114.] 
Transactions  held  valid:  Porter  v. 
Parmly,  39  N.  Y.  Sup.  Ct.  219;  Marsh 
V.  Whitmore,  21  Wall.  178  (delay  of 
twelve  years);  Jenkins  v.  Einstein,  3 
Bias.  128  (to  set  aside  a  conveyance  by 
a  person  pecuniarily  embarrassed  to 
his  attorney,  it  must  be  shown  that  the 
latter  had  been  consulted  in  regard  to 
the  transaction,  or  was  in  a  position 
to  take  an  unfair  advantage).  This 
seems  to  reverse  the  presumption. 
[Tancre  v.  Reynolds,  35  Minn.  476; 
also  Morrison  v.  Smith,  130  111.  304. 
Fact  that  one  of  the  parties  to  a 
contract  is  an  attorney,  and  that  he 
prepares  the  necessary  writings  with- 
out charge,  does  not  establish  the  re- 
lation of  attorney  and  client:  Stout 
V.  Smith,  98  N.  Y.  25;  50  Am.  Rep. 
632.] 

^  This  general  rule  is  recognized  by 
all  the  cases,  but  there  is  some  differ- 
ence of  decision  as  to  what  acts,  such 
as  purchases,  of  the  attorney  are  pro- 
hibited by  it.  It  results  from  the 
same  general  doctrine  that  in  contested 
matters  the  same  attorney  cannot  act 
on  behalf  of  two  opposing  parties; 
and  even  when  he  may  thus  act  for 
two  parties  in  uncontested  matters,  hia 
conduct  is  most  carefully  watched, 
and  must  exhibit  the  most  perfect 
good  faith;  he  cannot  prejudice  one 
client  for  the  benefit  of  another;  the 
injured  client  will  be  relieved  by  set- 
ting aside  such  a  transaction.  As  to 
mahiny  a  profit,  etc.,  see  Tyrrell  v. 
Bank  of  London,  10  H.  L.  Cas.  26,  44; 
Rhodes  V.  Beau  voir,  6  Bligh,  195; 
Lawless  v.  Mansfield,  1  Dru.  &  War. 
2  Eq.  Juk.  — 83 


557,  631;  Wood  v.  Downes,  18  Ves. 
120;  Proctor  v.  Robinson,  35  Beav. 
329,  335;  O'Brien  v.  Lewis,  4  Giff.  221; 
Gott  V.  Brigham,  41  Mich.  227;  Mc- 
Dowell v.  Milroy,  69  111.  498;  Wheeler 
V.  WiUard,  44  Vt.  640;  Harper  v. 
Perry,  28  Iowa,  57;  Hatch  v.  Fogerty, 
10  Abb.  Pr.,  N.  S.,  147;  40  How.  Pr. 
492  (using  information  afterwards); 
Davis  v.  Smith,  43  Vt.  269;  [Luddy's 
Trustee  v.  Peard,  33  Ch.  Div.  500; 
Taylor  v.  Barker,  30  S.  0.  23S;  By- 
ington  V.  Moore,  62  Iowa,  470.] 
Making  profits  by  purchasing  property 
of  client,  or  in  which  client  is  inter- 
ested; purchase  generally  held  void- 
able, or  in  trust  for  the  client:  Smith 
V.  Brotherline,  62  Pa.  St.  461;  Wheeler 
V.  Willard,  44  Vt.  640;  Porter  v.  Peck- 
ham,  44  Cal.  204  (purchase  held  valid); 
In  re  Taylor  Orphan  Asylum,  36  Wis. 
534;  Bowers  v.  Virden,  56  Miss.  595 
(valid);  Wright  v.  Walker,  30  Ark. 
44.  [See  also  Vallette  v.  Tedens,  122 
111.  607;  3  Am.  St.  Rep.  502  (searcher 
of  records  holds  confidential  relation 
with  his  client);  Bvingtonv.  Moore,  62 
Iowa,  470;  Broder  v.  Conklin,  77  Cal. 
331.]  Acting  for  two  parties,  and 
making  a  contract  in  violation  of  his 
duty  to  one  of  them:  Hesse  v.  Bri- 
ant,  6  De  Gex,  M.  &  G.  623;  Lee  v. 
Angas,  L.  R.  7  Ch.  79,  note;  Baker  v. 
Humphrey,  101  U.  S.  494.  Acting  for 
opposing  litigants:  Wallace  v.  Fur- 
bar,  62  Ind.  103;  De  Celis  v.  Brunson, 
53  Cal.  372;  Orr  v.  Tanner,  12  R.  1.  94; 
Mac  Donald  v.  Wagner,  5  Mo.  App.  56. 
*  This  rule  seems  to  be  settled  by 
the  English  decisions,  and  is  followed 
by  some,  but  not  by  all,  of  the  Amer- 
ican cases:  In  re  Bloye's  Trust,  1 
Macn.  &  G.  488;  Watt  v.  Grove,  2 
Schualea   &  L.  492;  Lowtber  v.  Low< 


§961 


EQUITY    JURISPRUDENCE. 


1394 


compensation,  and  agreements  with  respect  to  payment 
or  security  of  compensation,  are  exceedingly  strict,  but 
they  have  been  relaxed  in  many  if  not  all  of  the  American 
states.^  All  of  the  foregoing  rules  apply  not  only  to  those 
who  are  technically  attorneys,  but  also  to  all  who  de  facto 
act  as  professional  or  legal  advisers.'^ 

§  961.  Guardian  and  Ward.  —  The  equitable  rules  con- 
cerning dealings  between  guardian  and  ward  are  very 
stringent.     The  relation  is  so  intimate,  the  dependence 


ther,  13  Ves.  95;  Oliver  v.  Court,  8 
Price,  127;  Manning  v.  Hayden,  5 
Saw.  360;  Bowers  v.  Virden,  56  Miss. 
595;  Pacific  R.  R.  v.  Ketchum,  101 
U.  S.  '289;  Page  v.  Stubbs,  39  Iowa, 
S37;  Barrett  v.  Bamber,  9  Phila.  202; 
In  re  Taylor  Orphan  Asylum,  36  Wis. 
534;  Taylor  v.  Boardman,  24  Mich. 
287;  Warren  v.  Hawkins,  49  Mo.  137; 
Banks  v.  Judah,  8  Conn.  145,  146,  147; 
Phillips  V.  Belding,  2  Edw.  Ch.  15; 
Reed  v.  Warner,  5  Paige,  650;  Casey 
V.  Casey,  14  111.  412;  Sypher  v.  Mc- 
Henry,  18  Iowa,  232;  Church  v.  Ma- 
rine Ins.  Co.,  1  Mason,  341.  344; 
Baker  v.  Whiting,  3  Sum.  475;  [Wren 
V.  Followell,  52  Ark.  76;  Taylor  v. 
Young,  56  Mich.  285.] 

'  An  attorney  who  advances  money 
to  his  client  and  takes  security  for  it 
must  have  some  evidence  of  the  fact 
iDore  than  the  security  itself  and  any 
acknowledgment  of  payment  con- 
tained in  it:  Gresley  v.  Mousley,  3 
De  Gex,  F.  &  J.  433;  Morgan  v.  Lewes, 
4  Dow,  29,  46;  Morgan  v.  Evans,  3 
Clark  <%;  F.  159,  195;  Lawless  v.  Mans- 
field, 1  Dru.  «&  War.  557.  An  agree- 
ineut  to  pay  a  gross  sum  for  past  ser- 
vices may  be  valid,  although  the 
clearest  proof  of  good  faith  will  be 
required:  Morgan  v.  Higgins,  1  Giff. 
■270,  277;  Welles  v.  Middleton,  1  Cox, 
112,  125;  Cheslyn  v.  Dalby,  2  Younge 
&  C.  170;  but  an  agreement  to  pay  a 
gross  sura  for  future  services,  and  se- 
curity given  for  tlie  compensation  with 
respect  to  future  services,  or  money 
to  be  advanced  in  future,  were  entirely 
invalid  prior  to  a  recent  statute  of 
Parliament:  In  re  Newman,  30  Beav. 
196;  Jones  v.  Tripp,  Jacob,  322;  Up- 
phigton  V.  Bullen,  2  Dru.  &  War.  184. 
The  cases  are  numerous  in  which  set- 
tlements, payments,  and  securities 
have  been  set  aside  at  the  suit  of  the 


client  because  the  attorney's  bills  of 
costs  were  not  properly  taxed,  or  ex- 
amined, or  dealt  with  as  required  by 
law.  In  the  United  States,  attorneys 
and  clients  are  generally  permitted  to 
make  what  agreements  they  please 
concerning  compensation  for  future  or 
past  services,  even  though  the  agree- 
ment would  be  void  at  common  law 
for  champerty.  The  courts  will,  of 
course^  scrutinize  such  transactions, 
to  see  that  there  was  no  actual  undue 
influence;  that  the  client  acted  with 
knowledge,  and  intentionally;  but 
these  facts  being  established,  the  trans- 
action will  rarely  be  impeached  on 
account  of  its  subject-matter  and  pro- 
visions: Ryan  v.  Ashton,  42  Iowa, 
365;  Ballard  v.  Carr,  48  Cal.  74;  Hoff- 
man V.  Vallejo,  45  Cal.  564. 

"  To  counsel  or  barristers  as  distinct 
from  attorneys:  Broun  v.  Kennedy, 
4  De  Gex,  J.  &  S.  217;  33  Beav.  133; 
Carter  v.  Palmer,  8  Clark  &  F.  657, 
707;  MacCabe  v.  Hussey,  5  Bligh, 
N.  S.,  715;  Purcell  v.  McNamara,  14 
Ves.  91;  to  a  clerk  of  an  attorney: 
Hobday  v.  Peters,  28  Beav.  349;  Nes- 
bitt  V.  Berridge,  32  Beav.  282;  Nesbit 
V.  Lockman,  34  N.  Y.  167;  Poillon  v. 
Martin,  1  Sand.  Ch.  569;  [to  a  person 
employed  to  make  an  abstract  of  title: 
Vallettev.  Tedens,  122  111.  607;  3  Am. 
St.  Rep.  502;]  and  even  to  a  friend 
who  has  assumed  to  advise  in  legal 
matters,  and  thus  to  take  the  place  of 
an  attorney:  Tate  v.  Williamson,  L.  R. 
1  Eq.  528;  2  Ch.  55.  There  are  many 
other  rules  of  law  regulating  the  rela- 
tion of  attorney  and  client,  but  the 
foregoing  are  all  of  the  most  impor- 
tant ones  which  can  come  within  the 
cognizance  of  equity;  courts  of  equity 
cau  generally  deal  only  M'ith  contracts 
and  similar  transactions  between  aa 
attorney  and  client. 


1395  CONSTRUCTIVE    FRAUD.  §  961 

SO  complete,  the  influence  so  great,  that  any  transactions 
between  the  two  parties,  or  by  the  guardian  alone, 
through  which  the  guardian  obtains  a  benefit,  entered 
into  while  the  relation  exists,  are  in  the  highest  degree 
suspicious;  the  presumption  against  them  is  so  strong 
that  it  is  hardly  possible  for  tliem  to  be  sustained.  In- 
deed, many  authorities  lay  down  the  positive  rule  that 
the  parties  are  wholly  incapacitated  from  contracting, 
and  that  any  such  transaction  between  them  is  neces- 
sarily voidable.  This  statement  is  perhaps  too  broad.* 
A  will  by  the  ward  in  his  guardian's  favor  is  not  viewed 
so  strictly;  the  presumption  against  it  may  be  overcome, 
and  the  will  sustained.^  The  general  doctrine  of  equity 
applies  to  the  parties  after  the  legal  condition  of  guar- 
dianship has  ended,  and  as  long  as  the  dependence  on 
one  side  and  influence  on  the  other  presumptively  or  in 
fact  continue.  This  influence  is  presumed  to  last  while 
the  guardian's  functions  are  to  any  extent  still  performed, 
while  the  property  is  still  at  all  under  his  control,  and 
until  the  accounts  have  been  finally  settled.  It  follows, 
therefore,  that  any  conve3'ance,  purchase,  sale,  contract, 
and  especially  gift,  by  which  the  guardian  derives  a  ben- 
efit, made  after  the  termination  of  the  legal  relation,  but 

»  Hylton  V.  Hylton,  2  Ves.  Sr.  548,  2  Leigh,  11;  21  Am.  Dec.  594;  and  see 

549;    Hatch    v.    Hatch,    9   Ves.    292;  Smith  v.  Davis,  49  Md.  470;  [Wade  v. 

Dawson  v.  Massey,  1   Ball  &  B.  219,  Pulsifer,  54  Vt.  45.]     The  doctrine  ap- 

226;  Mulhallen  v.   Marum,  3  Dru.   &  plies  to  purchase  made  by  guardians  of 

War.    317;     Beasley    v.    Magrath,    2  ward's  property,  when  sold  by  order 

Schoales  &  L.  35;  Archer  v,  Hudson,  of  court,  or  at  other  judicial  or  public 

15  L.  J.   Ch.  211;  Everitt  v.  Everitt,  sales;    such   purchases   are   generally 

L.  R.  10  Eq.  405;  Walker  v.  Walker,  held  voidable,  and   are   clearly  so  ia 

101  Mass.  169;  Gallatian  v.  Cunning,  principle:    Redd   v.  Jones,  30  Gratt. 

ham,  8  Cow.  361;  Gallatian  v.  Erwin,  12:?;  Sanders  v.  Forgasson,  59  Tenn. 

1  Hopk.  Ch.  48;  White  v.  Parker,  8  249;  Green  v.  Green,  UN.  Y.  Sup. 
Barb.  48;  Henrioid  v,  Neusbaumer,  Ct.  492;  Walker  v.  Walker,  101  Mass. 
€9  Mo.  96;  Scott  v.  Freeland,  7  169;  Bland  v.  Lloyd,  24  La.  Ann.  603; 
Smedes  &  M.  409;  45  Am.  Dec.  310;  but  see  Doe  v.  Hassell,  68  N.  C.  213; 
Sullivan  v.  Blackwell,  28  Miss.  737;  Lee  v.  Howell,  69  N.  C.  200;  Small  v. 
Meek  v.  Perry,  36  Miss.  190;  Wright  Small.  74  N.  C.  16. 

V.  Arnold,   14  B.   Mon.  638;   61   Am.         »  Daniel  v.  Hill,  52  Ala.  430  (a  very 

Dec.  172;  Hanna  v.  Spotts,  5  B.  Mon.  instructive   case,  in  which    the   equi- 

362;  43  Am.   Dec.   132;  Blackmore  v.  table  doctrine  was  well  stated,  and  the 

Shelby,   8    Humph.   4:^9;   Williams  v.  will   was  held  valid);  Garvin's  Adm'r 

Poweil,  1  Ired.  Eq.  4(10;  Love  v.  Lea,  v.    Williams,    50   Mo.    206;   Meek   v. 

2  Ired.  Eq.  027;  Waller  v.  Armistead,  Perry,  36  Miss.  190. 


§961 


EQUITY    JURISPRUDENCE. 


ISOS 


while  the  influence  lasts,  is  presumed  to  be  invalid  and 
voidable.  The  burden  rests  heavily  upon  the  guardian 
to  prove  all  the  circumstances  of  knowledge,  free  consent,, 
good  faith,  absence  of  influence,  which  alone  can  over- 
come the  presumption.*  If  the  legal  relation  has  ended,, 
and  all  these  circumstances  of  good  faith,  full  knowledge, 
and  free  consent  are  clearly  shown,  a  settlement,  convey- 
ance, contract,  or  even  gift  from  the  former  ward  to  his- 
recent  guardian  will  be  as  valid  and  as  eff'ective  as  the 
same  transactions  between  any  other  competent  persons.'^ 
It  is  not  essential  that  a  legal  guardianship  should  exist; 
the  doctrine  applies  wherever  the  relation  subsists  in 
fact.' 


'  Hylton  V.  Hyltoii,  2  Ves.  Sr.  548, 
549;  Hatch  v.  Hatch,  9  Ves.  292; 
Pierce  v.  Waring,  1  P.  Wma.  121, 
note;  Dawson  v.  Massey,  1  Ball  &  B. 
219;  Gary  v.  Gary,  2  Schoales  &  L. 
173;  Revett  t.  Harvey,  1  Sim.  &  St. 
502;  Mellish  v,  Mellish,  1  Sim.  &  St. 
138;  Maitland  v.  Backhouse,  16  Sim. 
58;  Maitland  v.  Irving,  15  Sim.  437; 
Wedderbnrn  v.  Wedderhurn,  4  Mylne 
&  C.  41;  Espey  v.  Lake.  19  Hare,  260; 
Matthew  v.  Brise,  14  Beav.  341,  345; 
Wright  V,  Vanderplank,  8  De  Gex,  M. 
&  G.  133;  2  Kay  &  J.  1;  Wickiser  v. 
Cook,  85  111.  68;  Tucke  v.  Bucholz,  43 
Iowa,  415;  Ranken  v.  Patton,  65  Mo. 
.378;  Somes  v.  Skinner,  16  Mass.  348; 
Fish  V.  Miller,  1  Hoff.  Ch.  267;  Rap- 
alje  V.  Norsworthy,  1  Sand.  Ch.  399; 
Gale  V.  Wells,  12  Barb.  84;  Eberts  v. 
Eberts,  55  Pa.  St.  110;  Hawkins's 
Appeal,  32  Pa.  St.  263;  Wilis's  Ap- 
peal,  22  Pa.  St.  325,  3.32;  Sherry  v. 
Sausberry,  3  Ind.  320;  Waller  v.  Arm- 
istead,  2  Leigh,  11;  21  Am.  Dec.  594; 
Williams  v.  Powell,  1  Ired.  Eq.  460; 
Womack  v.  Austin,  1  S.  C.  421;  An- 
drews V.  Jones,  10  Ala.  400;  Johnson 
V.  Johnson,  5  Ala.  90;  Richardson  v. 
LJnney,  7  B.  Mon.  571;  Wright  v. 
Arnold,  14  B.  Mon.  513;  Sullivan  v. 
Blackwell,  28  Miss.  737.  (See  also  the 
important  case  of  Noble's  Adm'r  v. 
Moses,  81  Ala.  530;  60  Am.  Rep.  175, 
per  Stone,  C.  J. ;  Willey  v.  Tindal,  5 
Del.  Ch.  194;  McCoukey  v.  Cockey, 
69  Md.  286;  Carter  v.  Tice,  120  111. 
277;  Ashton  v.  Thompson,  32  Minn. 
25.]    The  rule   applies  with   especial 


force  to  settlements  by  the  guardiau 
with  his  ward.  The  guardian  must 
prove  not  only  an  absence  of  undue 
influence,  and  perfect  fairness  and 
good  faith,  but  that  the  ward  had  full 
opportunity  to  examine  the  accounts, 
either  by  himself  if  he  was  able  to 
understand  them,  or  by  the  aid  of 
some  competent  adviser  or  attorney: 
Fish  V.  Miller,  1  Hoff.  Ch.  267;  In  re 
Van  Home,  7  Paige,  46;  Stanley's 
Appeal,  8  Pa.  St.  431;  Say  v.  Barnes, 
4  Serg.  &  R.  112;  8  Am.  Dec.  679; 
Waller  v.  Armistead,  2  Leigh,  11; 
Garvin  v.  Williams,  44  Mo.  465;  100 
Am,  Dec.  314;  [Ralston  v.  Turpin,  25' 
Fed.  Rep.  18;  129  U.  S.  663;  Gregory 
v.  Orr,  61  Miss.  307;  Gillett  v.  Wiley, 
126  111.  310;  9  Am.  St.  Rep.  587^ 
Voltz  v.  Voltz,  75  Ala.  555.] 

^  Hylton  v.  Hylton,  2  Ves.  Sr.  548; 
Hatch  v.  Hatch,  9  Ves.  292,  297; 
Kirby  v.  Taylor,  6  Johns.  Cli.  242;. 
248;  Kirby  v.  Turner,  1  Hopk.  Ch. 
309;  Hawkins's  Appeal,  32  Pa.  St.  26:!, 
265;  Cowan's  Appeal,  74  Pa.  St.  329; 
Myer  v.  Rives,  11  Ala.  760;  Meek  v. 
Perry,  36  Miss.  190;  Sherry  v.  Sans- 
berry,  3  Ind.  320;  [Bickerstaff  v.  Mar- 
lin,  60  Miss.  509;  45  Am.  Rep.  418;. 
Ralston  v.  Turpin,  129  U.  S.  663.] 

'  For  example,  wherever  a  young 
person  has  actually  been  brought  up 
in  the  family  and  under  the  care  of  a 
relative  or  friend:    Revett  v.  Harvey, 

1  Sim.  &  St.  502:  Allfrey  v.  Allfrey,  1 
Macn.  &  G.  87,  98;  Espey  v.  Lake,  10 
Hare,  260,   2G2;    Bea.sley  v.   Magrath, 

2  Schoales  &  L.  31;  Mulhallen  v.  Ma- 


1397  CONSTRUCTIVE    FRAUD.  §  962 

§  962.  Parent  and  Child.  —  "  Transactions  between  par- 
ent and  child  may  proceed  upon  arrangements  between 
them  for  tlie  settlement  of  property  or  of  their  rights  in 
property  in  which  they  are  interested.  In  such  cases 
courts  of  equity  regard  the  transactions  with  favor.  They 
do  not  minutely  weigh  the  considerations  on  one  side  or 
the  other.  Even  ignorance  of  rights,  if  equal  on  both 
sides,  may  not  avail  to  impeach  the  transaction.*  On 
the  other  hand,  the  transaction  may  be  one  of  bounty 
from  the  child  to  the  parent,  soon  after  the  child  has  at- 
attained  twenty-one.  In  such  cases  the  court  views  the 
transaction  with  jealous}'',  and  anxiously  interposes  its 
protection  to  guard  the  child  from  the  exercise  of  paren- 
tal influence."*  "  The  law  on  this  subject  is  well  settled, 
A  child  makes  a  gift  to  a  parent,  and  such  a  gift  is  good 
if  it  is  not  tainted  by  parental  influence.  A  child  is  pre- 
sumed to  be  under  the  exercise  of  parental  influence  as 
long  as  the  dominion  of  the  parent  lasts.  AVhilst  that 
dominion  lasts  it  lies  on  the  parent  maintaining  the  gift 
to  disprove  the  exercise  of  parental  influence,  by  showing 
that  the  child  had  independent  advice,  or  in  some  other 
way.  When  the  parental  influence  is  disproved,  or  that 
influence  has  ceased,  a  gift  from  a  child  stands  on  the 
same  footing  as  any  other  gift;  and  the  question  to  be  de- 
determined  is,  whether  there  was  a  deliberate,  unbiased 
intention  on  the  part  of  the  child  to  give  to  the  parent."' 

rum,  3  Dru,   &  War.  317;  Wiltman's  »  Baker  v.  Bradley,  7  De  Gex,  M.  & 

Appeal,    28   Pa.    St.    376;    Hanna    v.  G.  597. 

Spotts,  5  B.  Mon.  362;  43  Am.  Dec.  »  Wright  v.  Vanderplank,  8  De 
132;  [Worrall's  Appeal,  110  Pa.  St.  Gex,  M.  &  G.  133,  146,  per  Turner, 
349;  Brown  v.  Burbank,  64  Cal.  99;  L.  J.  In  the  same  case  the  grounda 
Butler  V.  Hyland,  89  Cal.  575.]  of  the  doctrine  were  stated  in  a  very 
1  Baker  v.  Bradley,  7  De  Gex,  M.  &  forcible  manner  by  Knight  Bruce, 
G.  597,  620,  per  Turner,  L.  J.;  Twed-  L.  J.  A  daughter,  soon  after  coming 
dell  V.  Twediiell,  Turn.  &  R.  1;  Bel-  of  age,  made  a  conveyance  byway  of 
lamy  v.  Sabine,  2  Phill.  Ch.  425;  Jen-  gift  to  her  father;  the  daughter  marry- 
ner  v.  Jenner,  2  De  Gex,  F.  &  J.  359;  ing  and  afterwards  dying,  her  husband 
Williams  V.  Williams,  L.  R.  2  Ch.  294;  brought  this  suit  to  set  aside  the  con- 
Potts  V.  Surr,  34  Beav.  543;  Hoghton  veyance.  The  lord  justice  proceeds 
V.  Hoghton,  15  Beav.  278,  305;  Dims-  to  inquire  on  what  grounds  the  deed 
dale  V.  Dimsdale,  3  Drew.  556;  Cooke  can  be  impeached.  After  saying  that 
V.  Burtchaell,  2  Dru.  &  War.  1(55;  the  grounds  were,  not  because  the 
Wallace  v.  Wallace,  2  Dru.  &  War.  amount  was  immoderate;  nor  because 
452.  she  was  induced  by  any  fraud,  or  de* 


962 


EQUITY    JURISPRUDENCE. 


1398 


Where   the   positions   of  the   two  parties   are   reversed, 
where  the  parent  is  aged,  infirm,  or  otherwise  in  a  coudi- 


ceit,  or  coercion;  nor  because  she  acted 
under  any  mistake  or  misapprehen- 
sion; nor  because  she  did  not  intend  to 
do  what  she  did;  nor  on  the  ground 
that  the  defendant  acted  dishonestly 
(p.  137);  "  but  upon  the  ground  of  the 
close  attention,  the  strictness,  and  the 
jealousy  with  which,  upon  principles 
of  natural  justice,  and  upon  considera- 
tions important  to  the  interests  of 
society,  the  law  of  this  country  exam- 
ines, scrutinizes,  and,  if  I  may  borrow 
an  old  expression,  weighs  in  golden 
scales,  every  transaction  between  a 
guardian  and  his  ward,  or  between  a 
parent  and  his  child,  which,  including 
or  consisting  of  a  gilt  from  the  younger 
to  the  elder,  takes  place  so  soon  after 
the  termination  of  the  legal  authority, 
as  that  the  ward  or  child  may,  in  con- 
sequence, probably  be  not,  in  the  lar- 
gest and  amplest  sense  of  the  term,  — 
not  in  mind  as  well  as  person,  —  an 
entirely  free  agent." 

It  has  sometimes  been  said  that  a 
different  rule  prevails  in  the  United 
States;  it  has  been  asserted  that  Jen- 
kins v.  Pye,  12  Pet.  241,  253,  254,  and 
Taylor  v.  Taylor,  8  How.  183,  201, 
establish  another  doctrine.  It  must 
be  admitted  that  the  opinions  in  these 
two  cases  do  maintain  that  a  gift  from 
a  child  to  his  father  made  under  the 
circumstances  above  described  is  not 
pnma  facie  voidable;  that  no  pre- 
sumption arises  against  its  validity, 
but  on  the  contrary,  the  presumption 
is  that  the  transaction  was  entered 
into  for  the  purpose  of  promoting  the 
interests  of  the  child;  but  nevertheless 
all  such  dealings  should  be  carefi;lly 
scrutinized  by  the  courts.  In  regard 
to  this  theory  I  would  remark,  —  1. 
That  most  of  these  expressions  of  opin- 
ion were  entirely  obiter;  2.  They  are 
in  direct  conflict  with  the  overwhelm- 
ing weight  of  authority;  3.  They  are 
in  equally  direct  conflict  with  princi- 
ple. The  theory  makes  the  gift  of  a 
child  to  his  parent  to  be  impeachable 
only  on  the  ground  of  actual  undue  in- 
fluence exerted  by  the  parent,  and 
throws  upon  the  party  contesting  the 
validity  the  burden  of  proving  the  un- 
due influence.  This  position  is  simply 
a  denial  that  the  relation  of  parent 
and  child  is  in  fact  a  fiduciary  one; 


that  it  is  a  relation  of  dependence  on 
the   one   side   and    authority   on   the 
other;  since  if  the  relation  is  in  fact  fi- 
duciary, which  is  universally  admitted, 
then,  on  the  plainest  principle,  the  pre- 
sumption of  invalidity  mwit  arise;  and 
if   it  be   not   fiduciary,   then  there  in 
certainly    no    reason    whatever    why 
dealings  betweeu  the  parties  should 
be  carefully  scrutinized;  4.  The  theory 
and  the  reasoning  by  which  it  is  sup- 
ported are  in  conflict  with  the  com- 
mon experience  of  mankind.     To  say 
that  when  a  gift  of  property  is  made 
by  a  daughter  to  her  father,  just  after 
she   comes  of  age,  —  perhaps  for  the 
purpose  of  paying  his  debts,  —  it  must 
be  presumed  to  have  been  made  for  the 
purpose  of  promoting  her  interests,  — 
to  be  the  efi'ect  of  parental  afi'ection 
anxious  for  the  welfare  of  a  child,  — is 
so  opposed  to  universal  experience  and 
to  common  probability  that  it  is  en- 
titled to  no  weight  whatever  as  a  legal 
argument.    Finally,  the  peculiar  views 
of  these  two  cases  have  not  been  gen- 
erally adopted  by  the  American  courts. 
Most   of   the  recent   American   cases 
hereafter  cited  in  this  note  have  plainly 
followed  the  equitable  doctrine  as  first 
settled  in    England.      The   following 
cases  are  illustraticms  of  the  doctrine: 
Baker  v.  Bradley,  7  De  Gex,  M.  &  G. 
597,  620;  Wright  v.  Vanderplank,   8 
De  Gex,  M.  &  G.   133;  2  Kay  &  J.  1 
(remedy  barred  by  delay);  Turner  v. 
Collins,  L.  R.  7  Ch.  329;  Kempson  v. 
Ash  bee,   L.  R.   10  Ch.   15;  Savery  v. 
King,  5  H.  L-  Cas.  627,  655;  Davies  v. 
Davies,  4  Gift".  417;  Hannah  v.  Hodg- 
son,30Beav.  19;  Casbornev.  Barsham, 
2  Beav.   76;  Hoghton  v.  Hoghton,   l5 
Beav.   278;   Hartopp  v.    Hartopp,    21 
Beav.    259;    Bury  v.   Oppenheim,    26 
Beav.    594;    Berdoe   v.    Dawson,    34 
Beav.   603;    Chambers  v.   Crabbe,    34 
Beav.   457;    Potts  v.    Surr,   34   Beav. 
543;    Heron   v.    Heron,   2   Atk.    161; 
Young  V.   Peachy,   2  Atk.   254;  Car- 
penter V.    Heriot,   ]    Eden,   338;  Far- 
rant  V.  Blanchford,  1  De  Gex,  J.  &  S. 
107  (a  request  by  a  sick  father  near 
his  death  that  a  son  many  years  past 
his  majority  would  execute  a  release 
of   certain  claims   in   the  son's  favor 
against  the  father  and  another  person, 
held  not  to  be  undue  influence  which 


1399 


CONSTRUCTIVE    FRAUD. 


8  963 


tion  of  dependence  upon  his  own  child,  and  the  child 
occupies  a  corresponding  relation  of  authority,  convey- 
ances conferring  benefits  upon  the  child  may  be  set  aside. 
Cases  of  this  kind  plainly  turn  upon  the  exercise  of  ac- 
tual undue  influence,  and  not  upon  any  presumption  of 
invalidity;  a  gift  from  parent  to  child  is  certainly  not 
presumed  to  be  invalid.' 

§  963.  Other  Relations.  —  The  equitable  doctrine  ap- 
plies with  strictness  to  executors  and  administrators  who, 
in  common  with  all  trustees,  are  prohibited  from  purchas- 
ing the  property  of  the  estate  when  sold  in  course  of  ad- 
ministration, and  from  making  any  personal  profits  by 
their  dealings  with  it.^  The  same  general  principle 
extends,  with  more  or  less  force,  to  dealings  between 
a  physician  and  patient,'  a  spiritual  adviser  and    peni- 


would  avoid  the  release);  Miller  v. 
Siinonds,  5  Mo.  App.  33  (by  a  daugh- 
ter to  her  father);  Davis  v,  Dunne,  46 
46  Iowa,  684  (step-daughter  to  step- 
mother and  her  sou);  Bailey  v.  Wood- 
bury, 50  Vt.  166  (daughter  to  father); 
Ross  V.  Ross,  6  Hun,  SO  (child  to 
parent);  Bergen  v.  Udall,  31  Barb.  9; 
81ocum  V.  Marsliall,  2  Wash.  C.  C. 
397;  Jenkins  v.  Pye,  12  Pet.  241,  253; 
Taylor  v.  Taylor,  8  How.  183,  tiOl. 
[See  also  Noble's  Adm'r  v.  Moses,  81 
Ala.  530;  60  Am.  Rep.  175  (adult 
daughter  pays  father's  debts;  in  the 
opinion  of  Stoue,  C.  J.,  the  foregoing 
comment  on  Jenkins  v.  Pye  is  ex- 
pressly approved);  Miskey's  Appeal, 
107  Pa.  St.  611;  Williams  v,  Williams, 
63  Md.  371;  Bickerstatf  v.  Marlin,  60 
Miss.  509;  45  Am.  Rep.  418  (gift  up- 
held); Carter  v.  Tice,  120  lU.  277; 
Ashton  V.  Thompson,  32  Minn.  25; 
Knox  V.  Singinaster,  75  Iowa,  64.  In 
Pusey  V.  Gardner,  21  W.  Va.  409,  the 
rule  in  Jenkins  v.  Pye  was  followed. 
That  a  parent  will  not  be  suffered  to 
gain  an  unconscientious  advantaL'e 
over  a  child  by  reason  of  confidence 
reposed  by  the  child,  ajKirt  from  any 
presumption  of  undue  influence,  see 
Wood  V.  Rabe,  96  N.  Y.  414;  48 
Am.  Rep.  640;  post,  g  1056,  end  of 
note.] 

1  Dal  ton  V.  Dalton,  14  Nev.  419; 
Mulock  V.  Mulock,  31  N.  J.  Eq.  594; 
Martin  V.  Martin,  1  Heisk.  644;  iligh- 
berger  v.  Stiffler,  21  Md.  338;  83  Am. 


Dec.  593;  Todd  v.  Grove,  S3  Md.  188; 
Comstock  V.  Comstock,  57  Barb.  453; 
Whelan  V.  Whelau,  3  Cow.  537;  Deem 
V.  Phillips,  5  W.  Va.  188;  Liddel's 
Ex'r  V.  Starr,  20  N.  J.  Eq.  274.  The 
general  doctrine  of  the  text  is  applied 
to  transactions  between  other  near 
relations,  as  gifts  from  a  sister  to 
brother:  Thornton  v.  Ogden.  .32  N.  J. 
Eq.  723;  Hewitt  v.  Crane,  6  N.  J.  Eq. 
159,  631;  Sears  v.  Shatter,  6  N.  Y. 
268;  Boney  v,  Hollingsworth,  23  Ala. 
690;  [Gillespie  v.  Holland,  40  Ark.  28; 
48  Am.  Rep.  1;  Million  v.  Taylor,  38 
Ark.  428.]  It  has  been  held,  however, 
that  there  is  no  fiduciary  relation  ipno 
facto  between  a  son-ill-law  and  mother- 
in-law:  Fish  V.  Cleland,  33  111.  238; 
Cleland  v.  Fish,  43  111.  282. 

*  Scott  V.  Umbarger,  41  Cal.  410; 
Green  v.  Sargeant,  23  Vt.  466;  56  Am. 
Dec.  88;  Ives  v.  Ashley,  97  Mass.  19S; 
Hawley  v.  Mancius,  7  Johns.  Ch.  174; 
Wortman  v.  Skinner,  12  N.  J.  Eq. 
358;  Obert  v.  Obert,  10  N.  J.  Eq.  98; 
Kruse  v.  Steffens,  47  HI.  112;  Auden- 
reid's  Appeal,  89  Pa.  St.  114;  33  Am. 
Rep.  731.  (See  also  many  cases  cited 
under  §  958.] 

3  BiUage  V.  Southee,  9  Hare,  594; 
Dent  V.  Bennett,  4  Mylue  &  C.  269; 
Aherne  v.  Hogan,  1  Dru.  310;  Cris- 
pell  V.  Dubois,  4  Barb.  393;  IngersoU 
v.  Roe,  65  Barb.  346;  Cadwallader  v. 
West,  48  Mo.  483.  Cases  presenting 
the  same  question  arising  on  the  pro- 
bate of  wills  are  not  uncommon. 


§  963 


EQUITY    JURISPRUDENCE. 


1400 


tent,'  vendor  and  vendee  of  Ian d,'^  husbands  and  wives,  and 
persons  occupying  their  position,^  partners,*  and  indeed 
all  persons  who  occupy  a  position  of  trust  and  confidence, 
of  influence  and  dependence,  in  fact,  although  not  perhaps 
in  law.®  There  remain  to  be  mentioned  two  other  impor- 
tant relations  which  are  partially  fiduciary,  and  to  which 
the  principle  applies  with  limitations,  —  that  of  surety 
and  creditor  and  principal  debtor,*'  and  that  subsisting 
between  promoters  and  directors  or  trustees  of  corpora- 
tions and  the   corporation   itself  and  the  stockholders/ 


'  The  religions  belief  or  connection 
is  immaterial:  Lyon  v.  Home,  L.  R.  6 
Eq,  655;  Nottidge  v.  Prince,  2  Gifif. 
246;  Leighton  v.  Orr,  44  Iowa,  679; 
Greenfield's  Estate,  24  Pa.  St.  332; 
Nachtrieb  v.  Harmony  Settlement,  3 
Wall.  Jr.  6G;  [Connor  v.  Stanley,  72 
Cal.  556;  1  Am.  St.  Rep.  84  (spiritual- 
istic  medium);  AUcard  v.  Skinner,  36 
Ch.  Div.  145  (mother  superior  of  con- 
vent and  nun. — an  important  case); 
Pironi  v.  Corrigan,  47  N.  J.  Eq.  135; 
Caspari  v.  First  German  Church,  12 
Mo.  App.  293.] 

'  Baker  v.  Monk,  4  De  Gex,  J.  &  S. 
388;  Clark  v.  Malpas,  4  De  Gex,  F.  & 
J.  401. 

'  Corley  v.  Lord  Stafford,  1  De  Gex 
&  J.  238;  Nelson  v.  Stocker,  4  De  Gex 
&  J.  458;  Turner  v.  Turner,  44  Mo. 
535;  Coulson  v.  Allison,  2  De  Gex,  F, 
&  J.  521  (husband  and  wife's  sister); 
Bivins  v.  Jarnigan,  3  Baxt.  282  (con- 
veyance by  a  man  to  his  mistress). 
[See  also  Shea's  Appeal,  121  Pa.  St. 
302;  Farmer  v.  Farmer,  39  N.  J.  Eq. 
211;  Holt  V.  Agnew,  67  Ala.  360; 
Sbipman  v.  Furniss,  69  Ala.  555;  44 
Am.  Rep.  528  (conveyance  by  a  man 
to  his  mistress);  and  especially  the 
cases  of  Bartlett  v.  Bartlett,  15  Neb. 
593;  Brison  v.  Brison,  75  Cal.  525;  7 
Am.  St.  Rep.  189;  imt,  §  1056,  end  of 
note] 

♦  Bayne  v.  Ferguson,  5  Dow,  151; 
Rawlins  v.  Wickham,  3  De  Gex  &  J. 
304;  McLure  v.  Ripley,  2  Macn.  &  G. 
274;  Clecfg  v.  Edmondson,  8  De  Gex, 
M.  &  G.  787,  807;  Clements  v.  Hall,  2 
De  Gex  &  J.  173;  Perens  v.  Johnson, 
3  Smale  &  G.  419;  Blisset  v.  Daniel, 
10  Hare,  493,  538;  Chamliers  v.  How- 
ell, 11  Beav.  6;  Bentley  v.  Craven,  18 
Beav.  75;  Maddetord  v.  Austwick,  2 


Mylne  &  K.  279;  1  Sim.  89;  Burton  v. 
Wookey,  6  Madd.  367;  Short  v.  Ste- 
renson,  63  Pa.  St.  95;  Simons  v.  VuU 
can  Oil  Co.,  61  Pa.  St.  202;  100  Am. 
Dec.  628;  Flagg  v.  Mann,  2  Sum.  487; 
Wheeler  v.  Sage,  1  Wall.  518;  [Bow- 
man v.  Patrick,  36  Fed.  Rep.  138;  Col- 
ton  V.  Stanford,  82  Cal.  351  (the  rela- 
tion between  several  persons  associated 
for  the  purpose  of  organizing,  control- 
ling, and  operating  railroad  and  other 
corporations  is  fiduciary).] 

*  A  person  consulting  an  elder  and 
distant  relative,  or  a  confidential 
friend:  Tate  v.  Williamson,  L.  R.  2 
Ch.  55;  1  Eq.  528;  Taylor  v.  Obee,  3 
Price,  S3;  attorney  of  mortgagee  and 
mortgagor:  James  v.  Rumsey,  L.  R. 
11  Ch.  Div.  398;  and  see  Giddings  v. 
Giddings,  3  Russ.  241;  Tanner  v.  El- 
worthy,  4  Beav.  487;  Waters  v.  Bai- 
ley, 2  Younge  &  C.  Ch.  219;  Wake- 
mau  V.  Dodd,  27  N.  J.  Eq.  564.  [Also, 
Fisher  v.  Bishop,  108  N.  Y.  25;  2  Am. 
St.  Rep.  357;  Tappan  v.  Aylsworth, 
13  R.  I.  582;  Storrs  v.  Scougals,  48 
Mich.  387;  Hawk  v.  Leverett,  71  Ga. 
675;  Allen  v.  Jackson,  121  111.  567; 
King  V.  P^emington,  36  Minn.  15.] 

«  See  ante,  §  907. 

'  See  ante,  §  881.  Directors  and 
managers  of  corporations  are  in  many 
respects  trustees,  and  are  governed  by 
the  rules  applicaljle  to  trustees  gen- 
erally. They  are  prohibited  from 
making  contracts  with  themselves  in- 
dividually, from  purchasing  property 
from  themselves,  or  selling  to  them- 
selves, from  making  a  personal  profit 
out  of  their  dealings  with  the  corpora- 
tion affairs,  and  the  like:  Macon  v. 
Huff,  60  Ga.  221;  Barnes  v.  Brown,  80 
N.  Y.  527.     [See  2J05«,  §  1077.] 


1401  CONSTRUCTIVE    FRAUD.  §  964 

These  subj-ects  are  more  fully  examined  in  a  subsequent 
chapter. 

§  964.  Confirmation  or  Ratification.  —  Where  a  party 
originally  had  a  right  of  defense  or  of  action  to  defeat  or 
set  aside  a  transaction  on  the  ground  of  actual  or  con- 
structive fraud,  he  may  lose  such  remedial  right  by  a  sub- 
sequent confirmation,  by  acquiescence,  and  even  by  mere 
delay  or  laches.  Wherever  a  confirmation  would  itself 
be  subject  to  the  same  objections  and  disabilities  as  the 
original  act,  a  transaction  cannot  be  confirmed  and  made 
binding;  for  confirmation  assumes  some  positive,  distinct 
action  or  language,  which,  taken  together  with  the  origi- 
nal transaction,  amounts  to  a  valid  and  binding  agree- 
ment. In  general,  contracts  which  are  void  from  illegality 
cannot  be  ratified  and  confirmed;  contracts  which  are 
merely  voidable  because  contrary  to  good  conscience  or 
equity  may  be  ratified,  and  thus  established.'  If  the 
party  originally  possessing  the  remedial  right  has  ob- 
tained full  knowledge  of  all  the  material  facts  involved  in 
the  transaction,  has  become  fully  aware  of  its  imperfec- 
tion and  of  his  own  rights  to  impeach  it,  or  ought,  and 
might,  with  reasonable  diligence,  have  become  so  aware, 
and  all  undue  influence  is  wholly  removed  so  that  he  can 
give  a  perfectly  free  consent,  and  he  acts  deliberately,  and 
with  the  intention  of  ratifying  the  voidable  transaction, 
then  his  confirmation  is  binding,  and  his  remedial  right, 
defensive  or  aflSrmative,  is  destroyed.*  If,  on  the  other 
hand,  the  original  undue  influence  still  remains,  or  if  the 
act  is  simply  a  continuation  of  the  former  transaction,  or 

*  Thus  contracts  illegal  because  op-  *  ChesterfieM  v,  Janssen,  2  Ves.  Sr. 

posed  to  statute,  or  to  public  policy,  125;  1  Atk.  314;  Cole  v.  Gibson,  1  Ves. 

or  to  good  morals,  cannot  be  ratified,  Sr.  503,  506;Crowe  v.  Ballard,  3BrowQ 

because  the   ratification   itself   would  Ch.   J 17,   119;   Cole  v.  Gibbons,  3  P. 

be  'equally   opposed  to   statute,  good  Wms.  290,  293;  Cann  v.  Cann,   1  P. 

morals,  or  public  policy.      Contracts  Wins.  723;  Dobson  v.  Kacey,  8  N.  Y. 

obtained  by  actual  iraud,  by  undue  in-  216;  Pearsoll  v.  Chapin,  44  Pa.  St.  9; 

fluence,  by  breach  of  fiduciary  duty,  Cumberland  Coal  Co.  v.  Sherman,  20 

and   the  like,  may  be  confirmed,  be-  Md.  117;  and  see  cases  in  next  foUow- 

cause  the  parties  alone  are  concerned;  ing  note;  [also  §  916;  Kerby  v.  Kerby, 

the  state  or  society  has  no  special  in-  57   Md.    345;   Orocka   T.  Nippult,   44 

terest,  as  it  has  in  those  opposed  to  Minn.  239.] 
statute,  public  policy,  or  good  morals. 


§  965  EQUITY    JURISPRUDENCE.  1402 

if  the  party  wrongly  supposes  that  the  original  contract 
or  transaction  is  binding,  or  if  he  has  not  full  knowledge 
of  all  the  material  facts  and  of  his  own  riglits,  no  act  of 
confirmation,  however  formal,  is  effectual;  the  voidable 
nature  of  the  transaction  is  unaltered.^ 

§  965.  Acquiescence  and  Lapse  of  Time. — A  second 
mode  by  which  the  remedial  right  may  be  destroyed,  and 
the  transaction  rendered  unimpeachable,  is  acquiescence. 
The  term  "acquiescence  "  is  sometimes  used  improperly. 
It  differs  from  confirmation  on  the  one  side,  and  from 
mere  delay  on  the  other.  AVhile  confirmation  implies  a 
deliberate  act,  intended  to  renew  and  ratify  a  transaction 
known  to  be  voidable,  acquiescence  is  some  act,  not  de- 
liberately intended  to  ratify  a  former  transaction  known 
to  be  voidable,  but  recognizing  the  transaction  as  exist- 
ing, and  intended,  in  some  extent  at  least,  to  carry  it  into 
effect,  and  to  obtain  or  claim  the  benefits  resulting  from 
it.  The  theory  of  the  doctrine  is,  that  a  party,  having 
thus  recognized  a  contract  as  existing,  and  having  done 

•  Chesterfield  v.  Janssen,  2  Ves.  Sr.  357;  Cumberland  Coal  Co.  v.  Sherman, 

125;  Crowe  v.  Ballard,  3  Brown  Ch.  30  Barb.  553;  20  Md.  117;HoflFman  etc. 

117,  119;  2  Cox,  253;  Cann  v.  Cann,  1  Co.  v.  Cumberland  Coal  Co.,  16  Md. 

P.  Wms,  723,  727;  Wood  v.  Downes,  456;  Boyd  v.  Hawkins,  2  Dev.  Eq.  195; 

18  Ves.  120,  123,  128;  Morse  v.  Royal,  Butler  v.  Haskell,  4  Desaus.  Eq.  651; 

12Ve3.  355,373;Purcellv.  McNamara,  McCormick  v.  Malin,  5   Blackf.  509; 

14  Ves.  91;  Gowland  v.  De  Faria,  17  Williams  v.  Reed,  3  Mason,  405.    The 

Ves.  20;  Say  v.  Barwick,  1  Ves.  &  B.  same  rules  apply  to  a  release:     Lloyd 

195;  Walker  v.  Symonds,  3  Swaust.  1;  v.  Attwood,  3  De  Gex  &  J.  614;  Far- 

Savery  v.  King,  5   H.    L.    Cas.    627;  rant  v.  Blanchford,  1  De  Gex,  J.  &  S. 

Smith  V.  Kay,  7  H.  L.  Cas.  750;  Wall  107,  119;  Aveline  v.  Melhuish,  2  De 

V.  Cockerell,  10   H.  L.  Cas.  229;   De  Gex,  J.  &  S.    288;  Eyre  v.  Burmester, 

Montmorency  v.  Devereux,  7  Clark  &  10  H.  L.  Cas.  90,  106;  Duke  of  Leeds  v. 

F.  188;  Athenseum  Life  Soc.  v.  Pooley,  Amherst,  2  Phill.  Ch.  1 17;  Wedderbura 

3DeGex&J.  294,  299;  Stump  V.  Gaby,  v.  Wedderburn,  4  Mylne  &  C.  41;  2 

2  De  Gex,  M.   &   G.  623;  Salmon  v.  Keen,  722,  728;  Parker  v.  Bloxam,  20 

Cutts,  4  De  Gex  &  S.  125,  132;  Roberts  Beav.  295;  Millar  v.  Craig,  6  Beav.  433; 

V.  Tuns  tall,  4  Hare,  257;  Wedderburn  Bowles  v.   Stewart,   1    Schoales  &  L. 

V.  Wedderburn,  2  Keen,  722;  Potts  v.  209;  Skilbeck  v.  Hilton,  L.  R.  2  Eq. 

Surr,  34  Beav.  543;  Waters  V.  Thorn,  22  587;   Heron   v.    Heron,    2   Atk.    161; 

Beav.  547;  Cockell  v.  Taylor,  15  Beav.  Steadman  v.  Palling,  3  Atk.  423;  Pusey 

103,   125;    Cockerell   v.    Cholmeley,   1  v.  Desbouvrie,  3  P.  Wms.  315;  Brod- 

Russ.  &  M.  418,  425;  Murray  v.  Palmer,  erick  v.  Broderick,    1    P.    Wms.   239; 

2  Schoales  &  L.  474,  486;  Roche  v.  Salkeld  v.  Vernon,  1  Eden,  64;  Bradley 
O'Brien,  1  Ball  &  B.  330.  338,  340,  v.  Chase,  22  Me.  511;  Parsons  v. 
353;  Dunbar  v.  Tredennick,  2  Ball  &  Hughes,  9  Paige.  591;  Michoud  v.  Gi- 
B.  304,  316,  317;  Mnlhallen  v.  Marum,  rod,  4  How.  503;  [Dunn  v.  Dunn,  42 

3  Dru.  &  War.  317;  Dobson  v.  Racey,  8  N.  J.  Eq.  431;  Knight  v.  Watts,  26 
N.  Y.  216;  Comstock  v.  Ames,  3Keyes,  W.  Va.  175.] 


1403 


CONSTRUCTIVE   FRAUD. 


§  9G5 


something -to  carry  it  into  effect  and  to  obtain  or  claim  its 
benefits,  although  perhaps  only  to  a  partial  extent,  and 
having  thus  taken  his  chances,  cannot  afterwards  be  suf- 
fered to  repudiate  the  transaction  and  allege  its  voidable 
nature.  It  follows  that  mere  delay,  mere  suffering  time 
to  elapse  without  doing  anything,  is  not  acquiescence, 
although  it  may  be,  and  often  is,  strong  evidence  of  an 
acquiescence;  and  it  may  be,  and  often  is,  a  distinct 
ground  for  refusing  equitable  relief,  either  affirmative  or 
defensive.'  As  acquiescence  is  thus  a  recognition  of  and 
consent  to  the  contract  or  other  transaction  as  existing, 
the  requisites  to  its  being  effective  as  a  bar  are,  knowl- 
edge or  notice  of  the  transaction  itself,  knowledge  of  the 


'  See  Duke  of  Leeds  v.  Amherat,  2 
Phill.  Ch.  117,  123.  The  true  nature 
and  eflfect  of  acquiescence  were  admir- 
ably stated  by  Thesiger,  L.  J.,  in  deliv- 
ering the  opinion  of  the  court  of  appeal 
in  the  very  recent  case  of  De  Bussche 
V.  Alt,  L.  R.  8  Ch.  Div.  286,  314.  The 
suit  was  brought  to  set  aside  a  sale 
made  by  an  agent  to  himself  in  viola- 
tion of  his  fiduciary  duty.  The  lord 
justice  said:  "It  still  remains  to  be 
considered  whether,  short  of  such 
ratification  or  adoption,  the  plaintiff 
can  be  held  to  have  by  his  conduct  in 
any  way  precluded  himself  from  tak- 
ing the  present  proceedings.  The 
term  "acquiescence,"  which  has  been 
applied  to  his  conduct,  is  one  which 
was  said  by  Lord  Cottenham,  in  Duke 
of  Leeds  v.  Amherst,  supra,  ought 
not  to  be  used;  in  other  words, 
it  does  not  accurately  express  any 
known  legal  defense,  but  if  used  at  all 
it  must  have  attached  to  it  a  very 
different  signification,  according  to 
whether  the  acquiescence  alleged  oc- 
curs while  the  act  acquiesced  in  is  in 
progress  or  only  after  it  has  been  com- 
pleted. If  a  person  having  a  right, 
and  seeing  another  person  about  to 
commit,  or  in  the  course  of  commit- 
ting, an  act  infringing  upon  that  right, 
stands  by  in  such  a  manner  as  really 
to  induce  the  person  committing  the 
act,  and  who  might  otherwise  have 
abstained  from  it,  to  believe  that  he 
assents  to  its  being  committed,  he  can- 
not afterwards  be  heard  to  complain 
of  the  act.     This,  as  Lord  Cottenham 


said  in  the  case  already  cited,  is  the 
proper  sense  of  the  term  "acquies- 
cence," and  in  that  sense  may  be 
defined  as  quiescence  under  such  cir- 
cumstances as  that  assent  may  be  rea- 
sonably inferred  from  it,  and  is  no  more 
than  an  instance  of  the  law  of  estoppel 
by  words  or  conduct.  But  when  once 
the  act  is  completed,  without  any 
knowledge  or  assent  upon  the  part  of 
the  person  whose  right  is  infringed, 
the  matter  is  to  be  determined  on 
very  different  legal  considerations.  A 
right  of  action  has  then  vested  in  him 
which,  at  all  events  as  a  general  rule, 
cannot  be  divested  without  accord  and 
satisfaction,  or  release  under  seal. 
Mere  ituhmission  to  the  injury,  for  any 
time  short  of  the  period  limited  by 
statute  for  the  enforcement  of  the 
right  of  action,  cannot  take  away 
such  right,  although  under  the  name 
of  laches  it  may  afford  a  ground  for  re- 
fusing relief  under  some  peculiar  cir- 
cumstances; and  it  is  clear  that  even 
an  express  promise  by  the  person  in- 
jured, that  he  would  not  take  any  legal 
proceedings  to  redress  the  injury  done 
to  hiin,  could  not  by  itself  constitute  a 
bar  to  such  proceedings,  for  the  prom- 
ise would  be  without  consideration, 
and  therefore  not  binding."  In  pur- 
suance of  this  principle  so  admirably 
explained,  the  doctrine  of  "acquies- 
cence "  properly  belongs  to  and  is 
hereinbefore  discussed  in  connection 
with  equitable  estoppel,  ante,  §^  816- 
821.  See  also  2  Lead.  Cas.  Eq.,  4th 
Am.  ed.,  1263;  Kerr  on  Fraud,  298-303. 


§  965 


EQUITY   JURISPRUDENCE. 


1404 


party's  own  rights,  absence  of  all  undue  influence  or  re- 
straint, and  consequent  freedom  of  action;  a  conscious 
intention  to  ratify  the  transaction,  however,  is  not  an  es- 
sential element.  When  a  party  with  full  knowledge,  or 
at  least  with  sufficient  notice  or  means  of  knowledge,  of 
his  rights,  and  of  all  the  material  facts,  freely  does  what 
amounts  to  a  recognition  of  the  transaction  as  existing, 
or  acts  in  a  manner  inconsistent  with  its  repudiation,  or 
lies  by  for  a  considerable  time  and  knowingly  permits 
the  other  party  to  deal  with  the  subject-matter  under  the 
belief  that  the  transaction  has  been  recognized,  or  freely 
abstains  for  a  considerable  length  of  time  from  impeach- 
ing it,  so  that  the  other  party  is  thereby  reasonably 
induced  to  suppose  that  it  is  recognized,  there  is  acquies- 
cence, and  the  transaction,  although  originally  impeach- 
able, becomes  unimpeachable   in  equity.'      Even  where 


»  Kerr  on  Fraud,  301,  302;  Randall 
V.  Erriugton,  10  Vea.  423,  426,  428; 
Cholmondeley  v.  Clinton,  2  Mer.  171, 
361;  Honner  v.  Morton,  3  Russ.  65; 
Selsey  v.  Rhoades,  1  Bligh,  N.  S.,  1; 
Vigera  v.  Pike,  8  Clark  &  F.  562,  650; 
Charter  v,  Trevelyan,  11  Clark  &  F. 
714;  Bernal  v.  Lord  Donegal,  3  Dow, 
133;  Biiyne  v.  Ferguson,  5  Dow,  151; 
Archbold  v.  Scully,  9  H.  L.  Cas.  360; 
Bullock  V.  Downes,  9  H.  L.  Cas.  1; 
Wall  V.  Cockerell,  10  H.  L.  Cas.  229; 
Loader  v.  Clarke,  2  Macn.  &  G.  387; 
Wright  V,  Vanderplank,  8  De  Gex,  M. 
&  G.  133;  Stone  v.  Godfrey,  5  De  Gex, 
M.  &  G.  76;  Wall  v.  Cockerell,  3  De 
Gex,  F.  &  J.  737,  742;  Skottowe  v. 
Williams,  3  De  Gex,  F.  &  J.  535;  Gra- 
ham V.  Birkenhead  etc.  R'y-»  2  Macn. 
&  G.  146;  Coles  v.  Sims,  5  De  Gex,  M. 
&  G.  1 ;  Life  Ass'n  of  Scotland  v.  Sid- 
dal,  3  De  Gex,  F.  &  J.  58,  74;  Great 
Western  R'y  v.  Oxford  etc.  R'y,  3  De 
Gex,  M.  &  G.  341;  Ornies  v.  Beadel,  2 
De  Gex,  F.  &  J.  333;  Edwards  v.  Mey- 
rick,  2  Hare,  60,  75;  Tanner  v.  Smith, 
10  Sim.  410;  Dimsdale  v.  Dimsdale,  3 
Drew.  556;  Bellew  v.  Russell,  1  Ball 
&  B.  96;  Blennerhassett  v.  Day,  2  Ball 
&  B.  104;  Nagle  v.  Baylor,  3  Dru.  & 
War.  60;  Odlin  v.  Gove,  41  N.  H.  465; 
77  Am.  Dec.  773;  Bassett  v.  Salisbury 
etc.  Co.,  47  N.  H.  423,  4.39;  Peabody 
T.  Flint,  6  Allen,  52;  Fuller  v.  Mel- 


rose,  1  Allen,  166;  Tash  v.  Adams,  10 
Cush.  252;  Briggs  v.  Smith,  5  R.  L 
213;  SchifiFer  v.  Diet/,  83  N.  Y.  300, 
307,  308;  Cobb  v.  Hatfield,  46  N.  Y. 
533;  Tompkins  v.  Hyatt,  28  N.  Y.  347; 
Lawrence  v.  Dale,  3  Johns.  Ch.  23; 
More  V,  Smedburgh,  8  Paige,  600; 
Masson  v.  Bovet,  1  Denio,  69;  43  Am. 
Dec.  651;  Gale  v.  Nixon,  6  Cow.  444; 
Crosier  v.  Acer,  7  Paige,  137;  Moffat 
V.  Winslow,  7  Paige,  124;  Saratoga 
etc.  R.  R.  Co.  V.  Rowe,  24  Wend.  74; 
35  Am.  Dec.  598;  Bruce  v.  Davenport, 
3  Keyes,  472;  Doughty  v.  Doughty, 
7  N.  J.  Eq.  227;  Gray  v.  Ohio  etc.  R. 
R.,  1  Grant  Cas.  412;  Little  v.  Price, 
1  Md.  Ch.  182;  Moore  v.  Reed,  2  Ired. 
Eq.  580;  Burden  v.  Stein,  27  Ala.  104; 
62  Am.  Dec.  758;  Pillow  v.  Thompson, 
20  Tex.  206;  Edwards  v.  Roberts,  7 
Smedes  &  M.  544;  Ayres  v.  Mitchell, 
3  Smedes  &  M.  683;  McNau^hton  v. 
Partridge,  11  Ohio,  223;  38  Am.  Dec. 
731;  Borland  V.  Thornton,  12  Cal.  440; 
Phelps  V.  Peabody,  7  Cal.  50;  Marsh 
V.  Whitmore,  21  Wall.  178;  [Allcard 
V.  Skinner,  36  Ch.  Div.  145;  Wade  v. 
Pulsifer,  54  Vt.  45;  Maulfair's  Appeal, 
110  Pa.  St.  402;  Kilpatrick  v.  Hensou, 
81  Ala.  464.]  The  following  cases  are 
remarkable  instances  of  relief  given 
after  a  considerable  lapse  of  time: 
Gresley  v.  Mousley,  4  De  Gex  &  J. 
78;  Baker  v.  Bradley,  7  De  Gex,  M, 


1405  CONSTRUCTIVE   FRAUD.  §  9G6 

there  has  been  no  act  nor  language  properly  amounting 
to  an  acquiescence,  a  mere  delay,  a  mere  suffering  time 
to  elapse  unreasonably,  may  of  itself  be  a  reason  why 
courts  of  equity  refuse  to  exercise  their  jurisdiction  in 
cases  of  actual  and  constructive  fraud,  as  well  as  in  other 
instances.  It  has  always  been  a  principle  of  equity  to 
discourage  stale  demands;  laches  are  often  a  defense 
wholly  independent  of  the  statute  of  limitation.  Prompt- 
ness in  asserting  a  remedial  right  against  fraud  is  some- 
times required;  but  no  delay  will  prejudice  a  defrauded 
party  as  long  as  he  was  ignorant  of  the  fraud.  Each  case 
involving  the  defense  of  delay  or  lapse  of  time  must,  to  a 
great  extent,  depend  upon  its  own  circumstances.' 

§  966.  Third.  Frauds  against  Third  Persons  Who  are 
not  Parties  to  the  Transaction.  —  As  a  general  rule,  in 
the  cases  which  come  within  this  group,  and,  strictly 
speaking,  none  others  should  belong  to  it,  the  transaction 
is  not  fraudulent  as  to  the  immediate  parties,  —  the  gran- 
tor and  the  grantee,  and  the  like;  at  least,  neither  of  them 
is  permitted,  as  against  the  other,  to  set  aside  the  convey- 
ance, or  to  defeat  the  enforcement  of  the  contract  if  it  be 

&  Gr.  597;  Michoud  v.  Girod,  4  How.  v.  Hicks,  2  Younge  &  C.  46;  Attwood 
603,  561.  V.  Small,  6  Clark  &  F.  2.32,  359; 
The  doctrine  concerning  acquies-  Ashurst'a  Appeal,  60  Pa.  St.  290; 
cence  from  conduct  and  from  lapse  of  Watts's  Appeal,  78  Pa.  St.  371;  Evans's 
time  is  applied  with  special  strictness  Appeal,  81  Pa.  St.  278. 
in  mercantile  contracts,  such  as  deal-  It  follows  from  the  doctrine  as  to 
ings  with  stock,  and  subscriptions  for  acquiescence  that  a  vendee  of  real  es- 
shares,  and  in  agreements  of  a  specu-  tate  must  surrender  up  possession 
lative  nature:  See  wite,  §  881;  Ash-  acquired  under  the  contract  before  he 
ley's  Case,  L.  R.  9  Eq.  263;  In  re  can  maintain  an  action  for  its  cancel- 
Estates  Investment  Co.,  L.  R.  10  Eq.  lation:  See  More  v.  Smedburgh,  8 
603;  Smallcombe's  Case,  L.  R.  3  Eq.  Paige,  600;  Gale  v.  Nixon,  6  Cow. 
769;  Kentv.  Freehold  etc.  Co.,  L.  R.  444;  Tompkins  v.  Hyatt,  28  N.  Y. 
3  Ch.  493;  Sharpley  v.  Louth  etc.  R'y,  347. 

L.  R.  2  Ch.  Div.  663;  Ayerst  v.  Jen-        ^  See  ante,  %  917;  vol.  1,  §§  418,  419; 

kins,  L.  R.   16  Eq.  275;  Heymann  v.  Kerr   on   Fraud,    303-312;    Diman  v. 

European  etc.  R'y,  L.  R.  7  Eq.  154;  Providence  etc.  R.   R.,  5   R.  I.   130; 

Denton  v.  MacNeil,  L.   R.  2  Eq.  352;  Lloyd  v,  Brewster,  4   Paige,  537;  27 

Taite's  Case,  L.  R.  3  Eq.  795;  Jennings  Am.    Dec.  88;  Thomas  v.  Bartow,  48 

V.  Bronghton,  5  De  Gex,  M.  &  G.  126,  N.  Y.  193.   200;  Saratoga  etc.   R.   R. 

140;  Clegg  v.  Edmondson,  8  De  Gex,  v.  Row,  24  Wend.  74;  35  Am.   Dec. 

M,  &  G.  787;  Clements  v.  Hall,  2  De  598;  Brown  v.  County  of  Buena  Vista, 

Gex  &  J.  173;  Whalley  v,  Whalley.  2  95  U.  S.  157,  160;  Sullivan  v.  Portland 

De  Gex,  F.   &  J.  310;  Prendergast  v.  etc.  R.  R.,  94  U.  S.  806;  Grymes  T. 

Turton,  1  Younge  &  C.  Ch.  98;  Lovell  Sanders,  93  U.  S.  65,  62. 


§  967  EQUITY    JURISPRUDENCE.  1406 

executory.  The  transaction  is  of  such  a  nature  that  it 
defrauds  or  invades  the  rights  of  third  persons,  who  are 
not  its  immediate  parties;  and  they  alone  are,  in  general, 
entitled  to  impeach  it  and  to  obtain  affirmative  relief 
against  it/  The  only  cases  to  be  considered  under  this 
division  are  secret  bargains  in  fraud  of  compositions  with 
creditors,  transfers  in  fraud  of  creditors,  and  transfers  in 
fraud  of  subsequent  purchasers.^ 

§  967.  Secret  Bargains  in  Fraud  of  Compositions  with 
Creditors. — Where  a  composition  is  made  by  a  debtor 
with  his  creditors  upon  the  basis  of  his  payment  to  all 
who  join  in  the  transaction  the  same  proportionate  share 
of  their  claims,  and  of  being  therefore  discharged  by  them 
from  all  further  liability,  a  secret  agreement  by  the  debtor 
with  one  of  these  creditors,  expressly  or  impliedly  as  a 
condition  for  the  latter's  joining  in  the  composition, 
whereby  the  debtor  pays  or  secures  to  the  favored  cred- 
itor a  further  sum  of  money  or  amount  of  property,  or 
greater  advantage  than  that  received  and  shared  alike  by 
all  the  other  creditors,  is  a  fraud  upon  such  other 
creditors,  and  is  voidable.  The  agreement,  if  execu- 
tory, cannot  be  enforced  against  the  debtor  in  equity 
or  at  law;  the  security  may  be  set  aside  by  a  court  of 
equity,  and  the  amount  paid  by  the  debtor  in  pursuance 
of  the  contract  may  be  recovered  back  by  him.  The  re- 
lief, defensive  or  affirmative,  thus  given  to  the  debtor 
does  not  rest  upon  any  consideration  of  favor  due  and 
shown  to  him,  but  wholly  upon  motives  of  policy,  to  pro- 
tect the  rights  of  the  other  creditors  and  to  secure  them 
against  such  frauds.*     It  would  seem,  on  principle,  that 

'  This  is  the  general  rule;  there  is,  tion  may  be  impeached  by  one  of  its 

however,    one     important   exception,  immediate  parties, 

mentioned  in  the  next  paragraph.  *  Cullingworth  v.  Lloyd,  2Beav.  385; 

^  Other  particular  instances,  includ-  Wood  v.  Barker,  L.  R.  1  Eq.  139;  In  re 

ing  sales  by  expectants,  post  obit  con-  Lenzberg,  L.  R.  7  Ch.  Div.  650;  Mare 

tracts,  etc.,  which  are   placed  in  the  v.    Sandford,    1    GiflF.    288;    Mare    v. 

group  by  some  writers,  have  already  Walker,  3  Giff.    100;    Pendlebury   v. 

been  examined  in  previous  paragraphs.  Walker,   4   Younge    &   C.    424,    434; 

In   most   of    them,    whatever  be   the  Jackman  v.  Mitchell,  13  Ves.  581;  Ex 

grounds  of  the  invalidity,  the  transac-  parte  Sadler,   15  Ves.  52;  Mackenzie 


1407 


CONSTRUCTIVE    FRAUD. 


963 


a  secret  bargain  by  the  debtor,  giving  or  securing  an  ad- 
vantage to  Tone  creditor,  should  also  avoid  the  composition 
agreement,  at  the  option  of  the  other  creditors  who  are 
parties  to  it,  and  enable  them  to  recover  the  full  amount 
of  their  demands  against  the  debtor,  notwithstanding  the 
discharge  contained  in  the  composition.  In  no  other 
manner  can  the  defrauded  creditors  obtain  relief  from  an 
agreement,  confessedly  obtained  by  a  fraud  upon  their 
rights.  This  result  is  sustained  by  at  least  a  portion  of 
the  decisions. 

§  968.  Conveyances  in  Fraud  of  Creditors.  —  Dealings 
by  a  person  with  his  property  with  intent  to  defraud  his 
creditors  were  voidable  at  the  common  law;'  but  the  exist- 
ing rules  on  the  subject  both  in  England  and  in  this 
country  are  founded  upon  statute.^    The  operative  statute 


V.  Mackenzie,  16  Ves.  372;  Mawsonv. 
Stock,  6  Vea.  301;  Eastabrook  v.  Scott, 
3  Ves.  456;  Child  v.  Danbridge,  2  Vern. 
71;  Small  v,  Brackley,  2  Vern.  602; 
Middleton  v.  Lord  Onslow,  1  P.  Wms. 
768;  Spurret  v.  Spiller,  1  Atk.  105; 
Duffy  V.  Orr,  1  Clark  &  F.  253;  5 
Bligh,  N.  S.,  620;  Lee  v.  Lockhart,  3 
Mylne  &  C.  302;  Harvey  v.  Hunt,  119 
Mass.  279;  Case  v.  Gerrish,  15  Pick. 
49;  Ramsdell  v.  Edgarton,  8  Met.  227; 
41  Am.  Dec.  503;  Lothrop  v.  King,  8 
Cush.  382;  Doughty  v.  Savage,  28 
Conn.  146;  Solinger  v.  Earle,  82  N.  Y. 
393;  Van  Bokkelen  v,  Taylor,  62  N. 
Y.  105;  Lawrence  v.  Clark,  36  N.  Y. 
128;  Solinger  v.  Earle,  45  N.  Y.  Sup. 
Ct.  80,  604;  Breckv,  Cole,  4  Sand.  79; 
Feldmau  v.  Gamble,  26  N.  J.  Eq.  494; 
Loucheim  Brothers' Appeal,  67  Pa.  St. 
49;  Patterson  v.  Boehm,  4  Pa.  St.  507; 
Maun  V.  Darlington,  15  Pa.  St.  310; 
Lanes  v.  Squyres,  45  Tex.  382;  Clarke 
V.  White,  12  Pet.  178.  [See  also  Gug- 
genheimer  v.  Groeschel,  23  S.  C.  274; 
55  Am.  Rep.  20;  Woodruff  v.  Saul,  70 
Ga.  271;  Willis  v.  Morris,  63  Tex.  458; 
51  Am.  Rep.  655.]  In  Loney  v.  Bailey, 
43  Md.  10,  the  rule  is  laid  down  as 
follows:  In  a  composition  agreement  a 
debtor  professes  to  deal  with  all  cred- 
itors entering  it  on  terms  of  perfect 
equality,  and  a  secret  agreement  giv« 
ing  a  creditor  an  undue  advantage 
vitiates  the  agreem.ent  as  being  a  fraud 
upou  the  other  creditors,  who  may  sue 


for  and  recover  the  full  amount  of 
their  original  indebtedness,  less  the 
amount  they  have  received  under 
the  composition,  and  it  is  not  essential 
that  the  composition  agreement  should 
first  be  rescinded,  and  the  money  re- 
covered under  it  returned.  This  would 
seem  to  be  the  just  and  equitable  effect 
of  such  a  secret  bargain  upon  the 
rights  of  the  composition  creditors. 
Argall  V.  Cook,  43  Conn.  160,  holds 
that  the  fact  of  a  debtor  intending  to 
pay  certain  of  the  creditors  joining  in 
a  composition  deed,  in  full,  out  of  his 
future  earnings,  does  not  invalidate 
the  composition  as  to  other  creditors, 
if  there  is  no  afjreement  tending  to  de- 
fraud them;  and  see  Elfelt  v.  Snow,  2 
Saw.  94.  Other  secret  agreements 
made  by  an  insolvent  with  his  assignee, 
or  otherwise,  tending  to  secure  bene- 
fits for  himself  or  family  by  withdraw- 
ing his  property  from  his  creditors, 
are  fraudulent  as  against  the  credi- 
tors: See  McNeil  v.  Cahill,  2  Bligh, 
228;  Miller  v.  Sauerbier,  30  N.  J.  Eq. 
71;  In  re  Jacobs,  18  Bank.  Reg.  48; 
In  re  Blumeuthal,  18  Bank.  Reg.  555. 

'  Cadogan  v.  Keunett,  Cowp.  432; 
Copis  V.  Middleton,  2  Madd.  410,  428; 
Barton  v.  Vanheythuysen,  11  Hare, 
126,  131,  132;  Clark  v.  Douglass,  62 
Pa.  St.  408;  Clements  v.  Moore,  6 
Wall   299,  312. 

''■  The  earlier  statutes  were  50  Edw. 
IIL,  c.  6;  3  Ucn.  VIL,  c.  4. 


§  969  EQUITY    JURISPRUDENCE.  1408 

in  England,  which  is  also  the  basis  of  all  legislation  and 
judicial  decision  in  the  United  Stales,  is  the  celebrated 
act  13  Eliz.,  c.  5.  It  enacts  that  all  conveyances,  etc.,  of 
any  lands,  goods,  or  chattels,  had  or  made  of  purpose  to 
delay  or  defraud  creditors  and  others  of  their  actions  or 
debts,  shall  be  taken  only  as  against  such  persons  and 
their  representatives  as  shall  or  might  be  so  delayed  or 
defrauded,  to  be  utterly  void;  provided  that  the  act  shall 
not  extend  to  any  conveyance  or  assurance  made  on  good 
consideration  and  bona  fide  to  a  person  not  having  notice 
of  such  fraud.^  I  purpose  merely  to  state,  as  far  as 
possible,  the  general  and  fundamental  principles  and 
doctrines  which  have  been  established  in  the  judicial 
construction  of  this  legislation,  and  the  most  important 
classes  of  cases  to  which  it  is  applied.^ 

§  969.  The  Consideration.  —  It  should  be  observed 
that  the  statute,  by  its  generality  of  ^expression,  being 
without  any  such  limitation,  applies  to  both  existing  and 
subsequent  creditors,  and  to  both  conveyances  made  upon 
a  valuable  consideration  and  those  without  any  consid- 
eration.    It  does  not  declare  voluntary  conveyances  void; 

'  All   the  substantial   provisions  of         *  Since   these   fraudulent    transfers 

this  statute  have  been  adopted  by  the  are  void  at  law  as  well  as  in  equity, 

American  legislation;  still  the  statutes  so  that  the   jurisdiction   of   equity  is 

in  many  or  most  of  the  states  employ  merely  supplementary  to  that  of  the 

quite  different  language,  and  contain  law  courts,  and  since  the  details  of  the 

important  modifications  and  additions.  American  statutes  are  so  varied,  and 

Some  of  them  insert  a  general  clause,  since  the  subject  in  all  its  applications 

in  terms  applying  to  all  the  other  pro-  is  so  very  extensive,  it  would  be  im- 

visions.  to  the  effect  that  the  fraudu-  possible  within   the  limits  of  such  a 

lent  intent  shall  always  be  a  question  treatise  as  this  to  enter  upon  any  dis- 

of  fact;  in  some  this  clause  is  confined  cussion  of  specific  rules,  or  to  do  more 

to  a  portion   only  of   the   provisions;  than  give  the  general  doctrines.     Tlie 

while  in  some  it  is  entirely  omitted,  practical  application  of   these  priuci- 

There  is  a  great  diversity  of  external  plea,  the  instances  in  which  the  equi- 

form,  at  least  in  the  American  legisla-  table  jurisdiction  is  exercised,  and  the 

tion,  on  this  subject.    The  exact  terms  reliefs  which   are   given,  will   be  de- 

of  the  statute  13  Elizabeth,  describing  scribed  in  a  subsequent  chapter  which 

what   dealings   are  thus  void,  are  as  treats  of  "  creditors' suits  "  and  other 

follows:  "All  feoffments,  gifts,  grants,  remedies  granted  to  creditors,     A  full 

alienations,  conveyances,  bonds,  suits,  discussion  of  the  statute  both  in  law 

judgments,  and  executions   contrived  and  in  equity  will  be  found  in  the  edi- 

of  malice,  fraud,  covin,  or  collusion,  to  torial  notes  to  Twyne's  Case,  1  Smith's 

delay,  hinder,  or  defraud  creditors  or  Lead.  Cas.  33;  Sexton  v,  Wheaton,  I 

others  of  their  just  and  lawful  actions.  Am,  Lead.  Cas.  17;  and  Kerr  on  Fraud, 

suits,  debts,  accounts,  damages,"  etc.  196-215, 


1409  CONSTRUCTIVE    FRAUD.  §  969 

it  only  pronounces  fraudulent  conveyances  void,  whether 
they  are  voluntary  or  made  upon  a  consideration.  The 
validity  of  a  conveyance,  as  against  creditors,  is  made  in 
the  proviso  to  depend  "  upon  its  being  upon  a  good  con- 
sideration and  bona  fide";  either  is  not  sufficient;  con- 
sideration without  good  faith  plainly  does  not  displace 
the  operation  of  the  statute;  and  good  faith  without  con- 
sideration does  not  necessarily  protect  a  conveyance.  A 
deed  made  upon  a  valuable  consideration,  but  not  bona 
fide,  —  that  is,  with  a  fraudulent  intent,  —  is  void  against 
creditors  of  the  grantor  as  though  it  were  voluntary.^  Al- 
though the  statute  speaks  of  a  "good  consideration,"  yet 
it  is  fully  settled  that  a  valuable  consideration  is  intended, 
—  a  consideration  pecuniary  in  contemplation  of  law,  of 
which  kind  marriage  is  an  instance.  The  "good"  con- 
sideration of  love  and  afifection  does  not  meet  the  demands 
of  the  statute,  and  does  not  of  itself  validate  a  conveyance.* 
Voluntary  conveyances  are  perfectly  valid  and  binding 
as  between  the  immediate  parties  and  all  persons  claim- 
ing under  them  in  privity  of  estate;'  but  they  may  be 
void  as  against  creditors,  and  will  be  void  so  far  as  they 
delay  or  defraud  creditors.  A  voluntary  conveyance  may 
be  a  strong  indication  of  a  fraudulent  intent,  and  may 
sometimes  raise  a  presumption  of  such  intent;  still  the 
fact  that  a  conveyance  is  voluntary,  under  the  general 
course  of  legislation  and  decision  in  this  country,  is  ma- 
terial only  in  connection  with  the  fraudulent  intent,  only 

'  For  example,  a  conveyance  made  498;  90  Am.  Dec.  164;  Haymaker's 
by  a  defendant,  for  full  value,  but  Appeal,  53  Pa.  St.  306;  PuUiam  v. 
■with  intent  to  defraud  the  plaintiff  by  Newberry,  41  Ala.  168. 
placing  the  property  beyond  the  reach  '  Copis  v.  Middleton,  2  Madd.  410, 
of  an  expected  judgment:  Blenkinsopp  430,  Taylor  v.  Jones,  2  Atk.  600, 
V.  Blenkinsopp,  1  De  Gex,  M.  &  G.  Goldsmith  v.  Russell,  5  De  Gex,  M,  & 
495;  Twyne's  Case,  3  Coke,  80;  Ca-  G.  547,  and  all  the  cases  arising  out  of 
dogan  V.  Kennett,  Cowp.  432,  4.34;  voluntary  conveyances,  are  author- 
Holmes  v.  Penney.  3  Kay  &  J.  90,  99;  ities. 

Bott   V.    Smith,    21    Beav.    511,    516;  *  If  they  are  impeachable   by  such 

Harman  v.  Richards,  10  Hare,  81.  89;  successors  as  assignees  in  bankruptcy, 

Clements  v.  Moore,  6  Wall.  299;  Rob-  insolvency,  and   others   in   like   posi- 

insou  V.  Holt,  39  N.  H.  557;  75  Am.  tion,  it  is  because   such   persons   are 

Dec.  233;   Root  v.  Reynolds,  32  Vt.  representatives  of  creditors  more  thaa 

139;    Wadsworth    v.     Williams,     100  of  tlie  parties  from  whom  they  immo* 

Mass.  126;  Gragg  v.  Martin,  12  Allen,  diately  derive  title. 
2  Eq.  Jur.  — 89 


§  970  EQUITY   JURISPRUDENCE.  1410 

as  it  shows  or  tends  to  show  the  existence  of  such  intent.^ 
A  voluntary  conveyance  as  such  is  not  necessarily  void 
even  against  existing  creditors. 

§  970.  The  Fraudulent  Intent.  — The  essential  element 
required  by  the  statute,  in  order  to  render  a  transfer  void- 
able, is  the  fraudulent  intent.  There  must  be  an  intent 
to  hinder,  delay,  or  defraud  creditors.  All  other  consid- 
erations are  subordinate  and  ancillary  to  the  establish- 
ment of  this  indispensable  feature.  The  discussion  which 
has  arisen  under  the  statute,  and  the  special  rules  which 
have  been  formulated,  are  chiefly  concerned  with  the 
question,  when,  how,  and  by  what  means  may  this  in- 
tent be  sustained?^  There  are  three  general  modes  in 
which  the  intent  might  possibly  be  ascertained.  Certain 
circumstances  appearing,  it  might  (1)  be  inferred  there- 
from as  a  conclusive  presumption  of  law,  or  (2)  as  a  prima 
facie  or  rebuttable  presumption  of  law,  or  (3)  as  an  ar- 
gumentative conclusion  of  fact.  With  respect  to  these 
modes,  the  intent  may  be  express  or  actual,  which  simply 
means  that  it  is  proved  by  means  of  ordinary  evidence, 
either  direct  or  circumstantial,  tending  to  show  its  exist- 
ence, or  it  may  be  implied  or  inferred  as  a  presumption 

•  This  conclusion  may  seem  to  be  in«  the  property  conveyed:  See  the  dis- 
consistent  with  the  statement  that  the  cussions  in  Twyne's  Case.  Later,  the 
statute  requires  both  a  valuable  con-  tendency  has  been  to  abandon  the  no« 
sideration  and  good  faith,  and  that  tion  of  conclusive  presumptions,  and 
good  faith  without  such  consideration  to  infer  the  intent  as  a  rebuttable  pre- 
M  not  sufficient.  The  conclusion,  sumption  of  law  from  a  variety  of  cir- 
however,  is  certainly  sustained  by  the  cumstances;  and  this  doctrine  still 
course  of  legislation  and  the  current  prevails  in  England  and  in  many  of 
of  modern  decision  in  the  United  the  states,  at  least  in  its  application 
States.  It  is  firmly  settled,  as  the  to  some  circumstances.  Finally,  in 
general  doctrine,  that  a  voluntary  consequence  of  a  statutory  provision, 
conveyance,  made  by  a  party  indebted,  the  view  has  been  adopted  theoretically 
and  largely  indebted,  is  not  necessarily  in  several  of  the  states  that  the  intent 
void;  its  voidable  nature  depends  must  always  be  inferred  as  an  argn- 
npon  the  intent;  but  the  circum-  mentative  conclusion  of  fact,  without 
stances  may  be  such  that  the  intent  the  aid  of  any  legal  presumptions.  I 
is  inferred  as  an  irresistible  conclu-  describe  this  view  as  prevailing  theo- 
sion:  See  cases  cited  subsequently  on  retically,  because  it  will  be  found  that 
voluntary  conveyances.  the  courts  of  those  states,  in  the  de* 

*  At  an  early  day  the  intent  was  cision  of  cases,  do  practically  have  re- 
inferred  as  a  conclusive  presumption  course  to  prima  fade  presumptions  in 
of  law  from  many  particular  circum-  determining  the  existence  of  the  fraud* 
stances;  as,  for  example,  from  the  fact  uleat  intent. 

that  the  vendor  retained  possession  of 


1411  CONSTRUCTIVE    FRAUD.  §  971 

from  certain  circumstances  connected  "with  or  forming  a 
part  of  the  transaction.*  In  relation  to  the  mode  of  ascer- 
taining the  fraudulent  intent,  when,  how,  and  from  what 
it  may  be  inferred,  there  is  a  great  diversity  and  even 
conflict  of  judicial  opinion,  and  to  some  extent  antago- 
nistic rules  are  settled  in  different  states.  Any  attempt  to 
reconcile  this  discrepancy  would  be  unavailing.  I  shall 
merely  formulate  those  general  doctrines  which  are  sus- 
tained by  the  consent  of  the  highest  authority,  as  well  as 
by  principle,  and  which  constitute  a  part  of  the  equity 
jurisprudence;  and  it  will  be  the  most  convenient  to  state 
them  in  their  connection  with  and  relations  to  the  most 
important  classes  of  cases  which  occur  in  the  actual  trans- 
actions of  men. 

§  971.  Mode  of  Ascertaining  the  Intent.  —  In  the  first 
place,  where  a  conveyance  is  made  upon  a  valuable  con- 
sideration, and  is  alleged  to  be  fraudulent  against  the 
grantor's  creditors,  an  actual  and  express  intent  to  hin- 
der, delay,  or  defraud  is  necessary  to  be  proved.  The 
reason  for  this  is  obvious.  The  transaction  has  one  of 
the  requisites  prescribed  by  the  statute;  the  voluntary 
character  is  wanting  from  which  an  inference  of  fraud- 
ulent intent  might  arise.  On  the  contrary,  the  other  re- 
quisite—  the  good  faith  —  would  rather  be  presumed.  It 
is  necessary,  therefore,  to  overcome  this  presumption  by 
proving  the  absence  of  good  faith.  In  other  words,  the 
actual  and  express  fraudulent  intent  must  he  proved  by 
evidence  tending  to  show  its  existence,  and  from  which 
it  legitimately  results  as  a  conclusion  of  fact  drawn  by  a 
court  or  jury  without  the  aid  of  any  legal  presumptions.* 

*  Among   these   circumstances,    the  able  consideration.     It  seems  impossi- 

most  common  and  important  are  the  ble  to  decide  all  cases  arising  under 

insolvency  of  the  grantor,  or  the  ex-  the  statute  without  having  recourse, 

tent  of  his  indebtedness  compared  with  practically    if    not   avowedly,  to   the 

the  amount  of  his  property,  especially  doctrine  of  legal  presumptions, 

where   the   conveyance   is  voluntary,  '  Freeman  v.  Pope,  L.  R.  5  Ch.  538, 

and  the  fact  that  the  grantor  or  ven-  544,    per  Giffard,    L.    J.;    Holmes   v. 

dor  retains  possession  of  the  property  Penney,   3   Kay   &   J.    90;    Lloyd   y. 

conveyed  or  sold.     This  laat  circum-  Attwood,  3  De  Gex  &  J.  614;  Bott  ▼, 

stance  applies  equally  where  the  con-  iSmith,  21  Beav.  511,  516;  Harman  T. 

veyance  is  voluntary  or  upon  a  valu-  Richards,  10  Hare,  81,  89  (the   vico* 


§971 


EQUITY   JURISPRUDENCE. 


1412 


In  the  second  place,  where  a  conveyance  is  voluntary, 
and  is  alleged  to  be  fraudulent  as  against  existing  credi- 
tors, while  an  express  actual  intent  to  defraud  may  be 
present,  it  is  not  necessary.  The  fraudulent  intent  which 
will  avoid  the  conveyance  as  against  existing  creditors 
may  be  inferred  from  circumstances  connected  with  the 
transaction,  such  as  the  grantor's  insolvency,  great  in- 
debtedness compared  with  the  amount  of  his  property, 
and  the  like;  complete  insolvency,  however,  is  clearly  not 
a  requisite.  In  this  case  of  a  voluntary  deed  and  exist- 
ing creditors,  the  decisions  show  unmistakably  that  the 
intent  is  more  easily  inferred  than  in  any  other.*     In 


chancellor  said:  "Those  who  under- 
take to  impeach  for  mala  fidts  a  deed 
which  has  been  executed  for  a  valuable 
consideration  have,  I  think,  a  task  of 
great  diflSculty  to  discharge");  Clem- 
ents V.  Moore,  6  Wall.  299;  Robinson 
V.  Holt,  39  N.  H.  557;  75  Am.  Dec. 
233;  Root  v.  Reynolds,  32  Vt.  139; 
Wadsworth  v.  Williams,  100  Mass. 
126;  Gragg  v.  Martin,  12  Allen,  498; 
90  Am.  Dec.  164;  Haymaker's  Appeal, 
53  Pa.  St.  306;  PuUiam  v.  Newberry, 
41  Ala.  168. 

*  In  the  important  case  of  Spirett  v. 
Willows,  3  De  Gex,  J.  &  S.  293,  302, 
Lord  Westbury  said:  "If  the  debt  of 
the  creditor  by  whom  the  voluntary 
conveyance  is  impeached  existed  at 
the  date  of  the  conveyance,  and  it  is 
shown  that  the  remedy  of  the  creditor 
18  defeated  or  delayed  by  the  existence 
of  the  conveyance,  it  is  immaterial 
whether  the  debtor  was  or  was  not 
solvent  after  making  the  conveyance." 
This  is  true,  but  is  not  the  whole 
truth.  It  is  susceptible  of  the  inter- 
pretation that  if  the  debtor  is  not  in- 
solvent, then  an  express  actual  intent 
to  defraud  is  necessary.  This  mean- 
ing would  be  contrary  to  the  well- 
settled  doctrine.  In  the  subsequent 
case  of  Freeman  v.  Pope,  L.  R.  5  Ch. 
538,  decided  by  the  court  of  appeal. 
Lord  Hatherley  commented  upon  this 
language  of  Lord  Westbury,  and  said 
(p.  543):  "It  is  expressed  in  very 
large  terms,  probably  too  large.  It 
seems  to  me  that  the  difficulty  felt  by 
the  vice-chancellor  [in  the  decision  ap- 
pealed from]  arose  from  his  thinking 
that  it  was  necessary  to  prove  an  ac- 


tual intention  to  delay  creditors,  where 
the  facts  are  such  as  to  show  that  the 
necessary  consequence  of  what  was 
done  was  to  delay  them."  Lord  Hath- 
erley goes  on  to  show  by  many  exam- 
ples that  such  an  intent  is  not  neces- 
sary. In  the  same  case,  Lord  Justice 
Giffard  said  (p.  544):  "The  vice-chan- 
cellor seems  to  have  considered  that, 
in  order  to  defeat  a  voluntary  convey- 
ance, there  must  be  proof  of  an  ac- 
tual express  intent  to  defeat  creditors. 
That,  however,  is  not  so.  There  is 
one  class  of  cases,  no  doubt,  in  which 
an  actual  express  intent  is  necessary 
to  be  proved;  that  is,  where  the  in- 
struments sought  to  be  set  aside  were 
founded  on  valuable  consideration. 
But  where  the  conveyance  is  voluntary, 
then  the  intent  may  be  inferred  in  a  va- 
riety of  ways.  For  instance,  if,  after 
deducting  the  property  which  is  the 
subject  of  the  voluntary  conveyance, 
suflScient  available  assets  are  not  left 
for  the  payment  of  the  grantor's  debts, 
then  the  law  infers  intent;  and  it 
would  be  the  duty  of  a  judge,  in  leav- 
ing the  case  to  the  jury,  to  tell  the 
jury  that  they  must  presume  that 
such  was  the  intent.  Again,  if  at  the 
date  of  the  conveyance  the  person 
making  it  was  not  in  a  position  ac- 
tually to  pay  his  creditors,  the  law 
would  infer  that  he  intended,  by  mak- 
ing the  voluntary  conveyance,  to  de- 
feat and  delay  them."  On  the  other 
hand,  in  the  important  case  of  Skarf 
V.  Soulby,  1  Macn.  &  G.  364,  374, 
Lord  Cottenham  held  that,  although 
it  was  not  necessary  to  show  insol- 
vency, the  mere  fact  that  the  grantor 


1413  CONSTRUCTIVE   FRAUD.  §  971 

the  third  place,  where  a  convej^ance  is  voluntary,  and  is 
alleged  to  be  fraudulent  as  against  subsequent  creditors, 
the  intent  to  defeat  or  defraud  is  not  so  easily  inferred  as 
in  the  case  of  existing  creditors;  stronger  evidence  is  then 
required  to  establish   the  intent.     "If  a  voluntary  con- 
veyance or  deed  of  gift  be  impeached  by  subsequent  cred- 
itors whose  debts  had  not  been  contracted  at  its  date,  then 
it  is  necessary  to  show  either  that  the  grantor  made  the 
conveyance  with  express  intent  to  delay,  hinder,  or  de- 
fraud creditors,  or  that  after  the  conveyance  the  grantor 
had  no  sufficient   means   or   reasonable   expectation   of 
being  able  to  pay  his  then  existing  debts,  —  that  is  to  say, 
was  reduced  to  a  state  of  insolvency, — in  which  case  the 
law  infers  that  the  conveyance  was  made  with  intent  to 
delay,  hinder,  or  defraud  creditors,  and  is  therefore  fraud- 
ulent and   void."  *     This  proposition   is  clearly  correct, 
but   it    contains  one  apparent    limitation    which    hardly 
seems  to  be  sustained  by  the  weight  of  American  author- 
ity: it  is  not  essential  that  the  voluntary  grantor  should 
be  "  reduced  to  a  state  of  insolvency,"  or  in  other  words, 
that  he  should  be  left  absolutely  unable  to  pay  his  then 
existing  debts.     The  following  seems  to  be  the  true  rule: 
If  the  amount  of  property  after  the  voluntary  conveyance 
was  so  small  in  comparison  with  the  existing  indebted- 
then  owed  some  debts  was  not  suffi-     edies   of  creditors   are   delayed,    hin- 
cient   to  invalidate   a  voluntary  con-     dered,  or   defrauded."     This  proposi- 
veyance    against     existing    creditors;     tion  is  certainly  opposed  to  the  current 
citing  Townsend  v.  Westaeott,  2  Beav.     of  American  authority,  and  it  seems 
340,  per  Lord  Langdale;  and  Richard-     to  be  equally  contrary  to  the  English 
son  V.  Smallwood,  Jacob,  552,  per  Sir     decisions:     See  Kent  v.  Rdey,  L.  R. 
Thomas  Plumer.     This  is  beyond  ques-     14   Eq.    190,    194.     If   the   voluntary 
tion    the    settled    rule.     For  further     grantor  retains  property  sufficient  to 
cases,  see  post,  §  972,  and  note.  pay  all  his  existing  debts,  but  for  any 

1  Spirett  v.  Willows,  3  De  Gex,  J.  reason  fails  to  pay  them,  and  finally 
&  S.  293,  302,  303,  per  Lord  Westbury.  becomes  insolvent,  this  fact  might  be 
The  lord  chancellor  adds:  "  It  is  ob-  a  circumstance  to  be  considered  in  de- 
vious that  the  fact  of  a  voluntary  termiuing  upon  the  existence  of  a 
grantor  retaining  money  enough  to  fraudulent  intent,  but  it  certainly 
pay  the  debts  which  he  owes  at  the  would  not  of  itself  render  the  con- 
time  of  making  the  conveyance,  but  veyance  invalid:  See  Carr  v.  Breese, 
not  aaually  paying  them,  cannot  give  a  81  N.  Y.  584,  5S8,  590,  591;  Dunlap 
different  character  to  the  conveyance  v.  Hawkins,  59  N.  Y.  342;  Jencks  v. 
or  take  it  out  of  the  statute.  It  still  Alexander,  11  Paige,  619,  623;  and 
remains  a  voluntary  alienation  or  deed  Bee  post,  §  973,  and  notes. 
of  gift,  whereby,  in  the  event,  the  rem- 


§  972  EQUITY    JURISPRUDENCE.  1414 

ness  that  the  grantor  could  not  reasonably  have  contem- 
plated his  ability  to  perform  his  obligations,  or  in  other 
words,  he  could  reasonably  have  contemplated  his  inabil- 
ity to  perform  them,  then  an  intent  to  defeat  his  creditors 
generally  will  be  inferred,  and  the  conveyance  will  be 
fraudulent  against  subsequent  as  well  as  against  existing 
creditors.^  Having  thus  ascertained  the  general  rules 
concerning  the  manner  of  establishing  or  inferring  the 
fraudulent  intent,  I  shall  apply  these  rules  very  briefly 
to  the  two  classes  of  creditors,  existing  and  subsequent. 

§972.  Existing  Creditors. —  Conveyances  made  upon 
a  valuable  consideration  are  not  presumed  to  be  fraud- 
ulent against  existing  creditors,  and  the  extent  of  the 
grantor's  indebtedness  is  wholly  immaterial.^  Convey- 
ances upon  a  valuable  and  even  full  consideration  are 
void  against  existing  and  subsequent  creditors,  if  made 
with  an  actual  express  intent  to  hinder,  delay,  or  defraud 
them;  but  the  intent  cannot  be  inferred  by  presumptions,, 
and  must  be  proved  by  evidence  legitimately  tending  to- 

*  In  Carr  v.  Breeae,   81   N.  Y.  584,  stances   of  the  grantor,  his  business, 

688,  590,  Mr.  Justice  Miller  said:   "A  and   its   risks  and   contingencies,  hi» 

review  of  the  cases  shows  that  none  liabilities    and    obligations,    absolute 

of  them  have  any  application  to  the  and  contingent,  and  his  resources  and 

present,   where   there   is  no  evidence  means    of   meeting    and    solving    his 

to  show  a  fraudulent  purpose,  and   a  obligations,  and  showing  that  he  was 

considerable  amount  of  property,  am-  neither  insolvent  nor  contemplated  in- 

ply  sufficient   to  meet  present  debts  solvency,  and  thai  an  inability  to  meet 

and  future  liabilities  in  the  prosecu-  his  obligations   was   not   and  could   not 

tion    of   the    business    in  which    the  reasonably  be  supposed   to  have  been  in 

grantor  was  engaged,  was  retained  for  the  mind  of  the  party,  is  the  only  way 

that  purpose.     An  existing  indebted-  in  which   the   presumption   of  fraud, 

ness  alone  does  not  render  a  voluntary  arising  from  the  fact  that  the  convey- 

conveyance  absolutely  fraudulent  and  ance  is  without  a  valuable  considera- 

void  as  against  creditors,  unless  there  tion,  can  be  repelled  and  overcome  "  r 

is  an  express  intent  to  defraud:  Van  Carpenter  v.  Roe.  10  N.  Y.  227;  Sav- 

Wyck  V.  Seward,  6  Paige,  62.     This  age  v.  Murphy,  34  N.  Y.  508;  90  Am. 

is    especially    the    case   where    it    is  Dec.  73.S;  and  see  post,  %  973. 
shown  that   the  residue  of   the  prop-         '  If  the  conveyance  were  upon  a  full 

erty  was   amply  sufficient  to  pay  all  as  well  as  valuable  consideration,  no 

debts:  Jackson  v.  Post,  15  Wend.  588;  presumption  could  arise  even  though 

Phillips   V.  Wooster,    36   N.   Y.    412;  the    grantor   were   wholly   insolvent. 

Bank  of  United  States  v.  Housman,  6  since  it  would  be  merely  changing  the 

Paige,    526;   Dunlap  v.   Hawkins,    59  form  of   his  assets.      An   antenuptial 

N.  Y.  342.     In  the  case  last  cited  the  settlement  on  his  wife  by  an  insolvent 

conveyance  for  the  benefit  of  the  wife  trader,  not  unreasonable  in  amount,  is 

was   upheld,  and  Allen,  J.,  who  ,de-  valid:  Ex  parte  McBurnie,  1  De  Gex, 

livered  the  opinion  of  the  court,  says:  M.  &  G.  441;  Kevan  v.  Crawford,  L. 

*'By  proving   the  pecuniary   circum-  R.  6  Ch.  Div.  29. 


1415  CONSTRUCTIVE   FRAUD.  §  972 

show  its  existence.  Each  case  must  necessarily  depend 
upon  its  own  circumstances.*  A  voluntary  conveyance, 
gift,  or  transfer,  without  any  valuable  consideration,  creates 
a  prima  facie  presumption  of  an  intent  to  defraud  exist- 
ing creditors,  unless  statutes  have  declared  that  no  such 
presumption  ever  arises,  and  that  the  intent  is  always  a 
conclusion  of  fact.  This  presumption  may  be  overcome. 
The  mere  fact  that  a  grantor  is  indebted  at  the  time 
he  makes  a  voluntary  conveyance  does  not  necessarily 
render  such  conveyance  fraudulent  against  the  existing 
creditors.*  On  the  other  hand,  since  the  prima  facie  pre- 
sumption arises  in  such  case,  it  is  never  necessary  to 
show  by  affirmative  evidence  an  actual  express  intent  to 
defraud,  in  order  to  render  a  voluntary  conveyance  fraud- 
ulent and  void  as  against  existing  creditors.  The  intent 
will  be  inferred  when  the  grantor  was  or  is  left  insolvent, 
or  if  the  conveyance  deprives  him  of  the  means  of  pay- 
ing his  debts,  or  if  he  was  so  largely  indebted  that  it 
would  be  reasonable  to  suppose  that  he  contemplated  his 
inability  to  pay  his  debts,  or,  as  many  cases  hold,  if  he 

^  Blumer  v.  Hunter,  L.  R.  8  Eq.  46  Housman,   6   Paige,   526;   Jackson  t. 

(antenuptial  settlement  on  wife  void.  Post,  15  Wend.  588;  Phillips  v.  Woos- 

because  made  with  actual  intent  to  de-  ter.  36  N.  Y.  412;  Dunlap  v.  Hawkins, 

fraud  creditors,  the  wife  being  a  par-  59  N.  Y.  342. 

ticipant);  and  see  cases  cited  ante,  un-  The  prevailing  doctrine  in  this  coun- 

der  §  969.  try  is,  that  indebtedness,  at  the  time 

*  The  contrary  doctrine  was  laid  of  a  voluntary  conveyance,  creates  only 
down  by  Chancellor  Kent  in  the  cele-  a  prima  facit  presumption  of  fraud, 
brated  case  of  Reade  v.  Livingston,  3  and  that  each  case  must  largely  de- 
Johns.  Ch.  481;  8  Am.  Dec.  520.  The  pend  upon  its  own  circumstances,  the 
modern  English  decisions  have  shown  amount  of  the  indebtedness,  the  con- 
that  the  early  authorities  upon  which  dition  of  the  grantor's  business  affairs. 
Chancellor  Kent  relied — among  others,  etc.:  Sexton  v.  Wheaton,  8  Wheat. 
Lord  Hardwicke's  opinion  in  Lord  229,  230;  Hinde  v.  Longworth,  11 
Townshend  v.  Windham,  2  Ves.  Sr.  Wheat.  199;  Brackett  v.  Waite,  4  Vt. 
1 ;  Russell  v.  Hammond,  1  Atk.  13;  and  .S89;  Lerow  v.  Wilmarth,  9  Allen,  382, 
Walker  V.  Burrows,  1  Atk.  93  — do  3S6;83  Am.  Dec.  701  ;Thacher  v.  Phin- 
not  admit  of  the  interpretation  which  ney,  7  Allen,  146;  Beal  v.  Warren,  2 
he  put  upon  them.  The  rule  given  in  Graj'^,  447;  Norton  v.  Norton,  5  Cush. 
the  text  is  now  well  established  in  524;  Salmon  v.  Bennett,  1  Conn.  525, 
England,  and  generally  in  this  coun-  528-551;  7  Am.  Dec.  237;  Bank  of  U. 
try.  Reade  v.  Livingston  has  been  S.  v.  Housman,  6  Paige,  526;  Seward 
repeatedly  overruled:  Skarf  v.  Soulby,  v.  Jackson,  8  Cow.  406,  423,  434,  438; 
1  Macn.  &  G.  364;  Townsend  v.  Wes-  Verplankv.  Sterry,  12  Johns.  536,  559: 
tacott,  2  Beav.  340;  Kent  v.  Riley,  L,  7  Am.  Dec.  348;  Posten  v.  Posten,  4 
R.  14  Eq.  190;  Freeman  v.  Pope,  L.  Whart.  26;  Chambers  V.  Spencer,  6 
R.  5  Ch.  538;  Van  Wyck  v.  Seward,  Watts,  404. 
6  Paige,  62;  Bank  of  United  States  V. 


§973 


EQUITY    JURISPRUDENCB. 


1416 


was  so  largely  indebted  that  the  conveyance  would  ma- 
terially interfere  with  his  ability  to  meet  his  obligations.* 
§  973.  Subsequent  Creditors. — Where  a  person,  whether 
indebted  or  not,  makes  a  conveyance,  either  upon  a  valu- 
able consideration  or  voluntary,  with  the  express  and  ac- 
tual intent  of  defrauding  future  creditors,  it  is,  of  course, 
fraudulent  and  void  as  against  such  future  creditors. 
For  this  reason,  if  a  person,  in  contemplation  of  a  future 
indebtedness  which  he  expects  to  accrue,  makes  a  convey- 
ance for  the  purpose  of  placing  his  property  beyond  the 
liability  for  such  anticipated  indebtedness,  the  transfer 
is    fraudulent   as  against   the    future  creditor  when    his 

Goldsmith  v.  Russell,  5  De  Gex,  M.  & 
G.  547;  Reese  River  etc.  Co.  v.  Atwell, 
L.  R.  7  Eq.  347;  Cornish  v.  Clark,  L. 
R.  14  Eq.  184;  Freeman  v.  Pope,  L.  R. 
5  Ch.  538;  Taylor  v.  Coenen,  L.  R,  1 
Ch.  Div.  636;  Jenkyn  v.  Vaughan,  3 
Drew.  419;  Barlow  v.  Vanheythuysen, 
11  Hare,   126;  Thompson  v.  Webster, 

4  Drew.  628;  Church  v.  Chapin,  35  Vt. 
223;  Pomeroy  v.  Bailey,  43  N.  H.  118; 
Coolidge  V.  Melvin,  42  N.  H.  510,  531; 
Norton  v.  Norton,  5  Cush.  524;  Free- 
man V.  Burnham,  36  Conn.  469;  Bab- 
cock  V.  Eckler,  24  N.  Y.  623;  Van 
Wyck  V.  Seward,  6  Paige,  62;  18 
Wend.  .S75;  Loeschigk  v.  Hatfield,  5 
Robt.  (N.  Y.)  26;  Chambers  v.  Spencer, 

5  Watts,  406;  Wilson  v.  Howser,  12  Pa, 
St.  109;  Ellinger  v.  Crowl,  17  Md.  361; 
Kuhn  V.  Stansfield,  28  Md.  210;  92 
Am.  Dec.  681;  Wilson  v.  Buchanan,  7 
Gratt.  334;  Hunters  v.  Waite,  3  Gratt 
26;  Crambaugh  v.  Kugler,  3  Ohio  St. 
544;  Enders  v.  Williams,  1  Met.  (Ky.) 
.S46;  Mitchell  v.  Berry,  1  Met.  602; 
Lowry  v.  Fisher,  2  Bush,  70;  92  Am. 
Dec.  475;  Gridley  v.  Watson,  53  111. 
186;  Stewart  v.  Rogers,  25  Iowa,  .395; 
95  Am.  Dec.  794;  Filley  v.  Register,  4 
Minn.  391;  77  Am.  Dec.  522;  Doughty 
V.  King,  10  N.  J.  Eq.  396;  Emery  v. 
Vinall,  26  Me.  295;  Koster  v.  Hiller,  4 
111.  App.  21;  Lill  V.  Brant,  6  111.  App. 
366;  Fellows  v.  Smith,  40  Mich.  689; 
Crawford  v.  Kirksey,  55  Ala.  282;  28 
Am.  Rep.  704;  Lockhard  v.  Beckley, 
10  W.  Va.  87;  Rose  v.  Brown,  11  W. 
Va.  122;  Cowen  v.  Alsop,  51  Miss.  158; 
Ofifutt  V.  King,  1  MacAr.  312;  Hastoa 
V.  Castuer,  31  N.  J.  Eq.  697;  Dewey  V. 
Moyer,  72  N,  Y.  70. 


'  These  instances,  of  course,  include 
the  conditions,  spoken  of  in  some  de- 
cisions, of  the  voluntary  conveyance 
covering  all  the  debtor's  property, 
or  covering  so  large  a  part  of  it  that 
sufficient  is  not  left  to  meet  his  ex- 
isting indebtedness.  In  Smith  v. 
Cherrill,  L.  R.  4  Eq.  390,  395,  Mai- 
ins,  V.  C,  said:  "The  doctrine  of  the 
court  well  established  is  this:  if  a 
jjerson  makes  a  voluntary  settlement, 
and  is,  at  the  time,  indebted  to  the 
extent  of  insolvency,  or  if  the  effect 
of  the  settlement  is  to  deprive  him  of 
the  means  of  paying,  the  settlement  is 
void  as  against  creditors."  This  is 
clearly  correct.  In  Parkman  v.  Welch, 
19  Pick.  231,  2.35,  Dewey,  J.,  said: 
"All  that  is  necessary  to  entitle  a 
creditor  to  impeach  a  deed  as  fraudu- 
lent, when  made  without  a  valuable 
consideration,  is,  that  the  grantor  be 
deeply  indebted."  This  rule  appears  to 
be  very  simple;  the  practical  diflBculty 
in  applying  it  would  consist  in  deter- 
mining when  a  person  is  "deeply  in- 
debted." Deep  indebtedness  is  merely 
a  relative,  not  an  absolute,  term.  The 
amount  of  the  indebtedness  must  al- 
ways be  compared  with  the  debtor's 
reasonable  abiliby  to  pay,  based  upon 
the  amount  of  his  available  property. 
Here  we  are  thrown  back  upon  the  cir- 
cumstances of  each  case;  and  no  more 
definite  rule  for  inferring  the  fraiidu- 
lent  intent  in  general  can  be  given 
than  that  laid  down  above  in  the  text. 
The  following  cases  are  simply  cited  as 
illustrations  of  the  doctrine:  Spirett  v. 
W^illows,  3  De  Gex,  J.  &  S.  293;  French 
V.  French,  6   De   Gex,  M.  &  G.    95; 


1417  CONSTRUCTIVE   FRAUD.  §  973 

claim  arises.*  A  voluntary  conveyance  by  one  who  is  at 
the  time  free  from  debt  is  not  presumptively  fraudulent 
and  void  as  against  subsequent  creditors;  there  being  no 
prima  facie  presumption  against  its  validity,  the  burden 
of  proof  rests  upon  the  subsequent  creditor  who  impeaches 
it,  of  showing  either  an  actual  fraudulent  intent,  or  cir- 
cumstances from  which  such  intent  may  be  inferred.'  If 
a  person,  not  at  the  time  indebted,  being  about  to  engage 
in  a  new  and  hazardous  business,  makes  a  voluntary  set- 
tlement or  conveyance,  whereby  he  places  his  property 
or  a  considerable  portion  of  it  beyond  the  reach  of  his 
creditors,  such  settlement  or  conveyance  is  fraudulent  and 
void  as  against  the  subsequent  creditors  of  the  grantor.' 
Finally,  it  may  be  laid  down  as  a  doctrine  generally  ac- 
cepted, that  if  a  person,  being  at  the  time  indebted, 
makes  a  voluntary  conveyance  of  his  property  to  such  an 
extent  that  he  is  left  actually  insolvent,  or  wholly  un- 
able to  pay  his  existing  debts,  or  that  it  is  reasonable  to 
suppose  he  contemplated  his  consequent  inability  to  pay, 
or  even  that  it  is  reasonably  doubtful  whether  he  is  able 
to    meet   his    obligations,  then    the  conve^'ance  will   be 

■  Carpenter  ▼.  Carpenter,  25  N.  J.  though  when  the  settlement  was  made 

Eq.   194;  Mattingly  v.  Wulke,  2  III.  it  was  doubtful  whether  the  arrange- 

App.  169.  ments  under  which  the  settlor  was  to 

*  Carhart  v.  Harshaw,  45  Wis.  .S40;  engage   in   the    business   would    take 

30  Am.  Rep.  752;  Mattingly  v.  Nye,  effect.     When  a  voluntary  settlement 

8  Wall.  370;  [Smith  v.  Smith,  24  S.  C.  is  made  on  the  eve  of  the  settlor's  en- 

304.]  gaging  in  trade,  the  burden  rests  upon 

'  Mackay  v.  Douglas,  L.  R.  14  Eq.  him  of  showing  that  he  was  in  a  posi- 

106,  118-121;  Case  v.  Phelps,  39  N.  Y.  tion  to  make  it.     In  order  to  set  aside 

164;   Carr  v.    Breese,    81    N.  Y.    584,  such  a  settlement,  it  is  not  necessary 

588-591;  Mullen  v.  Wilson,  44  Pa.  St.  to  show  that  the  settlor  contemplated 

413;    84   Am.    Dec.    461;    Monroe   v.  becoming    actually    indebted;     it     is 

Smith,  79  Pa.  St.  459.     In  Mackay  v.  enough  if  he  contemplated  a  state  of 

Douglas,   supra,  Malins,  V.  C,  after  things   which    might  result  in   insol- 

a   careful   review   of   the   authorities,  vency  or  bankruptcy.     The  reason  for 

holds     that    a   voluntary  settlement,  this  particular  rule  is,  that  the  person 

whereby  the   settlor   takes   the   bulk  being  about  to  engage  in  a  hazardous 

of  his  property  out   of   the   reach   of  business  must  be  considered   as  con- 

his  creditors,  shortly  before  engaging  templating  the  probability  of  becom- 

in    trade   of    a   hazardous    character,  ing   unsuccessful   and    indebted,    and 

may  be  set  aside  in  a  suit  on  behalf  as  attempting  to  secure  his  property 

©f   creditors  who   became   such   after  against  such  possible  or  probable  loss; 

the    settlement,    though    there    were  it  is  in  fact  an  attempt  to  throw  all 

no   creditors   whose    debts   arose    be-  tbe  hazard  of   his   business  upon   hia 

fore  the  date  of  the  settlement,  and  expected  creditors. 


§973 


EQUITY   JUEISPEUDENCE. 


1418 


fraudulent  and  void  as  against  his  subsequent  as  well 
as  his  existing  creditors.  The  inference  of  a  fraudulent 
intent  must  always  depend  upon  there  being  an  amount 
of  property  remaining  after  the  voluntary  conveyance, 
reasonably  suflScient  to  defray  all  of  the  grantor's  existing 
liabilities;  and  each  case  must  therefore  stand  upon  its 
own  particular  circumstances.*  As  a  direct  result  from 
this  doctrine,  the  rule  has  been  well  established  that  a 
post-nuptial  settlement  upon  a  wife  or  children,  even 
when  the  settlor  is  entirely  free  from  debt,  must  be  rea- 
sonable in  its  amount  and  not  disproportioned  to  his 
whole  property.  If  the  settlement  is,  as  originally  it 
must  have  been,  in  the  form  of  property  conveyed  to 


»  Spirett  V.  Willows,  3  De  Gex,  J. 
&  S.  293;  Ware  v.  Gardner,  L.  R.  7 
Eq.  317;  Crossley  v.  El  worthy,  L.  R. 
12  Eq.  158;  Shand  v.  Hanley,  71  N.  Y. 
319;  Savage  v.  Murphy,  34  N.  Y.  508; 
90  Am.  Dec.  733;  Phillips  v.  Wooster, 
36  N.  Y.  412;  Dunlap  v.  Hawkins,  59 
N.  Y.  342;  Carr  v.  Breese,  81  N.  Y. 
584;  Jencks  v.  Alexander,  11  Paige, 
619,  623;  Bank  of  United  States  v. 
Housman,  6  Paige,  526;  Kirksey  v. 
Snedecor,  60  Ala.  192;  Lockhard  v. 
Beckley,  10  W.  Va.  87;  Rose  v.  Brown, 

11  W.  Va.  122;  Claflm  v.  Mess,  30 
N.  J.  Eq.  211;  Kane  v.  Roberts,  40 
Md.  590;  Monroe  v.  Smith,  79  Pa.  St. 
459:  Ammon's  Appeal,  63  Pa.  St.  284; 
Conley  v.  Bentley,  87  Pa.  St.  40; 
Nichol  V.  Nichol,  4  Baxt.  145;  Church- 
ill V.  Wells,  7  Cold.  364.  If  an  ex- 
press  actual  intent  to  hinder  or  defraud 
creditors  generally  is  shown,  subse- 
quent as  well  as  existing  creditors  are 
entitled  to  impeach  the  conveyance: 
Clark  V.  French,  23  Me.  221;  39  Am. 
Dec.  618;  Marston  v.  Marston,  54  Me. 
476;  Wyman  v.  Brown,  50  Me.  139, 
148;  Carter  V.  Grimshaw,  49  N.  H.  100; 
Coolidge  V.  Melvin,  42  N.  H.  510,  533, 
534;  Smyth  v.  Carlisle,  17  N.  H.  417; 
16  N.   H.  464;  McConihe  v.  Sawyer, 

12  N.  H.  396,  403;  McLane  v.  John- 
son, 43  Vt.  48;  Winchester  v.  Charter, 
102  Mass.  272;  97  Mass.  140;  12  Allen, 
606,  610;  Livermore  v.  Boutelle,  11 
Gray,  217;  71  Am.  Dec.  708;  Savage 
V.  Murphy,  8  Bosw.  75;  Cramer  v.  Re- 
ford,  17  N.  J.  Eq.  367;  90  Am.  Dec. 
594;  Mullen  v.  Wilson,  44  Pa.  St.  413; 


84  Am.  Dec.  461;  Moore  v.  Blondheim, 
19  Md.  172;  Lowry  v.  Fisher,  2  Bush, 
70;  92  Am.  Dec,  475;  Nicholas  v. 
Ward,  1  Head,  323;  73  Am.  Dec.  177; 
Horn  V.  Volcano  etc.  Co.,  13  Cal.  62; 
73  Am.  Dec.  569;  Dewey  v.  Moyer, 
72  N.  Y.  70,  76;  Day  v.  Cooley,  118 
Mass.  524. 

On  the  other  hand,  if  there  is  no 
actual  intent  to  defraud,  the  mere  fact 
that  a  voluntary  couvej'ance  may  be 
presumptively  fraudulent  against  ex- 
isting creditors  does  not  render  it 
fraudulent  as  against  subsequent 
creditors.  While  a  prima  facie  pre- 
sumption against  the  validity  of  the 
voluntary  deed  may  arise  in  favor  of 
the  grantor's  existing  creditors,  no 
such  presumption  exists  on  behalf  of 
his  subsequent  creditors.  These  latter 
cannot  impeach  such  a  transfer  merely 
because  the  former  can:  Howe  v. 
Ward,  4  Greenl.  195;  Kendall  v.  Fitts, 
22  N.  H.  1,  6;  Smith  v.  Smith,  11 
N.  H.  80;  Parsons  v.  McKnight,  8 
N.  H.  35,  37;  Carlisle  v.  Rich,  8  N.  H. 
44,  50;  Converse  v.  Hartley,  31  Conn. 
372,  380;  Babcock  v.  Eckler,  24  N,  Y. 
623;  Baker  v.  Gilman,  52  Barb.  26; 
Ward  v.  HoUins,  14  Md.  158;  Endera 
V.  Williams,  1  Met.  (Ky.)  346;  Todd 
V.  Hartley,  2  Met.  (Ky.)  206;  Hurdt 
V.  Courtenay,  4  Met.  (Ky.)  139;  Nich- 
olas V.  Ward,  1  Head,  323;  73  Am. 
Dec.  177;  Webb  v.  RofiF,  9  Ohio  St. 
430;  Lyman  v.  Cessford,  15  Iowa,  229; 
Fifield  V.  Gaston,  12  Iowa,  218; 
Whitescarver  v.  Bonney,  9  Iowa,  480. 


1419  CONSTRUCTIVE    FRAUD.  §  974 

trustees  for  the  wife's  separate  use,  courts  of  equity  will 
not  aid  her  in  enforcing  it  when  unreasonably  large.  If 
the  legal  title  is  conveyed  directly  to  her,  there  is  still 
danger  lest  the  husband-  should  obtain  credit  upon  his 
apparent  or  supposed  ownership.* 

§  974.  Conveyances  in  Fraud  of  Subsequent  Purchas- 
ers. —  By  the  statute  27  Eliz.,  c.  4,  made  perpetual  by  39 
Eliz.jC.  18,  sec.  31,  all  conveyances  of  hereditaments  for  the 
intent  and  purpose  to  deceive  purchasers  are  made  void 
as  against  them;  and  the  same  provisions  have  been  sub- 
stantially enacted  in  the  United  States.^  The  true  mean- 
ing and  interpretation  of  this  statute  were  for  a  consider- 
able period  of  time  unsettled  by  the  English  courts.  The 
doubt  was,  whether  it  extended  to  all  voluntary  convey- 
ances, or  whether  it  avoided  only  those  which  are  made 
with  a  fraudulent  intent,  and  therefore  furnished  pro- 
tection only  to  subsequent  bona  fide  purchasers  without 
notice.  The  rule  was  finally  settled,  and  still  prevails  in 
England,  that  the  statute  applies  to  and  avoids  all  volun- 
tary conveyances  as  against  subsequent  purchasers  for 
a  valuable  consideration,  even  though  such  conveyances 
were  made  in  good  faith  without  any  actual  fraudulent 
intent,  and  though  the  subsequent  purchasers  for  value 
had   notice  thereof.'      The    same   interpretation   of  the 

*  When  the  deed  of  gift  to  the  wife  tail,  for  life,  lives,  or  years  the  same 
is  immediately  put  on  record,  this  is,  estates,  or  to  defraud  and  deceive 
of  course,  a  fact  tending  to  show  good  such  as  have  purchased  or  shall  pur- 
faith;  failure  to  record  is  a  plain  chase  any  rent,  profit,  or  commodity 
badge  of  fraudulent  intent:  Carr  v.  out  of  the  same,  or  any  part  thereof, 
Breese,  81  N.  Y.  584,  591  (one  half  of  shall  be  deemed  (only  as  against  the 
the  husband's  property  not  unreasona-  defrauded  purchaser  having  purchased 
ble);  Babcock  v.  Ecklor,  2-4  N.  Y.  623;  for  money  or  other  good  consideration, 
(more  than  half  held  not  unreasonable);  his  heirs,  administrators,  and  assigns) 
Carpenter  v.  Roe,  10  N.  Y.  227;  to  be  utterly  void. 
Wickes  V.  Clark,  8  Paige,  161;  This  statute  only  declared  and  aided 
Mellon  V.  Mulvey,  2.3  N.  J.  Eq.  198;  a  jurisdiction  of  equity  which  existed 
Ammon's  Appeal,  63  Pa.  St.  284.  before  it,  and  which  has  not  been  dis- 

2  The  English  statute  provides  that  placed   by   it:    See   Perry  Herrick  v. 

all  fraudulent,  feigned,  and  covinous  Attwood,  2  De  Gex  &  J.  21. 
conveyances,    gifts,    grants,   charges,         *  The    English   theory   is,  that   the 

uses,  and  estates  of  lands,  tenements,  statute  conclusively  presumes  a  fraud- 

or  hereditaments,  made  for  the  purpose  ulent  intent  when  the  prior  conveyance 

to  defraud  and  deceive  such  persons  is  voluntary:  Pulvertoft  v.  Pulvertoft, 

or  bodies  as  have  purchased  or  shall  18  Ves.  84,  86;  Buckle  v.  Mitchell,  18 

afterwards  purchase,  in  fee-simple,  fee-  Ves.   100,    111;  Kelson  v.  Kelson,   10 


§  974  EQUITY  JURISPRUDENCE.  1420 

statute  and  the  same  general  doctrine  have  been  accepted 
by  a  portion  of  the  American  decisions.*  The  current  of 
American  authority,  however,  is  opposed  to  this  broad 
construction,  and  limits  the  operation  of  the  statute  to 
prior  voluntary  conveyances  made  with  a  fraudulent  in- 
tent, and  its  protection  to  subsequent  purchasers  for  a 
valuable  consideration  and  without  notice.  The  doctrine 
which  may  properly  be  called  American  is  as  follows: 
Conveyances  are  not  void  under  the  statute  merely  be- 
cause they  are  voluntary,  but  because  they  are  fraudulent, 
and  the  fraudulent  intent  may  be  inferred  in  the  same 
manner  and  under  the  same  circumstances  as  against 
subsequent  creditors.  A  voluntary  gift  of  property  is 
valid  as  against  subsequent  purchasers  and  all  other  per- 
sons, unless  it  was  fraudulent  when  executed;  and  a 
subsequent  conveyance  for  value  is  evidence  of  fraud 
committed  in  the  former  voluntary  conveyance,  but  not 
conclusive  evidence.  It  results  that  a  voluntary  gift  made 
when  the  grantor  is  not  indebted,  in  good  faith,  and 
without  intent  to  defraud  subsequent  creditors  or  pur- 
chasers, is  valid  as  against  a  subsequent  purchaser  for  a 
valuable  consideration  with  notice.^  What  constitutes 
a  purchase  for  value  without  notice,  and  what  is  a  val- 
uable consideration,  in  cases  arising  under  this  statute, 
are  determined  by  the  rules  contained  in  the  preceding 
section  upon  that  subject.  In  order  that  the  statute  may 
apply  and   uphold   a   subsequent   conveyance  for  value 

Hare,    385;    Daking   v.   Whimper,  26  v.  Jack,  5  Watts,  456;  30  Am.   Dec. 

Beav.  568;  Perry  Herrick  v.  Attwood,  335;  Lancaster  v.  Dolan,  1  Rawle,  231; 

2  De  Gex  &  J.  21;  Doe  v.  Manning,  9  18  Am.  Dec.  625;  Mayor  v.  Williams, 

East,  59;  and   see   Bayspoole  v.  Col-  6  Md.  235;  Tate  v.  Liggatt,  2  Leigh, 

lins,  L.  R.  6  Ch.  228,  232.     The  sub-  84;  Footman  v.  Pendergrass,  3  Rich, 

sequent  purchaser  must  be  one  for  a  Eq.  33;  Brown  v.  Burke,  22  Ga.  574 

real  valuable  consideration,  and  bona  Gardner  v.  Boothe,  31  Ala.  18(5;  Cor- 

fide,  although  notice  does  not  destroy  prew  v.  Arthur,  15  Ala.  525;  Coppage 

his  rights  under  the  statute.  v.    Barnett,    34  Miss.    621;   Weils  v. 

I  Starry  v.  Arden,  1  Johns.  Ch.  261,  Treadwell,  28   Miss.   717;    Enders  v. 

270;  12  Johns.  536;  Sexton  v.  Wheatou,  Williams,  1  Met.  (Ky.)  346;  Aiken  v. 

1  Am.  Lead.  Cas.  50,  51.  Bruen,  21  Ind.  137;  Chaffin  v.  Kimball, 

»  Beal  V.  Warren,  2  Gray,  447;  San-  23  III.  36;  Gardner  v.  Cole,  21  Iowa, 

ger     V.    Eastwood,     19    Wend.     514;  205;  Prestidge  v.  Cooper,  5  4Mis3.  74; 

Wickes  V.  Clarke,  8  Pai^e,  161;  Foster  Pence  v.  Croan,  51  Ind.  336;  Sexton  v. 

V.  Walton,  5  Watts.  378;  Dougherty  Wheaton,  1  Am.  Lead.  Cas.  17. 


1421  CONSTRUCTIVE   FRAUD.  §  974 

against  a  prior  voluntary  conveyance,  it  is  necessary  that 
both  the  conveyances  should  come  from  the  same  grantor. 
An  heir  or  devisee  cannot,  therefore,  by  a  conveyance  for 
value,  defeat  a  voluntary  settlement  made  by  his  ancestor 
or  testator.'  What  creditors,  purchasers,  and  their  repre- 
sentatives are  entitled  to  equitable  relief,  and  what  rem- 
edies may  be  obtained  by  them,  are  questions  which 
belong  to  subsequent  chapters  treating  of  remedies. 

*  Parker  v.  Carter,  4  Hare,  400,  409;  reason  a  bona  Jide  purchaser  for  valno 

Lewis  V.  Rees,  3  Kay  &  J.  132;  and  and  without  notice  from  the  prior  vol- 

see  Sterry  V.  Arden,  1  Johns.  Ch.  261;  untary   grantee    would   have   a  title 

Anderson  v.    Green,   7  J.   J.    Marsh,  superior  to  that  of  a  subsequent  pur- 

448;  23  Am.  Dec.  417.     For  thtt  same  chaser  from  the  original  grantor. 


PART   THIRD. 


PART  THIRD. 

THE  EQUITABLE  ESTATES,  INTERESTS,  AND 
PRIMARY  RIGHTS  RECOGNIZED  AND  PRO- 
TECTED    BY   THE    EQUITY    JURISPRUDENCE. 


PRELIMINARY  PARAGRAPH, 

§  975.  The  general  nature  of  equitable  estates  and 
interests,  as  distinguished  on  the  one  side  from  legal 
estates,  and  on  the  other  from  mere  equitable  remedial 
rights  or  "equities,"  has  been  sufficiently  described  in 
the  preceding  volume.'  In  contemplation  of  courts  of 
equity,  equitable  estates,  according  to  their  various  de- 
grees, are  as  truly  property  or  ownership  as  legal  estates 
are  property  in  contemplation  of  courts  of  law.  In  fact, 
the  entire  dealing  of  equity  with  the  subject  of  equitable 
estates,  and  the  fundamental  distinctions  between  equi- 
table and  legal  conceptions  and  modes,  are  based  upon 
the  notion  that  equitable  estates  are  in  the  truest  sense 
property,  and  not  mere  rights  of  action,  —  not  mere 
rights  to  obtain  certain  equitable  remedies.  Even  when 
the  equitable  estate  is  the  result  of  some  positive  wrong, 
doing,  when  the  legal  estate  has  been  vested  in  a  third 
person  by  fraud,  undue  influence,  breach  of  fiduciary 
duty,  and  the  like,  so  that  the  original  owner  can  only 
regain  the  title  by  means  of  a  cancellation,  he  is  never- 
theless, in  contemplation  of  equity,  the  equitable  and 
true  owner;  his  equitable  estate  in  the  subject-matter  is 
a  true  property,  capable  of  being  devised  and  otherwise 

»  See  ToL  1,  §§  146-149. 
2  Eq.  JUB.  — 90 


§975 


EQUITY   JURISPRUDENCE. 


1426 


dealt  with.'  In  short,  the  equitable  estate  is  often  re- 
garded by  a  court  of  equity  as  the  real,  beneficial,  sub- 
stantial ownership,  while  the  corresponding  legal  estate 
is  a  mere  form  and  shadow.  Many  important  incidents 
connected  with  equitable  estates  have  been  considered  in 
the  preceding  chapters,  such  as  the  relations  of  equitable 
with  legal  estates  in  the  sections  on  "  merger,"  "  prior- 
ities," "  bona  fide  purchase,"  some  of  the  modes  in  which 
equitable  estates  may  arise  in  the  sections  on  "fraud," 
"mistake,"  and  "accident,"  and  the  like.  I  purpose  now 
to  describe  more  directly  the  nature  and  characteristics 
of  equitable  estates,  interests,  and  primary  rights,  and  to 
state  the  rights  and  obligations  with  respect  to  them 
which  devolve  upon  their  owners.  The  entire  discussion 
will  comprise  the  following  subjects:  Trusts;  equitable 
interests  of  married  women;  equitable  interests  arising 
from  succession  to  a  decedent;  equitable  conversion; 
mortgage  of  real  and  personal  property;  equitable  liens; 
interests  arising  from  equitable  assignments;  and  con- 
tracts in  equity.^  To  these  will  be  added  an  account  of 
the  equitable  jurisdiction  over  persons  non  sui  juris. 


'  stump  V,  Gaby,  2  De  Gex,  M.  & 
G.  623,  630;  Gresley  v.  Mousley,  4  De 
Gex  &  J.  78,  90,  92,  93,  per  Turner, 
L.  J. ;  Uppington  v.  BuUen,  2  Uru.  & 
War.  184;  Dickinson  v.  Burrell,  L.  R. 
1  Eq.  337.  In  Stump  v.  Gaby,  A,  an 
owner  of  land,  conveyed  to  his  attor- 
ney, and  subsequently  by  will  con- 
firmed the  conveyance.  After  A's 
death,  his  heir  at  law  brought  a  suit 
to  set  aside  the  conveyance  as  void- 
able. Lord  St.  Leonards  said:  "I  will 
assume  that  the  conveyance  might 
have  been  set  aside  in  equity  for 
fraud.  What,  then,  is  the  interest 
of  a  party  in  an  estate  which  he  has 
conveyed  to  his  attorney  under  cir- 
cumstances which  would  give  a  right 
in  this  court  to  have  the  conveyance 
set  aside?  In  the  view  of  this  court 
he  remains  the  owner;  and  the  conse- 
quence is,  that  he  may  devise  the  es- 
tate, not  as  a  legal  estate,  but  as  an 
equitable   estate,  wholly   irrespective 


of  all  question  as  to  any  rights  of  en- 
try or  action,  leaving  the  conveyance 
to  have  its  full  operation  at  law,  but 
looking  at  the  equitable  right  to  have 
it  set  aside  in  this  court."  In  Gresley 
V.  Mousley,  supra,  A  conveyed  lands 
to  his  attorney  under  such  circum- 
stance that  the  deed  could  be  set  aside 
in  equity.  He  afterwards  died,  hav- 
ing devised  all  his  real  estate  to  the 
plaintiff.  Held,  that  the  equitable  es- 
tate passed  by  the  devise  to  the  plain- 
tiff, and  the  full  relief  was  granted. 

^"Trusts"  and  "mortgages"  are 
subjects  of  such  vast  extent,  embra- 
cing such  a  multitude  of  details,  and 
each  requiring  volumes  for  their  ade- 
quate treatment,  that  I  shall  endeavor 
to  present  only  their  general  and  fun- 
damental principles  and  doctrines;  the 
attempt  to  do  anything  more  within 
the  limits  of  this  treatise  would  be 
both  unnecessary  and  unavailing. 


1427  ORIGIN    OF    USES   AND   TRUSTS.  §  976 

CHAPTER   I. 

TRUSTS. 


SECTION   I. 

ORIGIN  OF  USES  AND  TRUSTS. 


S  976.  The  testament  in  the  Roman  law. 

§  977.  Fidei-commissa  in  the  Roman  law. 

§  978.  Origin  of  uses. 

§  979.  The  use  at  law. 

§  980.  The  use  in  equity. 

§  981.  Resulting  uses;  equitable  theory  of  consideration. 

§  982.  Double  nature  of  property  in  land,  the  use  and  the  seisin. 

§  983.  The  "statute  of  uses." 

§  984.  Kinds  of  uses  not  embraced  within  the  statute. 

§  985.  A  use  upon  a  use  not  executed  by  the  statute. 

§  986.  Trusta  after  the  statute;  effect  of  the  statute  in  the  American  states. 

§  976.  The  Roman  Law  Testament.  —  To  explain  the 
nature  and  extent  of  the  equitable  jurisdiction  and  juris- 
prudence with  respect  to  trusts,  some  historical  account 
of  trusts  themselves,  of  their  introduction  into  the  law  of 
England  under  the  name  of  "uses,"  and  of  the  enormous 
changes  which  they  made  in  the  primitive  conceptions 
of  property  in  land,  is  necessary.  The  elementary  notion 
of  trusts,  like  so  many  other  doctrines  of  equity,  was  bor- 
rowed from  the  Roman  law.  The  Roman  testament  was 
quite  unlike  the  last  will  of  our  own  law.  Its  essential 
feature  consisted  in  the  naming  or  appointing  some  per- 
son or  persons  as  heir,  upon  whom  the  entire  inheritance 
of  the  testator  devolved.  This  inheritance  included  not 
only  the  property  of  the  deceased,  but  also  his  liabilities. 
The  heir  thus  became  the  "universal  successor"  to  the 
testator,  acquiring  title  to  all  his  assets,  and  becoming 


§  976  EQUITY  JURISPRUDENCE.  142S 

liable  for  all  his  debts.  The  fundamental  conception  waSy 
that  the  legal  condition  of  the  deceased,  consisting  both 
of  rights  and  liabilities,  was  prolonged  and  imposed  upon 
the  heir;  that  death  made  no  real  break  in  the  continuity 
of  the  testator's  legal  personality.  Partly  from  rules  of 
the  ancient  law,  and  partly  from  prohibitory  statutes,  the 
Roman  citizen  was  much  restricted  with  respect  to  the 
persons  whom  he  might  appoint  as  liis  testamentary  heir. 
He  could  not  give  his  inheritance  to  an  alien  or  pregrinus 
(i.  e.,  one  not  strictly  a  citizen),  nor  to  a  person  pro- 
scribed, nor  to  a  posthumous  child  not  belonging  to  his 
own  family,  nor,  with  certain  exceptions,  to  a  woman.* 
To  evade  these  restrictions,  the  method  was  contrived, 
during  the  latter  period  of  the  republic,  of  appointing  a. 
qualified  person  as  heir,  upon  whom  the  inheritance  would 
devolve  according  to  legal  rules,  and  of  accompanying- 
the  appointment  by  a  direction  or  request  that  this  heir 
would,  as  soon  as  he  obtained  the  inheritance,  transfer  it 
to  another  specified  person  who  was  the  real  object  of  the 
testator's  bounty,  and  who,  although  prohibited  from 
being  made  heir,  was  not  prohibited  from  receiving  a 
transfer  of  property  from  a  living  person  by  way  of  gift. 
At  first,  the  fulfillment  of  the  testator's  direction  was  left 
wholly  to  the  heir's  sense  of  honor,  but  in  process  of  time 
the  claim  of  the  beneficiary  was  recognized  and  enforced 
by  a  magistrate.' 

*  Concernino  the  Roman  testament,  capable  of  taking  by  testament;  and 
see  Just.  Inst.,  b.  2,  tit.  10,  sees.  1-14;  Jidei-commisHa  were  so  called  because 
tit.  13,  sees.  1-7;  tit.  14,  sees.  1-6;  their  performance  could  not  be  en- 
Sandars's  Trans.,  pp.  245-280.  forced   by  law,   but   depended   solely 

*  Just.  Inst.,  b.  2,  tit.  23,  sec.  1;  upon  the  good  faith  of  the  person  to 
Sandars's  Trans.,  pp.  337,  338;  Gaius's  whom  they  were  intrusted.  After- 
Inst.,  b.  2,  sees.  246-259.  Justinian's  wards  the  Emperor  Augustus,  having 
Institutes  thus  describe  the  progress  been  frequently  moved  by  considera- 
of  the  beneficiary's  right:  "  At  first,  tion  for  certain  persons,  or  on  account 
^d«-comw).?ssawereof  little  force;  for  no  of  some  striking  instance  of  perfidy, 
one  could  be  compelled  against  his  will  commanded  the  consuls  to  interpose 
to  perform  what  he  was  only  requested  their  authority.  Their  interventioa 
to  do.  When  testators  were  desirous  being  favored  as  just  by  public  opin- 
of  giving  an  inheritance  or  legacy  to  ion,  it  gradually  assumed  the  char- 
persons  to  whom  they  could  not  di-  acter  of  a  regular  jurisdiction,  and 
rectly  give  either,  they  then  intrusted  ^^rfc^-i-omwi.fsrf  grew  into  such  favor  that 
them  to  the  good  faith  of  some  person  soon  a  special  praetor  was  appointed  to 


1429  ORIGIN    OF    USES    AND    TRUSTS.  §  977 

§977.  Pidei-commissa.  —  The  inheritance  thus  given 
to  the  appointed  heir,  in  trust  for  another  person,  was 
termed  a  fidei-commissurrif  the  heir  or  trustee  the  fiducia' 
rius,  and  the  beneficiary  the  fidei-commissarius.^  As  the 
heir  trustee,  although  he  might  surrender  the  whole  es- 
tate to  the  beneficiary,  would  still  remain  legally  liable 
for  all  the  debts  of  the  deceased,  since  a  transfer  of  the 
inheritance  inter  vivos  would  not  transfer  the  liabilities, 
he  was  accustomed  to  take  from  the  beneficiary  a  contract 
of  indemnity.  To  obviate  the  necessity  of  such  a  con- 
tract, "during  the  reign  of  Nero  (A.  D.  62)  a  statute 
known  as  the  senatus  consultum  Trebellianum  provided 
that  all  actions  which  by  law  might  be  brought  by  or 
against  the  heir  [trustee]  should  be  permitted  for  or 
against  the  beneficiary.  After  this  the  praetor  began  to 
give  equitable  actions  for  or  against  the  beneficiary  as 
if  he  were  the  heir."  ^  By  this  legislation,  the  equitable 
-estate  of  the  beneficiary  was  fully  established  and  pro- 
tected.' Although  it  is  plain  that  the  conception  of  a 
■"use"  was  borrowed  from  this  fidei-commissum  of  the 
Roman  law,  and  that  the  English  chancellor  followed  in 
the  footsteps  of  the  Roman  magistrate,  yet  beyond  this 
mere  elementary  notion  or  suggestion  there  is  little  re- 
semblance between  the  two  species  of  ownership.  Their 
essential  differences  are  as  marked  as  their  superficial 
similarity;  and  it  is  a  grave  error  to  represent  the  entire 

adjudicate  in  these  cases."     The  pro-  '  Subsequent   statutes  were   passed 

ceedings  before  this  praetor  to  enforce  limiting  the  power  of  testators,  with 

the  trust  did  not  belong  to  hia  "or-  respect   to  the   persons   to  whom   as 

dinary "   jurisdiction,    and   were    not  beneficiaries  Jidei-commissa   might    be 

conducted  by  means  of  forrnulce,  but  given,    and   providing   that   a   fourth 

fell  under  his  "  extraordinary  "  (i.  e.,  part  of  the  inheritance  might  be  re- 

€quity)  jurisdiction,  and  were  decided  tained  by  the  heir:   Just.  Inst.,  b.  2, 

by  the  magistrate  himself,  without  the  tit.    24.     The   law   also    permitted   a 

aid  of  any  judex  or  arbiter:  See  ante,  testator  to  give  any  particular  thing, 

vol.  1,  Introductory  Chapter,  §§  4,  6.  as  a  slave,   a  piece  of  land,   etc.,   as 

^  The     English     word    ^'fidticiary"  a  Jldci-commissum.     Justinian    added 

should  therefore  always  designate  the  stringent  provisions  for  enforcing  se- 

trustee;  to  apply  it  to  the  beneficiary,  cret  trusts  by  means  of  an  oath  ad- 

as  has  been  done  by  some  writers,  is  ministered  to  the  heir:  Just.  Inst.,  b. 

clearly  improper.    The  Latin ^r/e/-com-  2,   tit.   23,  sec.   12.     This,   it  will  be 

tnisifarms  cannot  be  easily  anglicized,  seen,    resembles    the    "discovery"   of 

*  Just.  Inst.,  b.  2,  tit.  23,  aec.  4.  the  English  chancery  procedure. 


§  978  EQUITY    JUKISPRUDENCB.  1430 

equity  jurisprudence  concerning  uses  and  trusts  as  de- 
rived from  the  Roman  law.* 

§  978.  Origin  of  Uses.  —  Uses,  in  the  ordinary  meaning 
of  the  term,  as  designating  those  which  are  passive,  seem 
to  have  been  invented  during  the  latter  part  of  the  reign 
of  Edward  III.^  Like  the  Roman  fidei-commissa,  they  were 
designed  to  evade  the  law;  but,  unlike  them,  they  were 
resorted  to  at  first  for  mere  purposes  of  fraud,  —  by  the 
clergy  to  defraud  the  statutes  of  mortmain,  and  by  the 
laity  to  defraud  creditors  or  feudal  superiors.  Being 
free  from  many  heavy  feudal  burdens,  uses  grew  rapidly 
into  favor,  and  it  is  said  that  during  the  reign  of  Henry  V. 
the  greater  part  of  the  land  in  England  was  held  in  this 
manner.'  At  the  very  outset  these  conveyances  to  use 
were  made  for  the  benefit  of  third  persons.  This  mode 
having  been  established,  conveyances  were  made  for  the 
benefit  of  the  original  owner,  the  feoffor.  Thus  A,  being 
seised  in  fee,  would  convey  the  land  by  a  legal  feoffment 
to  B  to  the  use  of  himself,  A.     In  this  manner  the  owner 

*  In  the  ancient  nse  and  modern  with.  Such  conveyances,  made  upon 
trust  there  are  of  necessity  two  distinct  an  active  trust,  had  probably  been 
estates,  the  legal  and  the  equitable,  known  from  a  very  early  day.  They 
vested  in  different  persons,  and  these  were  not  regarded  as  objectionable, 
must  continue  as  long  as  the  trust  they  were  not  referred  to  when  th& 
relation  exists.  In  the  Roman  law  phrase  "conveyance  to  use  "was  or- 
there  was  no  such  division  of  owner-  dinarily  employed,  and  they  were  not 
ship,  no  double  simultaneous  estates,  included  in  the  provisions  of  the 
Until  he  had  transferred  the  inheri-  statute  of  uses.  By  the  second 
tance,  the  heir  possessed  the  only  form,  a  conveyance  was  made  to  &■ 
estate,  and  the  beneficiary  had  only  a  feoffee  to  the  use  of  some  religious  cor- 
right  of  action.  After  the  inheritance  poration  or  of  some  private  person, 
was  transferred,  the  beneficiary  ob-  with  no  expectation  that  the  feoffee 
tained,  in  turn,  the  whole  and  only  es-  was  to  exercise  any  dominion  over  th& 
tate  in  the  portion  thus  transferred,  land,  but  with  the  assumption  that 
while  the  heir,  under  the  Trebillianian  the  cestui  que  use  was  to  have  and  en- 
act at  least,  was  left  without  either  joy  all  the  rights  and  privileges  of  an 
interest  or  liability.  owner,    except   that    of    holding   the 

*  1  Spence's  Eq.  Jur.  439-442.  naked  legal  title,   and  that,  to  com- 

*  1  Spence's  Eq.  Jur.  439-442,  442-  plate  this  arrangement,  the  feoffee 
444.  There  were  two  forms  of  con-  was  to  convey  the  legal  title  whenever 
veyance  to  use,  which  should  be  care-  and  to  whomsoever  the  cestui  que  nse 
fully  distinguished.  By  the  one  form  should  direct.  It  is  this  latter  form 
land  was  conveyed  upon  a  trust  that  of  passive  use  which  grew  to  be  so  im- 
the  feoffee  was  to  exercise  acts  of  do-  portant,  and  which  is  generally  re- 
minion  over  it  for  the  benefit  of  the  ferred  to  under  the  designation  of  a 
feoffor  or  of  a  third  person,  as,  for  ex-  "use"  or  "conveyance  to  use,"  and 
ample,  receiving  the  rents  and  profits  against  which  the  statute  of  uses  was 
and  paying  the  feoffor's  debts  there-  directed. 


1431  ORIGIN    OF    USES    AND    TRUSTS.  §  979 

in  fee  would  convert  his  legal  estate,  which  was  subject 
to  all  the  feudal  burdens  and  common-law  liabilities,  into 
an  equitable  estate  unknown  to  the  common  law,  which 
was  freed  from  these  burdens  and  restrictions,  which 
could  be  devised  by  will  and  aliened  without  livery  of 
seisin,  and  which,  under  the  doctrines  subsequently  es- 
tablished by  the  court  of  cliancery,  gave  him  all  the 
dominion,  possession,  rights,  and  powers  belonging  to 
the  legal  estate.' 

§  979.  The  Use  at  Law.  — For  a  while  the  cestui  que  use 
had  no  means  of  redress  in  any  court.  The  law  courts, 
as  a  necessary  consequence  of  common-law  doctrines, 
recognized  no  other  estate  than  the  legal  one  vested  in 
the  feofee.  If  the  cestui  que  use  had  any  legal  right  at  all, 
it  was  neither  a  jus  ad  rem  nor  a  jus  in  re,  and  so  there 
was  no  common-law  form  of  real  action  by  which  he 
could  recover  possession  of  or  enforce  any  claim  upon 
the  land  itself.  His  only  possible  remedy  would  be  an 
action  for  damages,  upon  contract  express  or  implied, 
against  the  feoffee  for  the  latter's  violation  of  the  trust.'' 
Even  this  action  was  not  generally  maintainable  upon 
common-law  principles,  since  there  was  no  privity  between 
the  feoffee  and  the  cestui  que  use  when  the  latter  was  a 
third  person;  whatever  promise  the  feoffee  had  made, 
whatever  legal  obligation  he  had  incurred,  was  to  the 
feoffor,  and  not  to  the  cestui  que  use.^     It  was  formally  de- 

'  1  Spence's  Eq.  Jur.  439-444,   447-  such  a  personal  action  could  only  be 

449.  niaintaiiied  by  him  under  one  special 

*  All  the  common-law  actions  for  state  of  facts. 
the  recovery  of  land,  or  for  the  main-  '  There  are  in  the  early  records  some 
tenance  of  any  interest  therein,  were  traces  of  such  actions  brought  in  the 
based  upon  tiie  assumption  that  the  common-law  courts;  but  I  presume  it 
plaintiff  either  had  some  "property  will  be  found  that  they  are  all  con- 
absolute  or  qualified  in  the  land  (jus  fined  to  cases  where  the  use  was  de- 
ad rem),  or  that  he  had  a  right  to  clared  for  the  benefit  of  the  feoffor 
some  particular  use  of  land  belonging  himself,  where  A  conveyed  to  B  to 
to  another, — an  easement  or  servitude  the  use  of  A.  In  such  a  case  alone 
{jus  in  re).  As  the  interest  of  the  wouhl  there  be  any  lefjal  liability  of 
cestui  que  tine  y/KS  neither  of  these,  .he  the  feoffee  to  the  rfsdj/i  ^we  Msc.  When- 
could  enforce  it  by  none  of  the  com-  ever  A,  upon  a  consideration  moving 
nion-law  real  actions,  and  was  there-  from  B,  promises  B  to  do  something 
fore  shut  up  to  actions  ex  contractu  for  the  benefit  of  C,  the  English 
for   damages;    but,    as   I   show,   even  courts  have  uniformly  maintained  tho 


§  980  EQUITY    JURISPRUDENCE.  1432 

cided  in  the  fourth  ^-^ear  of  Edward  IV.  that  the  common- 
law  courts  had  no  jurisdiction  over  the  use.* 

§  980.  The  Use  in  Equity.  —  There  heing  no  common- 
law  actions  to  which  resort  could  be  had,  the  rights  of 
the  cestui  que  use  were  for  a  considerable  time  purely 
moral,  and  were  protected  only  through  the  authority  of 
the  clergy,  acting  as  confessors,  upon  the  consciences  of 
those  who  held  the  legal  title  of  land  for  the  use  of  others.^ 
No  traces  of  applications  to  the  court  of  chancery  have 
been  found  in  the  early  records  prior  to  Henry  V.,  but 
during  his  reign  the  court  began  to  entertain  such  suits 
and  to  decree  relief.  In  the  reigns  of  Henry  VI.  and  of 
Edward  IV.  the  chancery  jurisdiction  was  fully  estab- 
lished, and  was  also  recognized  by  the  courts  of  law.  In 
other  words,  the  law  courts,  while  refusing  themselves  to 
protect  the  estates  of  cestui  que  usent,  admitted  the  fact 
that  such  estates  existed  and  were  protected  by  the  court 
of  chancery.*  The  passive  or  permanent  use  as  estab- 
lished in  equity  is  thus  described  by  Bacon  when  it  is 
created  in  favor  of  the  feoffor  himself,  and  the  description 
would  apply  to  the  case  where  it  is  created  for  the  benefit 
of  a  third  person  by  a  slight  change  of  language.  He 
says:  "The  use  consisted  of  three  parts:  1.  That  the 
feoffee  (trustee)  would  suffer  the  feoffor  (cestui  que  use)  to 
receive  the  profits;  2.  That  the  feoffee,  upon  request  of 
the  feoffor  (cestui  que  use),  would  execute  (i,  e.,  convey) 
the  estates  to  the  feoffor  (cestui  que  use),  or  his  heirs,  or 
to  any  other  by  his  directions;  3.  That  if  the  feoffee  were 
disseised,  and  so  the  feoffor  (cestui  que  use)  disturbed,  the 
feoffee  would  re-enter,  or  bring  an  action  to  recover  the 
possession."* 

rule  that  C  can  have  no  action  on  the  the   use  of  religious  corporations  or 

contract  against  A,  because  there  is  persons. 

no  privity  between  them.    The  modern  *  1  Spence's  Eq.  Jur.  445,  446.    For 

rule   has    been    settled   otherwise   in  an   explanation   of    the   theory   upon 

most  of  the  American  states.  which  the  early  chancellors  proceeded 

^  1  Spence's  Eq.  Jur.  445,  446.  in   awarding  relief,   see  ante,  voL   1, 

*  This  authority  would  be  especially  §§  428-431. 

exerted  where  lauds  were  conveyed  to  *  Bacon's  Reading  on  Uses,  9. 


1433  ORIGIN    OF    USES    AND    TRUSTS.  §  981 

§  981.  Resulting  Uses  —  Equitable  Theory  of  Consid- 
eration.—  In  addition  to  these  express  uses  created  by 
the  intentional  words  of  parties,  courts  of  equity  soon 
invented  another  class,  consisting  of  several  different  spe- 
cies, but  all  depending  upon  the  same  fundamental  prin- 
ciple, and  to  which  the  names  "  implied,"  "  resulting,"  and 
"  constructive"  have  been  given.  The  underlying  princi- 
ple upon  which  all  these  species  were  based  is  the  equita- 
ble doctrine  concerning  consideration.  This  theory  of 
consideration,  adopted  and  promulgated  by  the  chancellors, 
is  one  of  the  most  just,  most  productive,  and  most  benefi- 
cial conceptions  of  equity  jurisprudence.  It  accomplished 
more,  perhaps,  than  any  other  single  doctrine  in  over- 
throwing the  arbitrary  dogmas  of  the  common  law  con- 
cerning real  property,  and  in  building  up  the  distinctive 
system  of  equitable  estates  and  ownership.  It  is  certainly 
very  remarkable  that  the  early  chancellors,  in  the  very 
infancy  of  equity  jurisprudence,  should  formulate  a  prin- 
ciple so  admirably  comprehensive  and  wise,  that  it  has 
been  sufficient,  in  its  subsequent  development,  to  meet  all 
the  wants  of  an  advancing  civilization,  and  all  the  re- 
quirements of  modern  society.  The  common-law  notions 
of  title  and  ownership  rested  mainly  upon  the  observance 
of  external  forms.  Equity  first  introduced  the  principle 
that  in  all  the  transactions  of  men  concerning  land, — 
their  transfers  and  bargains, — the  consideration  is  the 
essential  fact  which  determines  the  real  beneficial  owner- 
ship, wherever  the  legal  title  may  be  vested.  The  consid- 
eration draws  to  it  the  equitable  right  of  property;  the 
person  '  from  whom  the  consideration  actually  comes^ 
under  whatever  form  or  appearance,  is  the  true  and  bene- 
ficial owner.  This  grand  principle  extends  not  only  to 
dealings  which  are  intentional  and  rightful,  but  to  those 
which  are  fraudulent,  or  in  any  manner  wrongful  or  un- 
conscientious. When  once  introduced,  it  was  easily  carried 
through  all  those  branches  of  equity  jurisprudence  which 
relate  to  property,  real  or  personal,  and  it  underlies  all 


§  981  EQUITY  JURISPRUDENCE.  1434 

the  modern  doctrines  of  resulting  and  constructive  trusts, 
and  all  the  remedies  by  which  the  beneficial  owner  is 
enabled  to  follow  his  equitable  property  in  the  hands  of 
third  persons.  In  its  origin,  the  principle  was  applied  to 
valuable  or  pecuniary  consideration,  but  it  was  soon  ex- 
tended, with  all  of  its  legitimate  results,  to  the  good  con- 
sideration of  blood  or  love  and  affection  between  near 
relatives  of  the  same  family.'  The  theory  as  to  consider- 
ation operated  in  the  development  of  uses  in  the  follow- 
ing manner:  Prior  to  the  statute  of  uses  in  the  reign  of 
Henry  VIII.,  a  gift  of  land  to  a  person  and  his  heirs  ac- 
accompanied  by  livery  of  seisin  —  that  is,  a  transfer  by 
feoffment — was  effectual  in  law  to  convey  the  entire  estate 
without  any  consideration.  The  law  did  not  require  a 
consideration,  and  moreover,  if  a  deed  or  charter  of  feoff- 
ment was  delivered,  its  seal  raised  a  conclusive  piesump- 
tion  of  a  consideration.^  Equity  broke  through  this 
doctrine  by  means  of  its  principle  concerning  considera- 
tion. It  established  the  rule  that  if  a  conveyance  of  the 
fee  was  made  without  any  use  being  declared,  and  without 
any  consideration,  although  the  legal  title  passed  to  the 
feoffee,  a  use  ipso  facto  arose  and  resulted  in  favor  of  the 
feoffor,  so  that,  having  parted  with  the  legal  estate,  he 
remained  clothed  with  all  the  equitable  interests,  rights, 
and  authority  which  the  court  of  chancery  gave  to  the 
cestui  que  use;  the  equitable  estate  in  fee  vested  in  him.* 
This  rule,  however,  did  not  apply  to  conveyances  between 
parent  and  child,  and  other  near  family  relatives,  since 
the  "good"  consideration  of  blood  or  marriage  relation- 
ship operated  between  such  persons,  in  the  same  manner 
as  valuable  consideration  between  strangers,  to  transfer 

'  It   thus  appears   that   the  special  sideration  between  strangers,  and  good 

rules  which  regulate  resulting  trusts  consideration  between  members  of  the 

from   the    payment    of   the   purchase  same  family,  as  the  sources  of   equi- 

price  between  parent  and  child,  etc.,  table  rights  of  ownership.     A  beauti- 

are  not,  as   they  have  been  regarded  ful  consistency  runs   through  all   the 

by   some   writers,    exceptions   to   the  rules   of   equity  concerning   resulting 

general  doctrine;  they  are  the  neces-  trusts. 

sary  consequences  of  the  one  universal  *  1  Spence's  Eq.  Jur.  449,  450. 

principle  which  regards  valuable  con-  •  1  Spence's  E^.  Jur.  450,  453.         j 


1435  ORIGIN    OP   USES    AND   TRUSTS.  §  981 

the  whole  estate,  legal  and  equitable,  free  from  any  result- 
ing use.*     As  a  corollary  to  the  foregoing  rule,  it  was  fur- 
ther settled  that  whenever  an  owner  conveyed  land  to  a 
feoffee  upon  some  particular  use  declared   in  favor  of  a 
third  person,  so  much  of  the  use  as  had  not  been  disposed 
of  resulted  back  to  himself.     In  other  words,  if  the  use 
declared  in  favor  of  the  third  person  did  not,  for  any  rea- 
son, equal  in  extent  and  exhaust  the  legal  estate  given  to 
or  held  by  the  feoffee,  then  a  use  for  the  residue  or  surplus 
of  such  estate  resulted  to  the  feoffor.'^     Carrying  out  the 
same    principle    of  consideration  in   cases   of  purchase, 
equity  also  established  the  doctrine,  that  where  no  decla- 
ration of  use  was  made  so  as  to  control,  a  use  arose  in 
favor  of  the  person  from  whom  the  consideration  came, 
whatever  position  he  might  occupy  with  respect  to  the 
legal  title.     In  pursuance  of  this  doctrine,  where  a  pur- 
chase was  made  by  one  person  in  the  name  of  another, 
the  party  receiving  the  legal  title  held  it  for  the  use  of 
the  one  who  advanced  or  paid  the  price.     Here,  also,  an 
apparent,  but  not  a  real,  exception  arose  from  the  fact  that 
good  consideration  of  blood  and  marriage  operated  be- 
tween near  relatives  in  the  same  manner  as  a  money  con- 
sideration between  strangers.     In  case  of  a  purchase  by  a 
parant  in  the  name  of  his  child,  no  use  was  held  to  result 
for  the  benefit  of  the  parent  paying  the  price,  but  the 
purchase  was  presumptively  regarded  as  an  advancement.' 
As  a  second  illustration  of  the  same  general  doctrine, 
whenever  an  owner  agreed  for  a  valuable   consideration 
to  sell  his  estate,  although  there  was  no  conveyance,  and 
there  were  no  words  of  inheritance  in  the  contract,  equity 
declared  that  a  use  was  created  in  favor  of  the  vendee,  by 
means  of  the  consideration,  and  that  the  vendor  held  the 
legal  title  as  his  trustee.     The  same  rule  was  extended  to 

•  1  Spence's  Eq.  Jur.  4^0.  wholly   failed,  for   any   reason,  to   be 

'  1  Spence's  Eq.  Jur.  451-453.    This  operative,  and  where  it  partially  failed 

particular  rule  applied  to  every  con-  to   exhaust   the   estate    held    by   the 

dition  of   circumstances,   both  where  feoffee. 

the  use  in  favor  of  the  third  person        *  1  Spence's  Eq.  Jur.  451-453. 


§  982  EQUITY   JURISPRUDENCE.  1436 

cases  between  near  relatives,  where  the  consideration  was 
that  of  marriage  or  blood.  If  a  person,  on  consideration 
of  marriage  or  blood,  covenanted  to  settle  an  estate  on  an 
intended  husband  or  wife,  or  on  his  children,  or  other 
nearest  blood  relatives,  equity  held  that  a  use  was  thereby 
created  in  favor  of  the  husband,  wife,  children,  or  rela- 
tives, and  treated  the  covenantor  as  a  trustee  for  their 
benefit.^  Finally,  the  principle  of  consideration  was  ex- 
tended by  analogy  to  cases  of  fraud,  actual  or  construct- 
ive, accident,  and  mistake.'  This  last  application  of  the 
doctrine  became,  in  time,  the  most  eflScient  means  in  the 
hands  of  courts  of  equity  for  working  substantial  justice 
in  disregard  of  legal  forms.  "Whenever  one  person, 
through  mistake  or  fraud,  or  in  violation  of  fiduciary  rela- 
tions, obtained  the  legal  title  and  apparent  ownership  of 
property  which  in  justice  and  good  conscience  belonged 
to  another,  such  property  was  immediately  impressed  with 
a  use  in  favor  of  the  latter  equitable  owner.* 

§  982.  Double  Nature  of  Property  in  Land  —  The  Use 
and  the  Seisin. —  From  these  doctrines  concerning  ex- 
press uses,  and  especially  concerning  those  implied  from 
the  acts  or  omissions  of  parties,  it  appears  that  equity  at 
an  early  day  introduced  the  notion  of  a  use  connected 
with  and  forming  a  part  of  every  ownership  of  land. 
The  very  conception  of  property  in  land  was  thus  changed 
from  its  primitive  unity  and  simplicity,  and  it  was  made 
to  involve,  as  an  essential  element,  the  notion  of  the  use 
in  connection  with  the  mere  legal  proprietorship  and 
seisin.  According  to  this  theory,  every  ownership  — 
property  itself — consisted  of  a  legal  title  and  of  a  use. 
These  two  might  be  combined  and  held  by  the  same  per- 
son, and  their  union  would  thus  constitute  the  highest  or 
ideal  dominion;  or  they  might  be,  and  often  were,  sepa- 
rated, and  held  by  different  persons;  but  of  the  two  the 
use  was  the  more  important,  since  it  represented  the  real, 

*  1  Spence's  Eq.  Jur.  451-453.  »  1  Spence's  Eq.  Jur.  453,  454. 

8  1  Spence's  Eq.  Jur.  453,  454. 


1437  ORIGIN    OF    USES    AND    TRUSTS,  §  983 

substantial  usufructuary  proprietorship,  while  the  other 
might  be  the  naked  legal  estate,  drawing  after  it  or  con- 
ferring no  beneficial  rights  of  enjoyment  whatsoever. 
While  the  legal  title  and  seisin  always  existed  in  some 
person,  and  remained  subject  to  the  common-law  dogmas, 
the  use,  being  a  creature  of  equity,  was  entirely  free  from 
the  feudal  burdens,  and  from  the  restrictions  growing  out 
of  the  common-law  theory  as  to  seisin.^  It  even  lacked 
some  other  common-law  incidents,  like  dower.  It  was 
descendible,  like  the  legal  estate;  but  this  was  substan- 
tially the  only  feature  of  uses  in  which  the  early  chan- 
cellors applied  the  maxim,  JEquitas  sequitur  legem.'  In 
every  other  respect  they  disregarded  the  narrow  dogmas 
of  the  common  law,  and  seemed  intent  on  building  up 
a  system  of  landed  ownership  which  should,  as  far  as 
practicable,  satisfy  the  needs  of  commerce,  and  at  the 
same  time  maintain  the  dignity  of  families  and  the 
supremacy  of  the  aristocracy.' 

§983.  The  Statute  of  Uses.  —  Several  statutes  were 
enacted,  from  time  to  time,  designed  to  prevent  some  of 
the  particular  effects  produced  by  uses,  and  especially  the 
statutes  of  mortmain  were  extended  so  as  to  prohibit  uses 
in  favor  of  ecclesiastical  corporations;  but  it  was  not  un- 
til the  reign  of  Henry  VIII.  that  any  legislative  attempt 
was  made  to  destroy  them.  That  monarch  became  ex- 
ceedingly displeased  at  his  losses  of  revenue  resulting 
from   the  practical  abrogation  of  wardships  and  other 

^  For  example,  the  use  might  be  de-  own  favor,  and  so  as  to  take  effect  in 
vised  or  aliened  without  livery  of  sei-  himself.  While  the  use  could  thus  be 
sin;  it  might  be  cut  up  into  different  created  and  conveyed  upon  future  and 
parts;  it  might  be  created  or  conveyed  contingent  limitations,  in  violation  of 
so  as  to  take  effect  upon  future  con-  the  strict  common-law  rules  respect- 
tingencies;  it  might  be  limited  in  fee  ing  the  creation  of  legal  estates  as 
after  a  prior  limitation  in  fee.  A  use  contingent  remainders,  the  legal  title 
could  be  declared  to  commence  in  and  seisin  were  conceived  of  as  always 
/uturo;  provision  could  be  made  for  vested  in  some  person,  ready  at  the 
revoking  uses  declared  in  favor  of  proper  time  to  be  united  with  the  use, 
certain  persons  or  for  certain  objects,  and  thus  to  produce  in  the  holder  of 
even  though  in  fee,  and  for  substitut-  the  two  a  perfected  and  complete  own- 
ing others  in  their  place;  a  use  could  ership. 

be  declared  by  a  husband  for  the  ben-  *  See  ante,  vol.  1,  §§  425-427. 

efit  of  and  given  to  his  wife;  and  even  •  1  Spence's  Eq.  Jur.  454-456. 
could  be  created  by  an  owner  in  hia 


§  983 


EQUITY   JURISPRUDENCE. 


1438 


feudal  incidents,  and  determined  to  cut  up  the  cause  of 
the  evil,  as  he  regarded  it,  from  the  very  roots.  In  the 
twenty-third  year  of  his  reign,  he  procured  a  bill  to  be 
introduced  into  Parliament  which  would  have  limited  the 
power  of  conveying  land  to  uses;  it  passed  the  House  of 
Lords,  but  was  rejected  by  the  Commons.*  In  the  twenty- 
seventh  year  of  his  reign  (A.  D.  1535)  he  introduced  a 
second  bill,  which  he  doubtless  supposed  would  be  effec- 
tual. It  was  drawn  up  with  great  care  by  some  of  the 
most  distinguished  lawyers  of  the  time.  The  preamble 
with  which  it  opens  describes  the  evil  nature  and  effects 
of  uses,  from  the  monarch's  point  of  view,  in  the  most 
sweeping  and  condemnatory  manner."  From  the  vigor- 
ous denunciations  of  the  preamble,  we  should  naturally 


1  1  Spence's  Eq.  Jur.  461,  462-465. 

*  The  preamble  represents  uses  as  an 
unmitigated  evil,  as  a  constant  source 
of  fraud  and  covin;  it  recites  the  ef- 
fects which  they  produce  in  abolishing 
the  feudal  incidents  of  property,  and 
stigmatizes  them  as  crying  grievances; 
it  laments  "the  trouble  and  unquiet- 
ness  and  utter  subversion  of  the  an- 
cient laws  of  the  realm"  resulting 
from  "the  imaginations  and  subtle 
inventions  and  practices  "  which  were 
known  as  uses  and  confidences. 

I  have  said,  in  the  text,  that  no  suf- 
ficient reason  for  the  halting  nature 
of  the  enacting  clause  as  compared 
with  the  fierce  assaults  of  this  pream- 
ble has  ever  been  given  by  the  text- 
writers.  It  is  certainly  impossible 
that  the  learned  lawyers  who  drew  up 
the  statute  did  not  or  could  not  fore- 
see the  construction  which  would  be 
put  upon  it  by  the  courts;  they  knew, 
of  course,  the  cases  which  were  omitted 
from  its  operation,  and  they  must  have 
anticipated  the  contrivance  by  which 
the  court  of  chancery  so  soon  evaded 
the  only  restrictive  provision  which 
they  introduced.  I  venture  to  sug- 
gest, as  a  solution  of  the  difficulty, 
and  as  an  explanation  of  the  whole 
statute,  that  while  the  preamble  ex- 
pressed the  feelings  and  wishes  of  the 
king,  the  whole  act  was  intentionally 
and  most  carefully  drawn,  so  as  to 
blind  him,  and  lead  him  to  suppose 
that  his  old  feudal  privileges  would 
be  restored,  but  at  the  same  time  to 


accomplish  no  real  change  in  a  system 
of  land  ownership  which  had  become 
firmly  established,  and  was  sustained 
by  an  overwhelming  preponderence  of 
public  opinion  throughout  the  realm. 
The  history  of  the  time  shows  that  Par- 
liament seldom,  if  ever,  dared  openly 
to  resist  and  defeat  the  clearly  ex- 
pressed will  of  Henry  VIII.  The  quib- 
ble by  which  the  court  of  chancery, 
taking  advantage  of  the  narrowness 
of  the  common-law  tribunals,  evaded 
the  intent  of  the  statute  as  expressed 
in  its  preamble,  and  restored,  or  rather 
preserved,  the  whole  system  of  equita- 
ble trust  estates,  substantially  as  they 
existed  before  the  act,  would  never 
have  been  endured  unless  the  system 
itself  had  been  fully  approved  by  the 
general  opinion  of  the  nation  and  by 
the  Parliament  itself.  This  is  evident 
from  the  fact  that  Parliament  did  not 
in  the  least  interfere  to  check  the 
legislative  work  of  chancery  by  which 
the  statute  was  virtually  avoided.  All 
these  facts  prove  most  conclusively 
that  the  clerical  chancellors  had  built 
up  an  harmonious  and  consistent  sys- 
tem of  equitable  land  ownership, 
founded  upon  general  and  just  prin- 
ciples, which  was  greatly  preferred 
by  the  nation  itself  to  the  harsh  and 
narrow  doctrines  of  the  common  law. 
The  only  important  doctrine  of  the 
common  law  which  the  chancellors 
shrank  from  attacking  was  that  con- 
cerning descent  and  inheritance. 


1439  ORIGIN    OF    USES    AND    TRUSTS.  §  983 

suppose  that  the  enacting  part  would  have  been  equally 
violent  and  sweeping;  that,  like  statutes  of  many  Amer- 
ican states,  it  would,  in  express  terms,  have  abolished  all 
uses  or  confidences,  and  have  prohibited  the  conveyance 
of  land  upon  trust  or  to  the  use  of  any  one,  or  in  any 
other  manner  than  by  the  common-law  mode  of  feoff- 
ment and  livery  of  seisin.  For  some  reason,  which  has 
never  been  explained  by  the  legal  writers,  the  statute 
attempted  no  such  thing.  It  did  not  forbid  conveyances 
to  uses,  but,  on  the  contrary,  assumed  that  they  would 
continue  as  before.  The  only  change  or  relief  which  it 
proposed  was  a  contrivance  "to  turn  the  equitable  estates 
of  the  cestuis  que  usent  into  legal  estates."  This  it  accom- 
plished by  a  provision  that  in  certain  classes  of  convey- 
ances to  use,  a  legal  estate  of  the  same  kind  and  extent 
as  the  use  should  by  virtue  of  the  statute  immediately 
pass  to  and  vest  in  the  cestui  que  use,  so  that  he  would  at 
once  acquire  the  legal  title  and  ownership  of  the  same 
degree,  in  place  of  the  mere  equitable  title  and  owner- 
ship which  he  would  formerly  have  held  under  the  name 
of  "the  use."  And,  what  is  still  more  strange,  the  opera- 
tion of  this  provision  was  confined  to  cases  where  the 
land  was  so  conveyed  or  held  that  the  feoffee  or  other 
holder  of  the  legal  estate  was  seised  of  it  to  the  use  of 
another,  —  that  is,  where  the  feoffee  or  other  holder  of 
the  legal  estate  had  the  land  in  fee,  fee-tail,  or  for  life; 
all  other  possible  cases  were  left  untouched  by  an  enact- 
ment which  promised  so  much  in  its  preamble.* 

^  The    following    is    the    operative  seisin,  estate,  and  possession   of  and 

clause,    unnecessary   repetitions   only  in   the   same    lands,    tenements,    and 

omitted:   Be  it  enacted,   "where  any  hereditaments  ....  of  and  in   such 

person   or   persons  stand  or   be  seised  like  estates,  as  they  had  or  shall  have 

....   of    any   lands,    tenements,   or  in  use,  trust,  or  confidence  of  or  in  the 

other  hereditaments,  to  the  use,  con-  same;  and  the  estate  that  was  in  such 

fidence,  or  trust  of  any  other  person  person  or  persons  that  were  or  shall 

or  persons,  by  reason  of  any  bargain,  be  seised  of  any  lands,  tenements,   or 

sale,    feoffment,    etc that  in  hereditaments  to  the  use  or  trust  of  any 

every  such  case  all  such  person  or  per-  such  person  or  persons  shall  be  from 

sons  that  have  .  .  .'  .  any  such  use,  henceforth  adjudged  to  be  in  him  or 

confidence,  or  trust  in  fee-simple,  fee-  them  that  have,  or  hereafter  shall  have, 

tail,  for  life,  or  for  years,  or  otherwise,  such  use  or  trust,  after  such  quality, 

....   shall    from    henceforth   stand  manner,  etc.,  as  they  had  before  in  or 

and  be  seised  and  adjudged  in  lawful  to  the  use  or  trust  that  was  in  them." 


§  984  EQUITY    JURISPRUDENCE.  1440 

§  984.  Uses  not  Embraced  within  the  Statute.  —  Not- 
withstanding this  statute,  the  equitable  estates  of  the 
same  nature  as  uses  continued  under  the  name  of  trusts. 
In  the  first  place,  many  species  of  existing  uses  were 
wholly  untouched  by  the  statute.  The  general  doctrine 
was  established,  that  when  any  control  or  discretion  is 
given  to  the  feoffee  or  trustee  in  the  application  of  the 
rents  and  profits,  or  where  he  is  required  to  do  any  spe- 
cific acts  in  regard  to  the  land,  and  in  all  similar  in- 
stances of  express  active  trust,  the  legal  estate  remains  in 
the  feoffee  or  trustee  to  enable  him  to  perform  the  trust 
reposed.^  All  such  cases,  though  perhaps  within  the 
letter,  were  held  not  to  be  within  the  design  and  scope  of 
the  statute.  Secondly,  where  only  a  term  of  years  is  con- 
veyed, or  assigned  to,  or  is  held  by  one  person  to  the  use 
of  another,  it  was  decided  that  the  statute  does  not  oper- 
ate, but  that  the  legal  and  equitable  estates  remain  dis- 
tinct; since  the  language  is,  *'  where  any  person  is  seised 
to  the  use  of,"  and  the  courts  gave  the  most  technical  and 
narrow  interpretation  to  the  word  "seised.'"'  Thirdly, 
the  statute  did  not  purport  to  interfere  with  uses  or 
trusts  of  things  in  action,  or  in  other  kinds  of  per- 
sonal property.'  Finally,  the  jurisdiction  of  chancery 
over  the  various  uses  which  are  created  by  implication 
or  operation  of  law  —  the  resulting  and  constructive  uses 

—  was  held  to  be  unaffected  by  the  statute.*     The  opera- 
tion of  the  statute  was  thus  confined  to  one  class  of  uses, 

—  passive  uses  in  land,  where  the  feofifee  or  holder  of  the 

^  Aa  examples,  where  the  trustee  is  *  Bacon's    Reading    on    Uses,    42; 

directed  or  empowered  to  pay  aanu-  Dyer,  369  a.     This  must  not  be  con- 

ities,  or  to  make  repairs,  or  to  main-  founded   with    the     case    where    the 

tain  the  cestui  que  use;  or  the  trust  is  holder  of  the  legal  estate  is  seised,  but 

to  reconvey  the  land  to  another,  or  to  the  use  declared  thereon  in  favor  of 

sell  it  for  the  purpose  of  raising  a  fund  some  person  is  only  for  a  term  of  years; 

to  pay  debts  or  legacies,  and  the  like:  e.  g.,  A,  being  owner  in  fee,  "bargains 

Wright  V.  Pearson,  1  Eden,  119,  125,  and  sells"  to  B,  a  term  of  years. 

per  Lord  Northington;  Nevil  v.  Saun-  '  Bacon's  Reading  on  Uses,  43. 

ders,  1  Vern.  415;  Pybus  v.  Smith,  3  *  1  Spence's  Eq.  Jur.  466,  467,  493- 

Brown  Ch.  340;  Shapland  v.  Smith,  1  512;  Sugden's  Gilbert  on  Uses,  introd., 

Brown  Ch.  75;  Harton  v.    Harton,  7  pp.    Ix.,    Ixi.,    75,    note    5;     Rigden 

Term  Rep.  652,  654;  Silvester  v.  Wil-  v.  Vallier,  2  Ves.  Sr.    252,   257,  per 

son,  2  Term  Rep.  444,  450.  Lord  Hardwicke. 


1441  ORIGIN    OF    USES    AND    TRUSTS.  §  985 

legal  title  was  seised  of  the  land  to  the  use  of  another,  — 
that  is,  held  an  estate  in  fee,  fee-tail,  or  for  life;  but  the 
use  itself  might  be  for  a  term  of  years,  or  for  any  higher 
interest. 

§  985.  A  Use  upon  a  Use  not  Executed  by  the  Statute. 
—  Even  the  operation  of  the  statute  in  this  single  class 
of  express  passive  uses  was  soon  defeated  by  the  combined 
action  of  the  law  and  equity  courts.  If  an  estate  was  given 
to  A  in  fee,  to  the  use  of  B  in  fee,  then  by  the  express  com- 
mand of  the  statute  the  legal  estate  passed  through  A  as  a 
mere  conduit,  and  became  vested  in  the  cestui  que  use,  B. 
The  statute  said  notliing,  in  terms,  of  a  conveyance  in  fee 
to  A,  to  the  use  of  B  in  fee,  to  the  use  of  or  in  trust  for  C 
in  fee.  Such  a  form  of  conveyance,  or  one  identified  with 
it  in  legal  import,  having  arisen,  the  courts  of  law,  either 
from  a  narrowness  of  construction  most  astonishing,  or, 
which  is  probably  the  true  explanation,  from  a  deliberate 
design  of  interpreting  the  statute  so  as  to  give  an  oppor- 
tunity for  its  complete  evasion,  held  that  there  could  be 
no  use  executed  upon  a  use/  but  that  when  the  legal  es- 
tate was  carried,  by  virtue  of  the  statute,  to  the  first  cestui 
que  use,  it  must  there  remain  vested  in  him.  By  virtue 
of  this  ruling,  the  legal  estate  in  the  case  supposed  passed 
through  A  and  became  vested  in  B,  while  C,  who  was  in- 
tended by  the  conveyance  to  be  the  final  and  actual  bene- 
ficiary, took  nothing.^  Here  was  an  opportunity  which 
the  court  of  chancery  could  not  overlook.  It  seized  hold 
of  the  construction  thus  given  by  the  law  courts,  and  de- 
clared that,  although  the  legal  title  was  vested  in  B  by 
virtue  of  the  statute,  he  could  not,  in  good  conscience, 
hold  it  for  his  own  benefit,  but  he  must  hold  it  for  the 

*  It  maybe  proper  to  remark  that  operation  of  the  statute.    In  this  sense 

the  word  "executed,"  in  these  old  de-  of    the  word,   the  use   is   "executed" 

cisions,  and   as   a   technical   term   in  when  the  legal  estate  is  vested  in  the 

English   conveyancing,  siinply   desig-  cestui  que  use. 

nates  the  passing  of  the  legal  estate  "  See  Tyrrel's  Case,  Dyer,   155  a;  1 

through  the  first  holder  (the  trustee).  Coke,  13(5  b,  1.37;  Hopkins  v.  Hopkins, 

and  vesting  it  in  the  person  described  1  Atk.  581,  590,   51)2,  per  Lord  Hard- 

as  the   cestui   que   use,    performed   by  wicke;  Sanders  on  Uses,  92,  93. 
2  Eq.  Jur.  —  91 


§  985 


EQUITY   JURISPRUDENCE. 


1442 


benefit  of  and  in  trust  for  C,  who  thereby  obtained  an 
equitable  estate  through  the  conveyance,  which  the  court 
of  chancery  would  maintain  and  protect/  This  doctrine 
of  chancery  was  acquiesced  in  at  once,  and  has  remained 
unquestioned  by  the  courts  to  the  present  day.  The 
practical  result  was,  that  by  making  a  slight  alteration  in 
the  formal  language  of  conveyances,  so  that  an  estate 
should  be  conveyed  to  or  held  by  one  person,  to  the  use 
of  a  second,  to  the  use  of  or  in  trust  for  a  third,  this 
third  person  would  acquire  an  equitable  estate  distinct 
from  the  legal  estate,  vested  by  operation  of  the  statute 
in  the  second  party;  and  the  whole  system  of  express  pas- 
sive uses  was  thus  restored,  or  revived  to  the  same  extent 
as  before  the  passage  of  the  act.' 


'  Hopkins  v.  Hopkins,  1  Atk.  581, 
590,  591,  per  Lord  Hardwicke;  Willet 
V.  Sandford,  1  Ves.  Sr.  186,  per  Lord 
Hardwicke. 

*  As  a  matter  of  fact,  in  creating 
theae  express  passive  uses  by  convey- 
ances inter  vivos,  the  old  form  of  feoff- 
ment to  A,  to  the  use  of  B,  to  the  use 
of  C,  was  seldom,  if  ever,  employed 
after  the  "statute  of  uses,"  since  it 
still  required  livery  of  seisin  to  be 
made  to  the  feoffee,  A.  Other  forms 
of  conveyance  became  universal,  in 
which  the  use  upon  a  use  was  created 
by  means  of  the  equitable  principle 
concerning  the  use  arising  and  follow- 
ing the  consideration.  In  family  set- 
tlements, where  the  good  consideration 
of  blood  or  affection  is  sufficient,  if 
A,  the  owner  of  land,  covenanted  to 
stand  seised  of  it  for  his  son  B,  then 
a  use  thereby  arose  in  favor  of  B,  and 
the  statue  executed  this  use  by  pass- 
ing the  legal  estate  directly  to  B,  who 
thereby  became  seised  in  law.  If, 
however,  A  wished  to  create  a  passive 
trust  for  his  son  B,  he  covenanted  to 
stand  seised  of  the  land  for  C  to  the 
use  of  or  in  trust  for  his  son  B,  and 
the  legal  estate  was  thereby  vested  by 
the  statute  in  C,  but  was  held  by  him 
simply  as  a  trustee  for  the  intended 
beneficiary,  B.  This  came  to  be  the 
universal  form  of  deed  for  the  purpose 
of  creating  passive  trusts  in  family  or 
marriage  settlements.  Wherever  the 
conveyance  was  between  strangers,  so 


that  a  pecuniary  consideration  was 
requisite,  another  form  of  deed  was 
adopted.  As  has  already  been  stated, 
the  doctrine  had  long  been  settled 
that  if  A,  the  owner  of  land,  agreed 
to  sell  it  to  B  for  a  valuable  consid- 
eration, a  use  was  raised  by  the  con- 
sideration in  B's  favor.  Carrying  out 
this  doctrine,  if  a  deed  of  convey- 
ance from  A,  the  owner,  to  B  recited 
or  admitted  that  a  consideration  bad 
been  received,  this  recital  was  re- 
garded as  evidence  of  the  fact  suffi- 
cient to  raise  a  use  in  B's  favor. 
Finally,  it  was  settled  that  if  in  a  deed 
of  conveyance  the  words  "  bargain  and 
sell "  were  employed  as  operative 
words  of  transfer,  they  conclusively 
imported  a  pecuniary  consideration, 
and  a  use  arose  therefrom  in  favor  of 
the  grantee.     A  deed,  therefore,  from 

A,  by  which  he  bargained  and  sold 
land  to  B,  created  the  use  in  B's  favor, 
which  the  statute  executed  by  trans- 
ferring the  legal  estate.  If,  however, 
A  designed  to  create  a  passive  trust 
for  B  as  the  beneficiary,  his  deed 
would  be  modified  in  form,  so  as  to  be 
a  bargain  and  sale  of  the  laud  to  C  to 
the  use  of  or  in  trust  for  B.  By  oper- 
ation of  the  statute  the  legal  estate 
would  thereby  be  vested  in  C,  but 
would  be  held  by  him  as  a  trustee  for 

B,  the  intended  beneficiary.  This  be- 
came the  common  form  of  deeds  cre- 
ating express  passive  trusts  inter  vivos, 
where  the  parties  were  not  near  fam- 


1443 


ORIGIN    OF    USES    A^:D    TRUSTS. 


§  986 


§  986.  Trusts  after  the  Statute.  —  Although  the  bene- 
ficial or  equitable  interests  which  had  existed  under  the 
denomination  of  "  uses  "  prior  to  the  statute  were  thus 
kept  in  existence,  and  continued  to  be  under  the  exclu- 
sive jurisdiction  of  chancery,  it  was  found  convenient  to 
give  them  a  new  name.  The  "  use  "  had,  by  virtue  of 
the  statute,  passed  within  the  cognizance  of  the  law 
courts,  and  thenceforth  it  played  a  most  important  part 
in  the  English  theory  and  practice  of  conveyancing;  and, 
as  such,  it  does  not  fall  within  the  scope  of  a  treatise  upon, 
■equity  jurisprudence.^     The   beneficial   interests   which 


ily  relatives.  Wherever  an  estate  was 
given  by  will,  and  the  testator  wished 
to  create  a  passive  trust  which  should 
be  valid  notwithstanding  the  statute, 
express  words  were  necessary  declar- 
ing or  creating  in  some  manner  one 
tise  upon  another. 

'  The  foregoing  account  of  the  text 
«hows  the  origin  of  trusts  as  they  ex- 
ist in  England  under  the  statute  of 
uses,  and  its  judicial  interpretation. 
The  question  then  arises,  How  far 
does  the  statute  exist  in  this  country, 
and  affect  the  creation  of  trusts  ?  Since 
the  statute  never  applied  to  personal 
property,  and  under  the  judicial  con- 
struction never  embraced  active  uses 
and  trusts,  it  follows  that  the  question 
suggested  practically  means,  how  far 
•do  express  passive  trusts  in  lands  exist 
in  the  states  of  this  country?  and  how 
far  does  their  creation  depend  upon 
the  statute  of  uses?  As  such  ex- 
press passive  trusts  are  very  rare  in- 
deed in  the  United  States,  and  are 
opposed  to  our  prevailing  notions  of 
landed  property  and  modes  of  dealing 
with  it,  this  question  is  plainly  more 
(theoretical  than  practical.  Still,  tlie 
operation  of  the  statute  has  some- 
times been  discussed  by  American 
•courts,  and  in  one  state  in  particular 
it  has  been  a  frequent  subject  for  judi- 
cial inquiry.  In  several  of  the  states, 
as  will  more  fully  appear  in  a  subse- 
quent paragraph,  all  express  passive 
trusts  in  laud,  and  all  express  active 
trusts,  with  the  exception  of  certain 
specified  species,  have  been  completely 
abrogated  and  abolished.  The  stat- 
ute of  uses  clearly  has  no  operation 
in  those  states,  since  it  has  been  super- 


seded by  more  destructive  legislation. 
In  some  of  them  certainly,  and  doubt- 
less in  all,  an  attempt  to  create  a  pas- 
sive trust —  a  conveyance  or  devise  to  A 
in  trust  for  B  —  would  vest  the  whole 
estate  directly  in  the  beneficiary,  B; 
while  an  attempt  to  create  au  active 
trust  not  authorized  by  the  statute 
would  simply  be  void,  except  so  far 
as  it  might  operate  as  a  valid  "power 
in  trust":  See  post,  §  1002.  In  most 
of  the  remaining  states,  as  Mr.  Perry 
shows  in  his  admirable  treatise,  the 
statute  of  uses  has  either  been  sub- 
stantially re-enacted,  or  adopted  and 
held  to  be  in  force  as  a  part  of  tlie 
English  legislation  regarded  as  opera- 
tive and  binding  in  this  country.  He 
gives  an  abstract  of  the  statutes  in 
various  states.  Vermont,  Ohio,  Ten- 
nessee, and  perhaps  a  few  others, 
seem  to  be  either  wholly  or  partially 
excepted  from  this  statement:  See 
Perry  on  Trusts,  sec.  299,  and  note, 
containing  abstract  of  statutes;  Gor- 
ham  V.  Daniels,  23  Vt.  600;  Helfen- 
stine  V.  Garrard,  7  Ohio,  274;  Hutch- 
ins  V.  Hey  wood,  50  N.  H.  491;  French 
V.  French,  3  N.  H.  234;  New  Parish 
V.  Odiorne,  1  N.  H.  2;<2,  2.SG;  Witham 
V.  Brooner,  63  111.  344.  In  this  class 
of  states,  theretore,  there  can  be  no 
doubt  that  a  conveyance  of  land  to 
A,  for  the  use  of  or  in  trust  for  B, 
would  operate  to  transfer  the  legal 
estate,  and  vest  it  directly  in  B.  For 
example,  it  is  held,  in  Georgia,  since 
a  statute  of  1S66  concerning  mar- 
ried women's  separate  estate,  that  a 
conveyance  to  a  trustee  for  her  in 
fee,  with  no  remainder  over,  and  no 
active  duties  prescribed  for  the  trustee 


§  986 


EQUITY    JURISPKUDENCE. 


1444 


equity  recognized  and  protected  —  both  those  kinds  which 
were  held  not  to  have  been  affected  at  all  by  the  statute, 


to  perform,  passes  the  legal  title  to 
her  immediately;  the  trust  is  thus  at 
once  executed:  Sutton  v.  Aiken,  62 
Ga.  733.  In  Alabama  it  is  held  that 
under  the  statute  of  uses  (27  Henry 
VIII. ),  which  forms  a  part  of  the 
common  law  of  the  state,  the  extent 
of  the  trustee's  legal  estate  is  to  be 
determined,  not  by  words  of  inheri- 
tance, but  by  the  whole  object  and  ex- 
tent of  the  trust  upon  which  the  land 
is  conveyed;  and  when  the  objects  of 
the  trust  are  fully  accomplished,  the 
estate  of  the  trustee  ceases,  and  the 
whole  title,  legal  and  equitable,  there- 
upon vests  by  operation  of  law  in 
the  beneficiary:  Schaffer  v.  Lavretta, 
67  Ala.  14;  Tindal  v.  Drake,  51  Ala. 
574;  see  Booker  v.  Carlile,  14  Bush, 
154.  In  states  where  the  statute  27 
Henry  VIII.  has  not  been  re-enacted, 
or  treated  as  actually  in  force,  the 
same  result  is  reached;  mere  passive 
uses  are  executed  by  virtue  of  the 
common  law  prevailing  in  those  com- 
monwealths, since  the  notion  of  the 
actual  beneficial  ownership  kept  per- 
manently separated  from  the  dry  legal 
estate  is  repugnant  to  American 
modes  of  dealing  with  real  property: 
See  Sherman  v.  Dodge,  28  Vt.  26,  31; 
Gorham  v.  Daniels,  23  Vt.  600;  Bryan 
V.  Bradley,  16  Conn.  474,  483;  McNab 
v.  Young,  81  111.  11.  14;  Guest  v.  Far- 
ley, 19  Mo.  147,  149;  Coughlin  v.  Seacjo, 
53  Ga.  250;  Adams  v.  Guerard,  29  Ga. 
651;  76  Am.  Dec.  624;  Bowman  v. 
Long,  26  Ga.  142,  147;  Booker  v.  Car- 
lile, 14  Bush,  154;  [Wooley  v.  Preston, 
82  Ky.  415.]  Can  an  express  passive 
trust  in  land  be  created  in  the  Amer- 
ican states?  In  several  of  the  states, 
as  has  already  been  shown,  it  would 
be  impossible,  being  expressly  prohib- 
ited by  statute.  In  other  states,  where 
the  statute  27  Henry  VIII.  prevails, 
would  the  interpretation  first  given  in 
Tyrrell's  Case,  that  a  use  upon  a  use  is 
not  executed,  be  followed?  By  some 
American  courts  the  rule  of  Tyrrell's 
Case  has  been  disapproved:  See 
Thatcher  v.  Omans,  3  Pick.  521,  528; 
by  other  courts  it  has  been  approved. 
It  has  been  held  that  where  land  was 
conveyed  by  a  deed  of  bargain  and 
sale  to  the  use  of  a  third  person,  the 
use  was  not  executed,  and  so  remained 


valid  as  a  trust:  See  Guest  v.  Far- 
ley, 19  Mo.  147;  Jackson  v.  Gary,  16 
Johns.  302;  Jackson  v.  Myers,  3  Johns. 
38S,  396;  3  Am.  Dec.  504;  Price  v.  Sis- 
son,  13  N.  J.  Eq.  168,  173;  Croxall  v. 
Shererd,  5  Wall.  268,  282.  I  would  re- 
mark, that  to  give  this  effect  to  deeds 
in  which  the  operative  words  are  "bar- 
gain and  sale,"  in  my  opinion,  violates 
the  theory  of  conveyancing  and  of  the 
effect  and  operation  of  deeds  as  es- 
tablished by  modern  statutes  in  a  ma- 
jority of  the  states.  By  modern  stat- 
utes, in  many  if  not  most  of  the 
states,  deeds  of  land  operate  as  grants 
to  convey  the  entire  legal  estate  and 
seisin,  by  force  of  their  words  of 
transfer,  and  sometimes  their  being 
recorded;  and  it  is  a  misapprehension, 
in  the  face  of  such  legislation,  to  re- 
gard any  deeds  in  these  states  as 
transferring  the  legal  estate  by  virtue 
of  the  statute  of  uses.  To  say,  there- 
fore, in  most  of  our  states,  that  a  deed 
of  bargain  and  sale  raises  a  iise  which 
the  statute  of  uses  executes,  and  that 
where  a  use  or  trust  is  expressly  lim- 
ited by  a  deed  of  bargain  and  sale,  it 
is  not  executed  by  the  statute,  are,  as 
it  seems  to  me,  wholly  inconsistent 
with  the  simplicity  of  the  law  as  now 
established  by  statute  throughout  the 
larger  part  of  the  United  States.  This 
view  is  not,  however,  at  all  antago- 
nistic to  the  conclusion  that  an  owner 
may,  by  deed  or  by  will,  give  land  in 
express  terms  to  A,  to  the  use  of  B, 
to  the  use  of  C,  and  that  such  a  form 
of  limitation  would  create  a  valid  pas- 
sive trust  in  C's  favor.  In  some  states, 
where  there  is  no  hostile  legislation, 
this  result  may  still  be  possible,  al- 
though the  question  is  almost  entirely 
speculative  and  theoretical. 

With  regard  to  the  cases  held  not 
to  be  within  the  force  and  operation 
of  the  statute  27  Henry  VIII.,  the 
American  law  is  generally  in  harmony 
with  that  settled  by  the  English 
courts.  Trusts  of  personal  property 
were  not  embraced  within  the  statute, 
and  such  trusts  are  generally  valid  in 
this  country,  as  in  England,  except  so 
far  as  they  have  been  regulated  or 
restricted  by  statutes  of  various  states: 
See  Perry  on  Trusts,  sec.  303;  Denton 
v.    Denton,    17    Md.    403;  [Owena    v. 


1445 


ORIGIN    OF    USES    AND    TRUSTS. 


986 


and  those  ■which  were  rescued  from  its  operation  by  the 
construction  described  in  the  last  paragraph  —  were  styled 


Crow,  62  Md.  491.]  Express  active 
trusts  ia  land  were  also  untouched  by 
the  statute,  and  they  are  generally 
valid  in  the  United  States  as  in  Eng- 
land, with  special  statutory  restric- 
tion, however,  in  several  of  the 
states:  See  Perry  on  Trusts,  sec.  306; 
Morton  v.  Barrett.  22  Me.  257,  261 ;  39 
Am.  Dec.  575;  New  Parish  v.  Odiorne, 
1  N.  H.  232;  Chapin  v.  Univ.  Soc,  8 
Gray,  580;  Stanley  v,  Colt,  5  Wall. 
119,  168. 

To  this  last  statement  concerning 
active  trusts  there  is  one  marked  ex- 
ception. A  doctrine  has  been  settled 
by  the  courts  of  Pennsylvania  very 
different  in  some  respects  from  that 
prevailing  in  other  states  and  in  Eng- 
land, and  unless  this  fact  is  carefully 
observed,  the  Pennsylvania  decisions 
would  be  quite  misleading  as  general 
authorities.  Without  entering  into 
any  examination  of  them,  I  shall 
merely  state  these  important  points  of 
difference,  and  cite  some  of  the  decis- 
ions by  which  they  are  illustrated. 

One  special  rule  established  in  Penn- 
sylvania is,  that  an  express  trust  for 
the  separate  use  of  a  woman,  even 
where  active  duties  are  given  to  the 
trustee,  so  that  the  trust  is  really 
active,  cannot  be  created,  unless  she 
is  already  married,  or  unless  it  is  made 
in  contemplation  of  her  marriage:  See 
Pickering  v.  Coates,  10  Phila.  65;  Ash 
V.  Bowen,  10  Phila.  96;  Ogden's  Ap- 
peal, 70  Pa.  St.  501;  and  cases  cited 
below.  This  particular  rule  often 
operates  in  connection  with  others 
which  are  to  be  mentioned.  The  two 
main  points  of  peculiarity  in  the  law 
as  settled  in  Pennsylvania  are  the  fol- 
lowing: 1.  Some  species  of  trusts  are 
treated  as  executed  by  the  statute  as 
though  they  were  wholly  passive,  so 
that  the  entire  estate,  legal  and  equi- 
table, vests  at  once  in  the  beneficiary, 
which  by  the  general  law  of  England 
and  of  this  country  are  not  thus  exe- 
cuted, on  the  ground  that  they  are  in 
reality  active  trusts;  as,  for  example, 
where  land  is  given  upon  trust  to  con- 
vey it  to  the  cestui  que  trust:  See  Ba- 
con's Appeal,  57  Pa.  St.  504;  Rife  v. 
Geyer,  59  Pa.  St.  393;  98  Am.  Dec. 
351;  Yarnall's  Appeal,  70  Pa.  St.  335; 
Nice's   Appeal,  50   Pa.  St.  143;  Bar- 


nett's  Appeal,  46  Pa.  St.  392;  86  Am. 
Dec.  50'J.  2.  Several  species  of  trusts 
are  treated  as  passive,  which  by  the 
general  doctrine  are  undoubtedly  ac- 
tive. Certain  trusts  which  require 
active  duties  by  the  trustees  are  held 
to  be  passive,  and  the  whole  estate  to 
vest  in  the  beneficiary.  For  example, 
a  trust  to  receive  rents  and  profits 
and  pay  them  over  is  clearly  active, 
while  a  trust  to  "permit  and  suffer" 
the  beneficiary  to  receive  is  passive  by 
the  English  law:  Wagstaff  v.  Smith,  9 
Ves.  520;  but  this  distinction  seems  to 
be  denied  in  Pennsylvania,  and  both 
are  held  to  be  passive:  See  Rife  v. 
Geyer,  59  Pa.  St.  393;  98  Am.  Dec. 
351,  and  cases  cited  below.  From  the 
combination  of  these  rules,  it  follows 
that  there  may  be  trusts  strictly  ac- 
tive which  are  not  affected  by  the 
statute,  and  in  which  the  legal  and 
equitable  estates  are  kept  separate. 
But  the  leaning  is  strongly  to  regard 
trusts  as  passive.  Many  instances  are 
treated  as  passive  which  by  the  gen- 
erally received  law  are  active;  and 
especially  where  an  active  trust  for 
any  reason  fails  of  its  purpose,  or  its 
purpose  is  accomplished,  the  tendency 
is  strongly  in  favor  of  holding  it  exe- 
cuted, and  the  estate  as  vestetl  in  the 
beneficiary.  The  following  cases  illus- 
trate tliese  tendencies:  Keene's  Estate, 
81  Pa.  St.  1.33;  Pickering  v.  Coates,  10 
Phila.  65;  Ash  v.  Bowen,  10  Phila.  96; 
Williams's  Appeals,  83  Pa.  St.  377; 
Ruber's  Appeal,  80  Pa.  St.  348;  Phil- 
lips's Appeal,  SO  Pa.  St.  472;  Ash's 
Appeal,  SO  Pa.  St.  497;  Deibert's  Ap- 
peal, 78  Pa.  St.  296;  Deibert's  Appeal, 
83  Pa.  St.  462;  Ashurst's  Appeal,  77 
Pa.  St.  464;  Earp's  Appeal,  75  Pa.  St. 
119;  Tucker's  Appeal,  75  Pa.  St.  354; 
Yarnall's  Appeal,  70  Pa,  St.  335;  Og- 
den's Appeal,  70  Pa.  St.  501;  West- 
cott  V.  Edmunds,  68  Pa.  St.  34;  Me- 
gargee  v.  Naglee,  64  Pa.  St.  216; 
Parker's  Appeal,  61  Pa.  St.  478;  Dod- 
son  V.  Ball,  60  Pa.  St.  492;  100  Am. 
Dec.  586;  Bacon's  Appeal,  57  Pa.  St. 
504;  Koenig's  Appeal,  57  Pa.  St.  352; 
Freyvogle  v.  Hughes,  56  Pa.  St.  228; 
Wickham  v.  Berry,  55  Pa.  St.  70; 
Shankland's  Appeal,  47  Pa.  St.  113; 
Barnett's  Appeal,  46  Pa.  St.  392; 
86  Am.  Dec.  502;  [Philadelphia  Trust 


§  987  EQUITY    JURISPRUDENCE.  1446 

trusts;  tlie  person  holding  the  legal  title  was  termed  the 
trustee;  while  the  holder  of  the  beneficial  or  equitable 
estate  was  ordinarily  known  as  the  cestui  que  trust,  or,  in 
more  modern  nomenclature,  as  the  beneficiary. 


SECTION   II. 

EXPRESS  PRIVATE  TRUSTS. 

ANALYSIS. 

§  987.  Classes  of  trusta. 

§§  988-990.  Express  passive  trusts. 

§  989.  Estates  of  the  two  parties;  liability  for  beneficiary's  debts,. 

etc. 

§  990.  Rules  of  descent,  succession,  and  alienation. 

§§  991-995.  Express  active  trusts. 

§  992.  Classes  of  active  trusts. 

§  993.  Voluntary  assignments  for  the  benefit  of  creditors;   Englisb 

doctrine. 

§  994.  The  same;  American  doctrine. 

§  995.  Deeds  of  trust  to  secure  debts. 

§§  996-999.  Voluntary  trusts. 

§  997.  The  general   doctrine;    incomplete  voluntary   trusts  not  en- 
forced. 

§  998.  When  the  donor  is  the  legal  owner. 

§  999.  When  the  donor  is  the  equitable  owner. 

§§  1000,  1001.  Executed  and  executory  trusts. 

§  1001.  Definition  and  description. 

§  1002.  Powers  in  trust. 

§§  1003-1005.  Legislation  of  various  states. 

§  1004.  Judicial  interpretation;  validity  of  trusts. 

§  1005.  Interest,  rights,  and  liabilities  of  the  beneficiary. 

§  987.  Classes  of  Trusts.  —  Having  thus  explained  the 
origin  of  trusts  and  their  historical  development  until 
the  jurisdiction  substantially  as  it  now  exists  had  become 

Co.'s  Appeal,  93  Pa.  St.  209;  Bristor  70  Am.  Dec.  105;  Bush's  Appeal,  33  Pa. 

V.   Tasker,   135  Pa.   St.   110;   20  Am.  St.  85;  Naglee's  Appeal,  33  Pa.  St.  89; 

St.  Rep.  853.     For  examples  of  trusts  McKee  v.   McKinley,  33  Pa.   St.   92; 

held  active,  see  Stanbaugh's  Estate,  135  Kay  v.  Scates,  37  Pa.  St.  31;  78  Am. 

Pa.  St.  585;  Livezey's  Appeal,  106  Pa.  Dec.  399;  Rush  v.  Lewis,  21  Pa.  St.  72. 

St.   201.]     In   earlier   decisions   these  The  foregoing  resumi  shows  that  the 

view  were   carried   to  a  still  greater  Pennsylvania  cases  cannot  always  be 

length:  See  Kuhn  v.  Newman.  26  Pa.  taken  as  safe  authority  in  other  states 

St.  227;  Whichcote  v.  Lyle's  ExV,  28  upon  the  subject  of  active  and  passive 

Pa.  St.  73;  Williams  v.  Leech,  28  Pa.  trusts,  and  the  extent  to  which  they 

St.  89;  Price  v.  Taylor,  28  Pa.  St.  95;  are  executed  by  the  "statute  of  uses." 


1447  EXPRESS    PRIVATE    TRUSTS.  §  987 

firmly  established,  I  shall  now  proceed  to  consider  the 
various  kinds  and  classes  which  are  recognized  by  equity 
and  form  a  part  of  its  jurisprudence.  All  possible  trusts, 
whether  of  real  or  of  personal  property,  are  separated  by 
a  principal  line  of  division  into  two  great  classes:  Those 
created  by  the  intentional  act  of  some  party  having  do- 
minion over  the  property,  done  with  a  view  to  the  crea- 
tion of  a  trust,  which  are  express  trusts;  those  created  by 
operation  of  law,  where  the  acts  of  the  parties  may  have 
had  no  intentional  reference  to  the  existence  of  any  trust, 
—  implied,  or  resulting,  and  constructive  trusts.  Express 
trusts  are  again  separated  into  two  general  classes,  —  pri- 
vate and  public.  Private  trusts  are  those  created  by  some 
written  instrument,  or  in  some  trusts  of  personal  prop- 
erty by  a  mere  verbal  declaration,  for  the  benefit  of  cer- 
tain and  designated  individuals,  in  which  the  cestui  que 
trust  is  a  known  person  or  class  of  persons.  Public,  or, 
as  they  are  frequently  termed,  charitable,  trusts  are  those 
created  for  the  benefit  of  an  unascertained,  uncertain, 
and  sometimes  fluctuating,  body  of  individuals,  in  which 
the  cestuis  que  trustent  may  be  a  portion  or  class  of  a  pub- 
lic community, —  as,  for  example,  the  poor  or  the  children 
of  a  particular  town  or  parish.  As  a  general  rule,  prop- 
erty of  every  kind  and  form,  real  and  personal,  may  be 
made  the  subject  of  an  express  trust  or  of  one  arising  by 
operation  of  law.  All  persons  who  have  the  capacity  to 
hold  and  dispose  of  property  can  impress  a  trust  upon  it; 
and,  generally,  all  persons  capable  of  holding  property 
may  be  made  trustees.^  All  persons  capable  of  holding 
property,  even  those  non  sui  juris,  and  such  persons  only, 

*  It  might  not   be  expedient  to  ap-  equity  would  have  compelled  him   to 

point  married  women  or  infanta  trus-  perform);  Elliott  v.  Horn,  10  Ala.  348; 

tees;  but  they  may  discharge  the  du-  44  Am.  Dec.  488;  Starr  v.  Wright,  20' 

ties  of  the  office:  Lake  v.  De  Lambert,  Ohio  St.  97;  Prouty  v.  Edgar,  G  Iowa, 

4  Ves.    593,   595;  Smith  v.  Smith,  21  353.]     Property  subject  to  an  express 

Beav.  385;  In  re   Kaye,  L.  R.   I    Ch.  or  implied  trust  might  devolve  upon  a 

387.     [See  also  Nordholt  v.  Nordholt,  person  wholly  non  «(// y/fn.y,  as  an  idiot; 

87  Cal.  552;  22  Am.  St.  Rep.  268  (an  equity  would  either  enforce  the  trust 

infant  cannot  disaffirm,  on  the  ground  against   the  property,  or  appoint  an- 

of  his  minority,  his  deed  made  in  ex-  other  trustee, 
ecution  of  a  trust,  which  a  court  of 


§  988  EQUITY    JURISPRUDENCE.  1448 

may  be  beneficiaries.'  Equity  will  enforce  all  lawful 
trusts.  If  a  trust  should  be  created  for  an  illegal  or 
fraudulent  purpose,  equity  will  not  enforce  it,  nor,  it 
seems,  relieve  the  person  creating  it  by  setting  aside  the 
conveyance.''  When,  however,  a  trust  is  unlawful  because 
it  is  one  which  the  statute  forbids,  or  which  conflicts  with 
the  statute  concerning  perpetuities,  and  the  like,  tho 
whole  disposition  is  void.' 

§  988.  Express  Passive  Trusts.  —  Express  private  trusts 
are  of  two  kinds,  —  passive  or  simple,  and  active  or  special. 
An  express  passive  or  simple,  or,  as  it  is  sometimes  called, 
pure,  trust  exists  when  land  is  conveyed  to  or  held  by  A 
in  trust  for  B,  without  any  power  expressly  or  impliedly 
given  to  A  to  take  the  actual  possession  and  management 
of  the  land,  or  to  exercise  acts  of  government  over  it  ex- 
cept by  the  direction  of  B.*  In  such  a  case  the  naked 
legal  title  alone  is  vested  in  the  trustee,  while  the  equi- 
table estate  of  the  cestui  que  trust  is  to  all  intents  the 
beneficial  ownership,  entitling  him  to  the  possession,  the 
rents  and  profits,  and  the  management  and  control,  ac- 
cording to  the  extent  of  his  estate.  These  passive  trusts 
are  considered  in  equity  as  virtually  equivalent  to  the 
corresponding  legal  ownerships;  the  trust  is  regarded 
rather  as  fastened  upon  the  estate  than  upon  the  person 
of  the  trustee;*  it  is  never  suff'ered  to  fail  for  want  of  a 

1  Wherever    the    common-law   rule  391;   Childers  v.  Childers,   1  De  Gex 

prevails    forbidding    aliens    from   ac-  &  J.  482. 

quiring  or   holding   real  estate  by  an  '  See  post,  §§  1003-1005,  concerning 

absolute  right,  they  cannot   be  made  the  legislative  system  in  many  of  the 

beneficiaries,  and   hold   the  equitable  states. 

interest  under  a  trust  in  their  favor;  *  1  Spence's  Eq.  Jur.  495-497;  Cook 

but  this  rule  does  not  prohibit  trusts  v.  Fountain,  3  Swanst.  585,  591,  592, 

of    personal    property    on    behalf    of  per  Lord  Nottingham;  Lloyd  v.  Spil» 

aliens:  Du    Hourmelin  v.  Sheldon,    4  let,  2  Atk.   148.     A   trust   merely  to 

Mylne  &  C.  525;  1  Beav.  79;  Sharp  v.  "permit  and  saSer"  the  cestui  que  trust 

St.  Sauveur,    L.  R.    7    Ch.   343,   352;  to  receive  the  rents  and  profits  is  not 

Leggett  V.    Dubois,  5    Paige,    1 14;  28  an  active  trust:  Wagstaff  v.  Smith,  9 

Am.  Dec.  413;  Hubbard  v.  Goodwin,  3  Ves.  520.    [See  also  Farmers'  National 

Leigh,  492;  Atkins  V.  Kron,  5  Ired.  Eq.  Bank  v.  Moran,  30  Minn.   165.]     For 

207;  Taylor  v.  Benham,  5  How.  233.  peculiar  doctrine  in  Pennsylvania  con- 

^  Unless,  perhaps,  the  illegal  purpose  cerning  passive  trusts,  see  ante,  note 

wholly  fails  to  take  effect:  See  Symes  under  §  986,  and  cases  cited. 

V.  Hughes,  L.  R.  9  Eq.  475;  Bracken-  *  Adair  v.  Shaw,   1    Schoales   &  L. 

bury  V.  Brackenbury,  2  Jacob  &  W.  262,  per  Lord  Redesdale, 


1449  EXPRESS    PRIVATE    TRUSTS.  §  989 

trustee,  either  when  the  designated  trustee  dies,  or  re- 
fuses to  act,  or  is  an  improper  person.*  As  a  general 
principle,  the  rules  of  law,  excepting  those  growing  out  of 
the  doctrine  of  tenure,  have  been  applied  by  analogy  as 
far  as  practicable  to  these  corresponding  passive  trust  es- 
tates.'^ A  person  cannot  hold  property  under  a  passive 
trust  for  himself,  for  generally,  when  the  legal  estate  and 
an  equal  or  less  equitable  estate  unite  in  the  same  owner, 
a  merger  takes  place;  but  this  rule  is  not  universal,  since 
the  two  estates  may  be  kept  separate  and  subsisting,  in 
order  to  protect  the  equitable  interests  of  the  owner.' 
Such  express  passive  trusts  in  land  are  certainly  very  in- 
frequent in  this  country,  although  they  may  occasionally 
exist,  where  not  prohibited  by  statute.*  Trusts  in  per- 
sonal  property,  however,  which  are  essentially  passive, 
are  not  at  all  uncommon.^ 

§  989.  Estates  of  the  Two  Parties.  — The  estate  of  the 
naked  trustee  in  a  passive  trust,  and  a  fortiori  of  the  trus- 
tee in  an  active  trust,  is  the  only  legal  ownership,  although 

1  Gravenor   v.    Hallam,    Amb.  643;  v.  State  Trust  Co.,  27  N.  J.  Eq.  .308; 

Pitt    V.     Pelham,    1    Cas.    Ch.     176;  and  see  an<e,  section  on  merger,  §^  787, 

Brown  v.  Higgs,  8  Ves.  561,  569;  New-  788.     A  trust  is  not  rendered  void  by 

lands  V.  Paynter,  4  Mylne  &  C.  408;  the  conrt  a.]^pomting  the  cesijii que  (rusi 

Attorney-General     v.      Stephens,      3  the  trustee:  Rogera  v.  Rogers,  18  Hun, 

Mylne  &  K.  347;   Lewis  v.  Lewis,   1  409. 

Cox,  102;  and  although  no  trustee  was         *  They  would   probably  most  often 

ever  expressly  appointed,  or  from  any  appear  in  connection  with  the  separate 

cause  there  may  be  no  acting  trustee,  estates  of  married  women:  See  Boyd 

the  person  acquiring  the  legal  interest  v.  England,  56  Ga.  598;  Sutton  v.  Aiken, 

in  the  property  will  be  bound  by  the  62  Ga.  733;  [Dean  v.  Long,  122111.447.] 
trust  to  which  it  is  subject:  Id.     It         ^  For  example,  A  may  deposit  money 

is  a  fundamental  principle  of   equity  in  a  bank,  in  "trust  for  B,"   or  may 

that  "the  trust  follows  the  legal  es-  deposit  in  the  name  of  B,  "in  trust  for 

tate  wherever  it  goes,  except  it  comes  C,"   and   thus   create    a    valid    trust 

into  the  hands  of  a  6o?ta^cZe  purchaser  which    is    really    passive,    since    the 

for   a  valuable  consideration  without  trustee  is  not  cliarged  with  any  duties 

notice  ":   Attorney-General    v.    Lady  of  management,  such  as  receiving  the 

Downing,  Wilm.   1,  21,  per   Wilmot,  interest  and  paying  it  over;  in  fact, 

C.  J.  he  holds  the  corpus  of  the  property  in 

'  Watts   V.    Ball,   1    P.    Wms.    108;  trust  for  the  beneficiary.     As  illustra- 

Burgess  v.  Wheate,  1  Eden,  177,  184,  tions,  see  Martin  v.   Funk,  75  N.  Y. 

195,  per  Sir  T.  Clarke;  p.  223,  per  Lord  134;  31   Am.  Rep.  446;  Boone  v.  Citi- 

Manstield;  p.  250,  per  Lord  Northing-  zens'  Sav.  Bank,  84  N.  Y.  83;  38  Am. 

ton;  Cholmondeleyv.  Clinton,  4  Bligh,  Dec.  498;  Weber  v.  Weber,  58  How. 

1,  115,  per  Lord  Redesdale.  Pr.  225;  Stone  v.  Bishop,  4  CliflF.  593; 

'  Brydges  v.  Brydges,   3   Ves.    120,  Rogers  Locomotive  Works  v.  Kelly,  19 

126;  Wa.ie  v.  Paget,  1  Brown  Ch.  363;  Hun,  399;  [Leighton  v.  Bowen,  75  Me, 

Badgett  v.  Keating,  31  Ark.  400;  Bolles  504.] 


§  989  EQUITY   JURISPRUDENCE.  1450 

it  must  be  used,  in  equity,  only  for  the  purposes  of  carry- 
ing out  the  trust  and  protecting  the  rights  of  the  benefi- 
ciary. The  trustee,  having  the  legal  interest,  is  the  proper 
person  to  bring  actions  at  law,  and  to  do  other  things 
which  can  be  done  only  by  one  having  the  legal  estate.* 
The  estate  of  the  cestui  que  trust,  while  regarded  in  equity 
as  the  real  ownership,  is  governed,  so  far  as  practicable, 
by  the  legal  rules  applicable  to  similar  estates  at  law. 
The  language  of  the  instrument  creating  or  declaring  the 
trust  is  interpreted  by  courts  of  equity  in  accordance  with 
the  rules  followed  by  courts  of  law.  The  interest  of  the 
cestui  que  trust  is  alienable;  if  real  estate,  it  may  be  con- 
veyed by  ordinary  deed;  if  personal,  it  may  be  assigned; 
but  the  rule  is  established  in  England  that  notice  must 
be  given  to  the  trustee,  in  order  to  perfect  an  assignment 
by  a  cestui  que  trust  of  personalty,  and  to  protect  the  as- 
signee.' The  estate  cannot,  by  any  restrictions  annexed 
to  the  trust,  be  rendered  inalienable,  nor  can  it  be  stripped 
of  other  incidental  rights  of  ownership.'  It  is  also  liable 
for  the  debts  of  the  beneficiary.*  It  cannot  be  so  created 
that,  while  it  is  subsisting  and  enjoyed  by  the  beneficiary, 
it  shall  be  absolutely  free  from  such  liability.  The  trust 
may  be  so  limited  that  it  shall  not  take  efi*ect  unless  the 
beneficiary  is  free  from  debt,  or  that  his  estate  shall  cease 
upon  his  becoming  insolvent,  or  upon  a  judgment  being 
recovered  against  him,  and  shall  thereupon  vest  in  an- 
other person;  but  the  cestui  que  trust  cannot  hold  and  enjoy 
his  interest  entirely  free  from  the  claims  of  creditors.* 

'  May  V.  Taylor,  6  Man.  &  G.  261.  »  Brandoa  v.  Robinson,  18  Ves.  429; 

When  money  is  deposited  in  a  bank  to  Rochford  v.  Hackman,  9  Hare,  475. 

the  credit  of  A,  in  trust  for  B,  A,  or  *  Pratt  v.  Colt,  2  Freem.  Ch.   139; 

upon  his  death    his  administrator,  is  Forth  v.   Duke  of  Norfolk,   4   Madd. 

prima  facie  the  proper  person  to  de-  503;  Hutchins  v.  Heywood,  50  N.  H. 

mand  and  receive  payment  from  the  491;    Kennedy    y,    Nunan,    52     Cal. 

bank:  Boone  v.   Citizens'  Sav.  Bank,  326. 

84  N.  Y.  83;  38  Am.  Dec.  498;  Stone  *  Nichola  v.  Levy,  5  Wall.  433,  441; 

V.  Bishop,  4  Cliff.  593.  Hallett   v.  Thompson,  5   Paige,    583; 

*  This  rule  is  adopted  in  only  a  por-  Bramhall  v.  Ferris,   14  N.  Y.  41;  67 

tion  of  the  American  states:  See  ante.  Am.  Dec.  113;  Easterly  v.  Keney,  36 

§§   695-687,    where   the   English  and  Conn.    18,    22;   Dick   v.  Pitchford,   1 

American  casea  are  cited.  Dev.  &  B.   Eq.   480.     In  Nichola  r. 


1451 


EXPRESS   PRIVATE   TRUSTS. 


§  989 


These  rules  are  subject  to  a  most  important  exception  in 
the  case  of -the  married  woman's  separate  estate,  —  prop- 
erty held  upon  trust  for  her  separate  use.  It  is  the  fa- 
miliar doctrine  with  reference  to  such  separate  estate,  — 
the  very  essential  element  that  it  may  be  settled  to  her 
own  separate  use  so  as  to  be  held  by  her  entirely  free  from 
her  husband's  control  and  from  the  claims  of  his  credi- 
tors.    It   is  also  the   established   doctrine,   designed   to 


Levy,  supra,  Swayne,  J.,  said:  "It  is 
a  settled  rule  of  law  that  the  bene- 
ficial interest  of  the  cestui  que  trust, 
whatever  it  may  be,  is  liable  for  the 
payment  of  his  debts.  It  cannot  be 
so  fenced  about  by  inhibitions  and 
restrictions  as  to  secure  to  it  the  in- 
consistent characteristics  of  right  and 
enjoyment  to  the  beneficiary  and  im- 
munity from  his  creditors.  A  condi- 
tion precedent  that  the  provision  shall 
not  vest  until  his  debts  are  paid,  and 
a  condition  subsequent  that  it  shall  be 
divested  and  forfeited  by  his  insol- 
vency with  a  limitation  over  to  a  third 
person,  are  valid,  and  the  law  will 
give  tliem  full  effect.  Beyond  this, 
protection  from  the  claims  of  creditors 
is  not  allowed  to  go.  In  the  more  re- 
cent case  of  Nichols  v,  Eaton,  91  U.  S. 
716,  the  court  went  somewhat  further. 
A  trust  was  created  to  pay  income  to 
A  during  her  life;  if  he  became  insol- 
vent, his  interest  was  instantly  to  cease, 
and  was  to  pass  to  and  vest  in  an- 
other person;  but  in  that  case  the 
trustees  were  authorized,  in  their  dis- 
cretion, but  without  it  being  obliga- 
tory upon  them,  to  apply  a  portion  of 
the  income  to  A's  use.  The  court  held 
that  the  discretion  and  authority  thus 
given  to  the  trustees  did  not  render 
the  disposition  and  limitation  over 
void,  nor  the  income  liable  to  the 
claims  of  A'a  creditors  after  his  in- 
solvency. While  the  rule  stated  in 
the  text  is  general,  it  has  been  adopted 
by  some  courts  onlj-  in  a  modified  form. 
In  Pennsylvania,  property  may  be 
given  by  a  third  person  to  A  upon 
such  a  trust  for  his  life  that  he  has  no 
control  whatever  over  the  property, 
and  a  proviso  attached  tliat  his  inter- 
est is  to  be  free  from  all  liability  to 
his  creditors  is  held  to  be  valid  and 
operative.  The  same  result  may  be 
accomplished  iu  the   creation  of   the 


trust,  by  clothing  the  trustees  with  a 
discretion  as  to  the  amount  of  income 
which  they  shall  apply  to  the  use  of 
the  beneficiary.  A:  Keyserv.  Mitchell, 
67  Pa.  St.  473;  Rife  v.  Geyer,  59  Pa. 
St.  :i93,  396;  98  Am.  Dec.  35;  Shryock 
V.  Waggoner,  28  Pa.  St.  430;  Brown 
v,  Williamson's  Ex'rs,  36  Pa.  St.  338; 
Eyrick  v.  Hetrick,  13  Pa.  St.  438; 
Shankland's  Appeal,  47  Pa.  St.  113; 
Girard  L.  Ins.  Co.  v.  Chambers,  46 
Pa.  St.  485;  86  Am.  Dec.  513;  Norris 
V.  Johnston,  5  Pa.  St.  287;  Vaux  v. 
Parke,  7  Watts  &  S.  19;  Fisher  v. 
Taylor,  2  Rawle,  33.  But  a  person 
8ui  juris  cannot  convey  his  property 
upon  trusts  for  himself  free  frojn  the 
claims  of  his  creditors:  Ashurst's  Ap- 
peal, 77  Pa.  St.  464;  Mackason's  Ap- 
peal, 42  Pa.  St.  330;  82  Am.  Dec.  517. 
[See  also  Pacific  Nat.  Bank  v.  Wind- 
ram,  133  Mass.  175;  Jackson  v.  Von 
Zedlitz,  136  Mass.  342;  Warner  v. 
Rice,  66  Md.  436;  Ghoimlev  v.  Smith, 
139  Pa.  St.  584;  23  Am.  St.' Rep.  215.] 
See  also,  as  to  the  extent  to  which  the 
beneficiary's  estate  may  be  made  free 
from  liability,  Leavitt  v.  Beirne,  21 
Conn.  1,  8;  Johnfeton  v.  Zane's  Trus- 
tees, 11  Gratt.  552,  570;  Markham  v. 
Guerrant,  4  Leigh,  279;  Hill  v.  McRae, 
27  Ala.  175;  Mcllvaine  v.  Smith,  42 
Mo.  45;  97  Am.  Dec.  295;  Pope's 
Ex'rs  v.  Elliott,  8  B.  Mon.  56.  [See 
also  Spindle  v.  Shreve,  4  Fed.  Rep. 
136  (intent  to  make  estate  free  from 
liability  need  not  be  expressly  de- 
clared); Broadway  Nat.  Bank  v. 
Adams,  133  Mass.  170;  43  Am.  Rep. 
504,  and  cases  cited;  Foster  v.  Foster, 
133  Mass.  179;  Smith  v.  Towers,  69 
Md.  77,  and  cases  cited;  9  Am.  St. 
Rep.  398  and  note;  Jones  v.  Reese, 
65  Ala.  134;  Steib  v.  Whitehead,  111 
111.  247;  Henry  V.  Strong,  39  Ch.  Div. 
443;  Jourolmon  v.  Massengill,  86 
Tenn.  81.] 


§  990  EQUITY  JURISPRUDENCE.  1452 

protect  her  from  the  moral  influence  of  her  husband, 
that  in  creating  the  trust  a  clause  maybe  inserted  against 
"anticipation,"  by  which  her  power  of  aliening  her  inter- 
est is  taken  away  during  her  marriage;  and,  as  the  rule 
is  generally  accepted,  the  restraint  of  such  clause  may 
operate  during  any  future  as  well  as  present  marriage/ 

§  990.  Rules  of  Descent  and  Succession.  —  The  rules 
concerning  descent,  devolution,  and  succession,  applied  to 
the  equitable  estates  of  beneficiaries,  are  generally  the  same 
which  regulate  corresponding  legal  estates.^  Those  rules, 
however,  which  result  from  the  doctrine  of  tenure  do  not 
apply,  and  therefore  it  is  settled  in  England  that  the 
equitable  estate  of  the  beneficiary  in  lands  held  in  trust 
for  him  is  not  subject  to  escheat,  but  the  trustee  holds 
the  land  absolutely.'  As  a  consequence  of  the  general 
doctrine,  estates  of  inheritance  held  in  trust  for  the  wife 
are  subject  to  the  husband's  curtesy;  *  but  by  a  strange  in- 
consistency of  the  English  law,  the  wife  had  no  dower  in 
similar  estates  held  in  trust  for  her  husband.* 

^  Hawkes  v.  Hubback,  L.  R.  11  Eq.  ticular   rule   prevails   in   the    United 

5;  In  re  Gaffee's  Trusts,  1  Macn.  &  G.  States;  it  should  not,  upon  principle, 

541;  Rennie  v.  Ritchie,  12  Clark  &  F.  since  with  us  the  doctrine  of  escheat 

204;  Tullett  V.  Armstrong,  4  Mylne  &  to  the  state  is  not  in  the  least  based 

C.  377;  1  Beav.  1;  Baggett  v.  Menx,  1  upon  the  notion  of  tenure:    See  Mat- 

Phill.  Ch.  627;  1  Coll.  C.  C.  138;  Shirley  thews  v.  Ward,  10  Gill  &  J.  443,  454. 

V.  Shirley,  9  Paige,  363;  Waters  v.Taze-  Where  the  trust  is  one  of  personalty, 

well,  9  Md.  291;  Fears  v.  Brooks,   12  on  the  death  of  the  beneficiary  iutes- 

Ga.  195,  197;  Fellows  v.  Tann,  9  Ala.  tate  and  without  any  next  to  kin,  the 

999,  1003.     By  some  American  courts  crown   or   the   state   succeeds    to   his 

the    clause    against    anticipation    has  property,  upon    other    grounds    than 

been  held  valid  only  during  the  exist-  that  of  common-law  escheat:    Burgess 

ing  marriage:    See  Dubs  v.   Dubs,  31  v.   Wheate,  supra:  Williams  v.  Lons- 

Pa.  St.  149;  Wells  v.  McCall,  64  Pa.  dale,  3  Ves.  752;  Taylor  v.  Haygarth, 

St.  207;  Apple  v.  Allen,  3  Jones  Eq.  14  Sim.  8;  Cradock  v.  Owen,  2  Smale 

120;  Miller  v.  Bingham,  1  Ired.  Eq.  &  G.  241;  [see  also  Johnston  v.  Spicer, 

423;  36  Am.  Dec.  58.  107  N.  Y.  198.] 

»  Burgess  v.   Wheate,  1  Eden,   177;         *  Roberts  v.  Dixwell,    1    Atk.  607; 

Trash  v.   Wood,   4  Mylne  &  C.   324,  D'Arcy  v.  Blake,  2  Schoales  &  L.  387; 

328  (descent);  Price  V.  Sisson,  13  N.  J.  Cooper  v.    Macdonald,    L.    R.    7  Ch. 

168,  174;  Croxall  v.  Shererd,  5  Wall.  Div.  288;  Appleton  v.  Rowley,  L.  R. 

267,  281.     The  rule  in  Shelley's  case  8  Eq.   139;  Follett  v.  Tyrer,   14  Sim. 

extends  to  trust  estates:  Jones  v.  Mor-  125;  Morgan  v.  Morgan,  5  Madd.  408; 

gan,  1  Brown  Ch.  206,  222;  [Sprague  Dubs  v.  Dubs,  31  Pa.  St.   149;  Cush- 

V.  Sprague,   13  R.  I.  701;  Taylor  v.  ing  v.  Blake,  30  N.  J.  Eq.  689. 
Lindsay,  14  R.  I.  518.]  *  D'Arcy  v.  Blake,  2  Schoales  &  L. 

*  Burgess  v.  Wheate,   1  Eden,  177;  387;  Dixon   v.  Saville,  1    Brown  Ch. 

Onslow  V.  Wallis,  1  Macn.  &  G.  506;  325.     A  diflFerent  rule  generally  pre- 

Sweeting   v.    Sweeting,   33   L.   J.   Ch.  vails  in  the  United  States:    See  Gush- 

211.     It  ia  doubtful  whether  this  par-  ing  v.  Blake,  supra. 


1453  EXPRESS    PRIVATE    TRUSTS.  §  901 

§  991.  Express  Active  Trusts.  — Active  or  special 
trusts  are  those  in  which,  either  from  the  express  direc- 
tions of  the  language  creating  the  trust,  or  from  the  very 
nature  of  the  trust  itself,  the  trustees  are  charged  with 
the  performance  of  active  and  substantial  duties  with 
respect  to  the  control,  management,  and  disposition  of 
the  trust  property  for  the  benefit  of  the  cestuis  que  trus- 
tent.  They  may,  except  when  restricted  by  statute,  be 
created  for  every  purpose  not  unlawful,  and,  as  a  general 
rule,  may  extend  to  every  kind  of  property,  real  and  per- 
sonal. In  this  class  the  interest  of  the  trustee  is  not  a 
mere  naked  legal  title,  and  that  of  the  cestui  que  trust  is 
not  the  real  ownership  of  the  subject-matter.  The  ex- 
tent and  incidents  of  the  rights  held  by  the  respective 
parties  must,  of  course,  vary  with  the  nature  of  the  trust 
itself  and  the  duties  which  the  trustee  is  called  upon  to 
perform.  It  is  a  universal  rule,  however,  that  the  trus- 
tee's estate  and  power  over  the  subject-matter  are  com- 
mensurate wath  the  duties  which  the  trust  devolves  upon 
him,  and  are  sufficient  to  enable  him  to  perform  all  those 
duties.^     The  trustee  is  generally  entitled  to  the  posses- 

*  1  Spence's  Eq.  Jur.  496,  497;  Lord  ciary  by  operation  of  the  statute: 
Glenorchy  v.  Bosville,  Cas.  t.  Talb.  Perry  on  Trusts,  see.  351.  But  the 
3;  Williams's  Appeals,  83  Pa.  St.  377,  beneficiary  may  then  be  entitled  to  a 
387;  Delbert'a  Appeal,  83  Pa.  St.  4G2;  conveyance  of  the  legal  estate  from 
[Zabriskie  v.  M.  &  E.  R.  R.  Co.,  33  the  trustee:  Sherman  v.  Dodge,  28  Vt. 
N.  J.  Eq.  22;  East  Rome  Town  Co.  v.  26,  30;  Leonard's  Lessee  v.  Diamond, 
Cothran,  81  Ga.  359.]  For  the  some-  31  Md.  536,  541.  After  a  great  lapse 
■what  exceptional  views  maintained  in  of  time  and  a  long-continued  posses- 
some  states  concerning  active  trusts,  sion  by  the  beneficiary  or  person  rep- 
see  ante,  note  under  §  986.  Trusts  resenting  his  interests,  a  conveyance 
once  active  may  be  accomplished  and  may  be  presumed:  Leonard's  Lessee 
become  passive,  and  a  question  may  v.  Diamond,  sufirn;  Den  v.  Bordine,  20 
then  arise,  whether  the  legal  estate  of  N.  J.  L.  394;  Aikin  v.  Smith,  1  Sneed, 
the  trustee  still  continues,  or  whether  804.  On  the  other  hand,  where  the 
it  passes  to  and  vests  in  the  benefici-  active  duties  conferred  upon  the  trus- 
ary  by  operation  of  the  statute  of  uses,  tee  constituted  the  only  ground  for 
If  the  existence  and  separation  of  the  keeping  the  two  estates  separate  and 
two  estates  did  not  originally  depend  distinct,  upon  the  ceasing  of  those 
alone  upon  the  trustee's  having  active  duties  the  legal  title  will  vest  in  the 
duties  to  perform, — that  is,  if  the  ce.'5<M<  7!«  </ws<  by  operation  of  the stat- 
trust  was  originally  created  for  some  ute:  Perry  on  Trusts,  sec.  351 ;  Welles 
other  purpose  beside  the  active  duties  v.  Castles,  3  Gray,  323;  [Long  v. 
on  behalf  of  the  beneficiary,  — then,  Long,  62  Md.  33.]  It  is  said  that  if 
upon  the  accomplishment  or  ceasing  all  the  beneficiaries  are  in  existeuce 
of  these  active  duties,  the  legal  estate  and  sui  juris,  and  consent,  a  court  may 
■will  not  ipso  /ado  vest  in  the  benefi-  decree    the   couveyauce   of   the   trust 


§992 


EQUITY    JURISPRUDENCE. 


1454 


sion  and  management  of  the  property,  and  to  the  receipt 
of  its  rents  and  profits;  and  in  many  cases  he  has,  from 
the  very  nature  of  the  trust,  authority  to  sell  or  otherwise 
dispose  of  it.  The  interest  of  the  beneficiary  is  neces- 
sarily more  limited  than  in  passive  trusts,  and  it  some- 
times cannot  with  accuracy  be  called  an  equitable  estate.^ 
He  always  has  the  right,  however,  to  compel  a  perform- 
ance of  the  trust  according  to  its  terms  and  intent. 

§992.  Classes  of  Active  Trusts.  —  Although  active 
trusts  may  be  created  for  a  great  number  of  special  pur- 
poses, those  which  are  the  most  frequent  and  important 
may  be  reduced  to  the  four  following  generic  classes: 
1.  Where  the  trust  is  simply  to  convey  the  property  to 
some  designated  person,  or  class  of  persons.^  2.  Where 
the  primary  object  is  to  sell  or  dispose  of  the  entire 
trust  property  in  some  manner  and  to  use  the  proceeds 
for  some  ulterior  purposes.^  In  all  instances  of  this  class, 
where  the  trust  is   to  sell   the  corpus  of  the    property 


property  to  them,  although  the  trust 
has  not  been  completed  nor  ceased: 
Perry  on  Trusts,  sees.  274,  922;  Smith 
V,  Harringtou,  4  Allen,  566;  Bowditch 
V.  Andrew,  8  Allen,  339;  Culbertson's 
Appeal,  76  Pa.  St.  145,  148;  but  see 
Douglas  V.  Cruger,  80  N.  Y.  15, 
which  holds  that  a  court  of  equity  has 
no  power  to  decree  the  determination 
of  an  existing  and  valid  trust.  Such  a 
conveyance  is  prohibited  by  the  stat- 
utes of  New  York  and  of  the  other 
states  which  have  followed  the  New 
York  type  of  legislation. 

*  [As  to  provisions  imposing  a  re- 
straint on  anticipation,  and  freeing 
the  interest  of  the  beneficiary  from  the 
claims  of  his  creditors,  see  ante,  §  989, 
cases  cited  in  note.] 

*  This  species  is  often  found  in  con- 
nection with  other  kinds.  Trusts  for 
investment  and  accumulation  almost 
invariably  terminate  with  a  trust  to 
convey  the  accumulations  to  specified 
beneficiaries;  in  trusts  for  applying 
rents  and  profits  to  particular  uses, 
there  is  generally  a  provision  for  con- 
veying the  capital  fund,  at  the  expira- 
tion of  the  period  limited,  to  some 
designated  persons  by  way  of  re- 
mainder.    Trusts   merely   to    convey 


the  property,  unaccompanied  by  any 
other  duties  of  the  trustee,  are  un- 
common. [For  an  example,  see  Preach- 
ers' Aid  Society  v.  England,  106  111. 
125.]  Such  dispositions  are  very  fre- 
quent in  English  marriage  settlements, 
but  they  are  usually  accomplished  by 
means  of  powers,  rather  than  by 
trusts. 

*  Among  the  most  important  in- 
stances belonging  to  this  class  are  con- 
veyances or  assignments  by  a  debtor 
upon  trust  to  sell  the  property  and 
pay  debts  with  the  proceeds,  includ- 
ing the  oflBcial  assignments  made  to 
assignees  in  bankruptcy,  insolvency, 
and  other  analogous  proceedings. 
Also,  a  devise  or  bequest  of  property 
by  will,  upon  trust  to  sell,  mortgage, 
or  lease  the  same,  and  with  the  pro- 
ceeds to  pay  the  testator's  debts,  or 
legacies,  or  annuities,  or  other  charges 
and  liabilities,  or  to  pay  "portions" 
to  daughters  and  younger  sons.  This 
last  object,  which  is  very  common  in 
England,  is  often  found  in  family  set- 
tlements as  well  as  in  wills.  A  trust 
to  exchange  lands,  or  to  dispose  of 
property,  and  with  the  proceeds  pur- 
chase other  kinds  or  forms,  falls  under 
the  same  class. 


1455  EXPRESS    PRIVATE    TRUSTS.  §  992 

and  to  distribute  the  proceeds  among  creditors,  legatees, 
and  the  like,  the  beneficiaries  plainly  acquire  no  proper 
estate  in  the  original  trust  fund  prior  to  its  sale;  their 
right  and  interest  attach  to  the  proceeds  of  this  fund, 
which  are  to  be  paid  to  or  distributed  among  them.  In 
order  to  make  their  right  fully  available,  and  to  guard 
their  interest  as  much  as  possible  against  the  large  au- 
thority given  to  the  trustees,  equity  has  invented  in  such 
cases  the  doctrine  of  conversion,  by  which  real  property 
is  regarded  as  personal,  and  personal  property  as  real/ 
3.  This  class  includes  all  those  trusts  where  the  pri- 
mary object  is  to  hold  and  invest  the  entire  property  and 
its  proceeds,  and  thus  to  accumulate  for  some  ulterior 
purposes.'  4.  This  class  includes  all  those  trusts  of 
which  the  primary  object  is  to  hold  the  corpus  of  the 
property,  receive  its  rents,  profits,  and  income,  and  apply 
them  to  some  prescribed  uses.'  More  than  one  of  these 
four  general  objects  may  be  embraced  in  the  same  trust. 

*  It  is  in  trusts  of  this  form,  to  sell  invest  the  income  in  the  same  manner; 
land  and  pay  over  the  proceeds,  and  sometimes  personal  property  is  di- 
in  those  exactly  opposite,  to  use  rected  to  be  converted  into  money, 
money  in  the  purchase  of  land  which  and  the  proceeds  to  be  invested  in 
is  then  to  be  conveyed,  that  the  doc-  lands,  the  income  of  which  is  to  be 
trine  of  conversion  finds  its  special  accumulated  by  the  constant  purchase 
field  of  operation:  See  Fletcher  v.  of  other  lands,  etc.  In  all  these  forms 
Ashburner,  1  Brown  Ch.  497;  1  Lead,  provision  is  made  for  the  disposition 
Cas.  Eq.  1118;  Greenhill  v.  Greenhill,  of  the  accumulated  fund  at  the  expira- 
2  Vern.  679;  Guidot  v.  Guidot,  3  Atk.  tion  of  the  period,  in  some  manner  on 
254,  256;  Wheldale  v.  Partridge,  5  behalf  of  the  beneficiaries.  The  periods 
Ves.  388,  396;  Biddulph  v.  Biddulph,  for  which  such  trusts  may  be  created 
12  Ves.  161;  Stead  v.  Newdigate,  2  are  now  limited  by  statute  in  England 
Mer.  521;  Ashby  v.  Palmer,  1  Mer.  and  in  this  country,  so  as  to  prevent  a 
296;    Elliott  v.   Fisher,   12  Sim.  505;  "perpetuity." 

Griffith  V.  Ricketts,  7  Hare,  299;  Far-  '  The  forms  of   this    class   also  are 

rar  v.  Earl  of  Winterton,  5  Beav.  1;  various.     Real  or  personal  property, 

Craig  V.  Leslie,  3  Wheat.  563;  Peter  or   both,  is  sometimes   given  by  will 

V.    Beverly,    10    Pet.  532,  534,    553;  upon   trust   to   hold   the    capital  and 

Gott    V.   Cooke,    7    Paige,    521,    523,  apply  the  income  to  the  payment  of 

534;  Lorillard  V.  Coster,  5  Paige,  173,  debts,  legacies,  annuities,  etc.;  pro])- 

218.  erty,    real    or    personal,    or   both,  is 

*  Sometimes  land  or  personal  prop-  given  by  will  or  by  deed  in  trust  to 
erty  is  given  on  trust  to  receive  the  receive  the  rents  and  profits  and  pay 
income,  and  continually  to  invest  it  in  the  same  to,  or  apply  them  to  the  use 
the  purchase  of  other  lands,  or  in-  of,  designated  beneficiaries  during 
terest-bearing  securities,  during  the  their  lives,  or  for  some  specified  period, 
period  of  the  trust;  sometimes  land  is  In  this  manner  provision  is  often  made 
given  on  trust  to  sell  and  to  invest  for  wives  in  marriage  settlements,  and 
the  proceeds  in  securities,  and  to  re-  for  widows  and  children  by  wilJL 


§  993  EQUITY    JURISPRUDENCE.  1456 

In  instances  of  the  third  and  fourth  classes,  the  benefi- 
ciaries may  have  a  direct  equitable  interest  in  the  trust 
property  itself,  which  is  plainly  more  than  a  mere  right 
of  action,  but  is  not  so  substantial  an  estate  as  that  held 
by  the  cestui  que  trust  under  a  simple  passive  trust. 

§  993.  Assi^ments  for  the  Benefit  of  Creditors.  — 
Among  the  active  trusts  which  are  quite  frequent  in  this 
country  are  voluntary  and  general  assignments  by  fail- 
ing debtors  of  their  property  to  trustees  upon  trust  to  pay 
the  creditors  of  the  assignor.*  The  doctrine  is  settled  in 
England  that,  primarily,  such  assignments  do  not  create  a 
trust  nor  clothe  the  creditors  with  the  character  oi  cestuis 
que  trustent;  they  rather  confer  a  power  upon  the  trustee, 
and  make  him  an  agent  for  the  debtor  to  dispose  of  the 
property  under  the  debtor's  directions.  It  follows  from 
this  view  that  until  the  assignment  has  been  communi- 
cated to  the  creditors,  it  may  be  revoked,  or  altered,  or 
superseded  by  the  assignor,  at  his  own  will.^  But  when 
the  fact  of  such  assignment  has  been  communicated  to 
creditors,  and  their  position  is  altered  by  it,  and  espe- 
cially if  they  have  assented  to  it,  then  it  becomes  irrevo- 
cable as  to  such  creditors,  and  they  can  enforce  its  trusts 
and  take  the  benefit  of  its  provisions  in  their  behalf.'  If 
creditors  make  themselves  actual  parties  by  executing  the 

*  These  general  assignments  are  not  act  showing  his  assent;  others  appear 
common  in  England,  since  they  inter-  to  hold  that  after  information  of  the 
fere  with  the  modern  bankrupt  laws;  assignment  is  communicated  to  a 
60  far  as  they  do  not  conflict  with  creditor  his  assent  will  be  presumed, 
those  laws  they  are  valid.  In  some  unless  the  contrary  is  shown, — unless 
of  the  states  the  wliole  ground  is  he  indicates  his  dissent  in  some  man- 
covered  by  local  insolvent  laws;  in  ner:  Acton  v.  Woodgate,  2  Mylne  & 
others,  assignments  for  the  benefit  of  K.  492;  Browne  v.  Cavendish,  1  Jones 
creditors  are  strictly  regulated  and  &  L.  600;  Simmonds  v.  Palles,  2  Jones 
limited  by  statutes.  &  L.  489;  Field  v.  Lord  Donoughinore, 

^Garrard  v.  Lauderdale,  3  Sim.  1;  1  Dru.  &  War.  227;  Biron  v.  Mount,  24 

2  Russ.  &  M.  4d1;  Walwyn  v.  Coutts,  Beav.  642;  Nicholson  v.  Tutin,  2  Kay 

3  Mer.  707;  3  Sim.  14;  Acton  v.  &  J.  18;  Kirwan  v.  Daniel,  5  Hare, 
Woodgate,  2  Mylne  &  K.  492;  Browne  493,  499;  Griffith  v.  Ricketts.  7  Hare, 
V.  Cavendish,  1  Jones  &  L.  606;  and  299,  307;  Smith  v.  Hurst,  10  Hare,  30; 
see  Brooks  v.  Marbury,  11  Wheat.  78.  Cornthwaite  v.  Frith,  4  De  Gex  &  S. 

'  There  is  some  discrepancy  in  the  552;  Cosser  v.  Radford,  1  De  Gex,  J. 

language   of    different    decisions  upon  &  S.  585;  Synnot  v.  Simpson,  5  H.  L. 

this  point.     Some  seem  to  require  that  Cas.  121,  133;  Glegg  v.  Rees,  L.  R.  7 

a  creditor  should  do  some  aifiruiative  Ch.  71. 


1457 


EXPRESS    PRIVATE    TRUSTS. 


§994 


deed  of  assignment,  it  of  course  becomes  irrevocable  as 
to  them;  their  rights  under  it  are  fixed.' 

§  994.  The  American  Doctrine.  —  With  a  few  excep- 
tions,  the  American  courts  have  not  adopted  this  English 
theory  with  respect  to  the  nature  of  such  assignments. 
The  doctrine  is  generally  settled  in  this  country  that  vol- 
untary general  assignments  for  the  benefit  of  creditors,  if 
otherwise  valid,  are  not  mere  agencies  of  the  debtor;  they 
create  true  trust  relations,  and  the  creditors  are  true  bene- 
ficiaries. When  once  duly  executed,  they  are  irrevocable, 
and  the  creditors,  on  being  informed  of  their  existence, 
may  take  advantage  of  the  provisions  in  their  own  favor, 
and  may  enforce  the  trusts  declared  without  making  them- 
selves parties,  or  doing  any  act  indicating  their  own  ac- 
ceptance or  assent.^     Although   the   assignee  is  thus   a 

V.  Kirkpatrick,  6  Ired.  Eq.  463;  51 
Am.  Den.  428;  Stimpson  v.  Fries,  2 
Jones  Eq.  156;  Tennant  v.  Stouey,  1 
Rich.  Eq.  222;  44  Am,  Dec.  213;  Eiig- 
laud  V.  Reynolds,  38  Ala.  370;  Pear- 
son  V.  Rockhill,  4  B.  Mon.  29G;  Fur- 
man  V.  Fisher,  4  Cold.  6'26;  94  Am. 
Dec.  210;  [Golden'a  Appeal,  110  Pa. 
St.  581;  Cohen  v.  Morris,  70  Ga.  313; 
Mcllhennyv.  Todd,  71  Tex.  400;  10 
Am.  St.  753;  Fuller  v,  Hasbrouck, 
46  Mich.  78;  Wilhelm  v.  Byles,  60 
Mich.  561;  Preston  v.  Spaulding,  120 
111.  209;  Weider  v.  Maddox,  66  Tex. 
372;  59  Am.  Rep.  617;  Wynne  v. 
Hardware  Co.,  67  Tex.  40  (assignee 
liable  for  refusing  to  perform);  How- 
ell V.  Moores,  127  111.  67  (creditor  may 
maintain  bill  against  personal  repre- 
sentative of  deceased  assignee  for  en- 
forcement of  the  trust);]  but  see  Gib- 
son V.  Rees.  50  111.  383.  The  doctrina^ 
which  generally  prevails,  in  the  ab- 
sence of  statutory  regulations,  seems 
to  be  as  follows:  A  creditor  is  not 
bound  to  accept  the  provision  made  in 
his  behalf,  nor  does  the  assignment 
preclude  him  from  suing  the  debtor 
and  obtaining  a  judgment  upon  his 
claim;  but  he  cannot  reach  the  assifjned. 
■property  in  satisfaction  of  his  judgment, 
unless  he  is  able  to  procure  the  assign- 
ment to  be  set  aside  as  fraudulent 
against  creditors.  In  many  of  the 
states  the  acceptance  by  the  creditor 
of  the  provision  made  la  the  asaiga- 


'  Mackinnon  v.  Stewart,  1  Sim., 
N.  S.,  76,  88;  Le  Touche  v.  Earl  of 
Lucaa,  7  Clark  &  F.  772;  Montefiore 
V.  Browne,  7  H.  L.  Cas.  241,  206.  If 
the  assignment  prescribes  a  time 
within  which  it  must  be  executed  by 
the  creditors,  those  who  refuse  to  exe- 
cute, and  those  who  claim  adversely  to 
it,  or  act  inconsistently  with  it,  will  be 
excluded  from  its  benefits:  Johnson  v. 
Kershaw,  1  De  Gex  &  S.  260;  Watson 
V.  Knight,  19  Beav.  369;  Field  v.  Lord 
Donoughmore,  1  Dru.  &  War.  227; 
Forbes  v.  Limond,  4  De  Gex,  M.  &  G. 
298.  But  mere  delay  in  executing  the 
deed  will  not  debar  those  creditors 
who  do  act  under  it  or  accept  it: 
Nicholson  v.  Tutin,  2  Kay  &  J,  18; 
Ra worth  v.  Parker,  2  Kay  &  J.  163; 
Whitmore  v.  Turquand,  3  De  Gex,  F. 
&  J.  107;  In  re  Baber's  Trusts,  L.  R. 
10  Eq.  554;  Biron  v.  Mount,  24  Beav. 
642. 

»  Ellison  V.  Ellison,  1  Lead.  Cas.  Eq., 
4th  Am.  ed.,  423;  Moses  v.  Murga- 
troyd,  1  Johns.  Ch.  119,  129:  7  Am. 
Dec.  478;  Shepherd  v.  McEvers,  4 
Johns,  Ch.  136,  138;  8  Am.  Dec.  561; 
Nicoll  V,  Mumford,  4  Johns,  Ch.  522, 
529;  Pratt  v,  Thornton,  28  Me,  355; 
48  Am,  Dec,  492;  Ward  v.  Lewis,  4 
Pick.  518,  523;  New  Encdand  Bank  v, 
Lewis,  8  Pick,  113,  118;  Pingree  v. 
Comstock,  18  Pick.  46,  50;  Read  v. 
Robinson,  6  Watts  &  S.  329;  McKin- 
ney  v.  Rhoads,  5  Watts,  343;  Ingram 
2  E(i.  JUE.— 92 


§994 


EQUITY   JURISPRUDENCE. 


1458 


trustee  for  the  creditors,  yet  he  is  at  the  same  time  so  far 
a  representative  of  the  debtor  that  he  must  be  governed 
by  the  express  terms  of  the  trust;  he  cannot  indirectly 
modify  the  provisions  of  the  assignment/  The  doctrine 
generally  prevails  in  the  American  states,  that  unless 
])rohibited  by  statutes,  voluntary  general  assignments 
by  failing  debtors  for  the  benefit  of  their  creditors, 
even  when  preferring  individuals  or  classes  among  the 
beneficiaries,  are  valid.  The  necessary  delay  incident 
to  the  execution  of  the  trust  is  not  within  the  meaning 
and  scope  of  the  statute  which  avoids  transfers  in  fraud 
of  creditors.^ 


ment  in  part  payment  of  his  demand 

will  not  preveut  him  from  subse- 
quently enforcing  the  balance  of  the 
claim  against  the  debtor's  after-ac- 
quired property,  since  the  assignment 
is  purely  voluntary,  and  is  not  per  se 
a  composition  with  creditors,  nor  does 
it  operate  as  a  discharge  in  bankruptcy. 
A  clause  inserted  in  the  assignment  to 
the  efifect  that  a  creditor  must  release 
and  discharge  his  entire  demand  as  a 
condition  to  his  claiming  any  benefits 
under  the  trust  is  held  in  many  states 
to  render  the  whole  assignment  void, 
oa  the  ground  that  it  necessarily  hin- 
ders and  delays  creditors.  Such  pro- 
visions, however,  seem  to  be  sustained 
as  valid  and  operative  by  the  courts  of 
other  states:  [Clayton  v.  Johnson,  36 
Ark.  406;  38  Am.  Rep.  40  (valid); 
Collier  v.  Davis,  47  Ark.  367;  68  Am. 
Rep.  758  (void).] 

1  In  re  Lewis,  81  N.  Y.  421;  Nich- 
olson  V.  Leavitt,  6  N.  Y.  510,  519;  57 
Am.  Dec.  499.  In  the  first  case,  it 
■was  held  that  an  assignee  could  not 
prefer  a  particular  debt  not  preferred 
by  the  terms  of  the  assignment. 

■^  Hendricks  v.  Robinson,  2  Johns. 
Ch.  283;  Nicholson  v.  Leavitt,  6  N.  Y. 
510;  57  Am.  Dec.  499;  Hauselt  v.  Vil- 
inar,  76  N.  Y.  630;  Halsey  v.  Whit- 
ney, 4  Mason,  206,  227-230;  Ogden  v. 
Larrabee,  57  111.  389.  [See  also  Rich- 
ardson V.  Marqueze,  59  Miss.  80;  42 
Am.  Rep.  353;  Kyle  v.  Harvey,  25 
W.  Va.  716;  52  Am.  Rep.  235.  As  to 
preferences  not  invalidating  the  assign- 
ment, see  Albany  etc.  Steel  Co.  v. 
Southern  Agrl.  Works,  76  Ga.  135; 
2  Am.  St.  Rop.  26;  Estes  v.  Guiiter, 


!22  U.  S.  450;  Pyles  v.  Furniture 
Co.,  30  W.  Va.  123.]  The  validity  of 
the  assignment  depends  upon  the  ques- 
tion whether  it  falls  within  the  inhi- 
bitions of  the  statute  of  13  Eliz.,  c. 
5,  and  analogous  statutes  of  the  Amer- 
ican states.  If  executed  with  an  ac- 
tual intent  to  hinder,  delay,  or  defraud 
creditors,  as  shown  by  extrinsic  evi- 
dence, or  if  it  contains  provisions 
which  necessarily  operate  to  binder 
or  delay  creditors,  and  tlierefore  raise 
a  conclusive  presumption  of  such  an 
intent,  the  assignment  will  be  declared 
void.  Various  provisions  have  been 
thus  condemned  by  the  courts,  al- 
though there  is  not  a  perfect  uni- 
formity among  the  decisions.  A  pro- 
vision which  creates  a  trust  in  favor  of 
the  debtor  himself,  to  be  operative 
before  all  the  creditors  are  fully  paid, 
will  always  render  the  assignment 
void:  See  Stickney  v.  Crane,  35  Vt. 
89;  Therasson  v.  Hickok,  37  Vt.  454; 
McGregor  v.  Chase,  37  Vt.  225;  Frink 
V.  Buss,  45  N.  H.  325;  Fairchild  v. 
Hunt,  14  N.  J.  Eq.  367;  Hyslop  v. 
Clarke,  14  Johns.  458;  Austin  v.  Bell, 
20  Johns.  442;  11  Am.  Dec.  297;  Seav- 
ing  V.  Brinkerhoff,  5  Johns.  Ch.  329; 
Sheldon  v.  Dodge,  4  Denio,  217;  Len- 
tilhon  V.  Moffat,  1  Edw.  Ch.  451; 
Grover  v.  Wakeman,  11  Wend.  187, 
201,  203;  25  Am.  Dec.  624;  4  Paige, 
23;  Halstead  v.  Gordon,  34  Barb.  422; 
Schlussel  v.  Willett,  34  Barb.  615; 
Barney  v.  Griffin,  2  N.  Y.  365;  Leitch 
V.  HoUister,  4  N.  Y.  211;  Litchfield 
V.  White,  7  N.  Y.  438;  57  Am.  Dec. 
534;  Kellogg  v.  Slawsen,  11  N.  Y. 
302,  304;  Nichols  v.  McEwen,  17  N.  Y. 


1459  EXPrvESS  ruivAXE  trusts.  §  995 

§  995.  Deeds  of  Trust  to  Secure  Debts.  —  A  special 
form  of  trust  for  the  benefit  of  creditors  peculiar  to  the 
law  of  this  country  has  become  quite  common  in  several 
of  the  states,  and  requires  a  brief  description.  A  "deed 
of  trust  to  secure  a  debt"  is  a  conveyance  made  to  a 
trustee  as  security  for  a  debt  owing  to  the  beneficiary, — 
a  creditor  of  the  grantor,  —  and  conditioned  to  be  void  on 
payment  of  the  debt  by  a  certain  time,  but  if  not  paid 
the  trustee  to  sell  the  land  and  apply  the  proceeds  in  ex- 
tinguishing the  debt,  paying  over  any  surplus  to  the 
grantor.  The  object  of  such  deeds  is,  by  means  of  the 
introduction  of  trustees,  as  impartial  agents  of  the  credi- 
tor and  debtor,  to  provide  a  convenient,  cheap,  and  speedy 
mode  of  satisfying  debts  on  default  of  payment.*  A  dis- 
tinction, however,  should  be  noted,  in  this  connection, 
between  unconditional  deeds  of  trust  to  raise  funds  for 
the  payment  of  debts,  and  deeds  of  trust  in  the  nature 
of  mortgages,  the  former  being  absolute  and  indefeasible 
conveyances  for  the  purposes  of  the  trust,  while  the  latter 
are  conveyances  by  way  of  security,  subject  to  a  condition 
of  defeasance.^     In  many  states,  deeds  of  trust  to  secure 

22;  Campbell  v.  Woodworth,  24  N.  Y.  the  lien  of  the  levy:  Mumper  v.  Rush- 
30-t;  33  Barb.  425;  Dunham  v.  Water-  more,  79  N.  Y.  19.  An  assignment 
man,  17  N.  Y.  9;  72  Am.  Dec.  406;  may  be  made  by  a  debtor  of  a  part  of 
Nicholson  v.  Leavitt,  6  N.  Y.  510;  57  his  property,  intrust,  to  pay  some  par- 
Am.  Dec.  499;  Brighamv.  Tillinghast,  ticular  creditor  or  creditors;  its  valid- 
13  N.  Y.  215;  Rapalee  v.  Stewart,  27  ity  would  depend  upon  the  same  ques- 
N.  Y.  310;  Ogden  v.  Peters,  21  N.  Y.  tion,  whether  it  was  made  witli  a  fraud- 
23;  78  Am.  Dec.  122;  Grifiin  v.  Mar-  ulent  intent:  See  State  v.  Benoist,  37 
quardt,  21  N.  Y.  121;  Jessup  v.  Hulse,  Mo.  500;  Robbins  v.  Fitz,  33  N.  Y.  420. 
21  N.  Y.  168;  Wilson  v.  Robertson,  21  [As  to  preferences  rendering  the  assign- 
N.  Y.  587;  Coyne  v.  Weaver,  84  N.  Y.  ment  invalid,  see  Preston  v.  Spaulding, 
386;  McConnell  v.  Sherwood,  84  N.  Y.  120  III.  209;  Moore  v.  Church,  70  Iowa, 
522;  38  Am.  Rep.  537;  Townsend  v.  20S;  59  Am.  Rep.  439.] 
Stearns,  32  N.  Y.  209;  Benedict  v.  i  Taylor  v.  Stearns,  18  Gratt.  244, 
Huntington,  32  N.  Y.  219;  Spaulding  278. 

V.  Strang,  37  N.  Y.  135;  38  N.  Y.  9;  ^  Hoffman  v.  Mackall,  5  Ohio  St. 
Cuyler  v.  McCartney,  40  N.  Y.  221;  124,  130;  64  Am.  Dec.  637;  Newman 
Putnam  V.  Hubbell,  42  N.  Y.  106;  and  v.  Samuels,  17  Iowa,  528;  Turner  v. 
Bee  1  Am.  Lead.  Cas.  56-75;  [Knapp  Watkins,  31  Ark.  429;  Soutter  v.  Mil- 
V.  McGowan,  96  N.  Y.  75;  Bagley  v.  ler,  15  Fla.  625;  [Catlett  v.  Starr,  70 
Bowe,  105  N.  Y.  171;  59  Am.  Rep.  Tex.  485;  McDonald  v.  Kellogg,  30 
488;  De  Wolf  y.  Sprague  Mfg.  Co.,  49  Kan.  170.]  But  see  State  Bank  v. 
Conn.  282.]  An  as.signment  including  Chapelle,  40  Mich.  447,  where  a  con- 
property  of  the  debtor  which  has  been  veyance  to  a  trustee  for  sale  and  pay- 
levied  on  by  execution  against  him  is  ment  of  debta  was  treated  as  a  rnort* 
valid,  and  passes  the  title,  subject  to 


§  995  BQUITY   JURISPRUDENCE.  1460 

debts  are  much  favored,  either  on  account  of  the  inter- 
vention of  disinterested  third  parties,  whose  position  as 
trustees  secures  to  the  debtor  fair  dealing,  or  the  absence 
of  any  necessity  for  the  intervention  of  the  courts;  though 
in  some  states  they  are  required  to  be  judicially  foreclosed, 
and  are  therefore  of  no  practical  advantage.'  Indeed,  in 
a  majority  of  the  states,  this  form  of  security  has  come 
into  general,  and  in  some  instances  universal,  use.  An 
intimate  relation  exists  between  deeds  of  trust  to  secure- 
debts  and  mortgages,  especially  mortgages  containing 
powers  of  sale;  in  fact,  the  former  are  generally  consid- 
ered as  being  in  legal  effect  mortgages.^  Where  a  mort- 
gage is  regarded  as  a  conveyance  of  the  legal  estate,  a' 
deed  of  trust  can  be  no  less  a  conveyance  of  the  legal 
estate,  and  where  a  mortgage  is  considered  as  but  a  mere 
lien,  a  deed  of  trust  is  generally  considered  as  nothing 
more  than  a  lien.'  A  reconveyance,  as  a  general  rule,  is 
not  necessary  on  payment  of  the  debt  secured  by  a  deed 
of  trust,  satisfaction  being  entered  in  the  margin,  as  in 
the  case  of  a  mortgage.*     Statutes  relating  to  the  record- 

» Iowa:  Code  1880,  sec.  3319;  Ingle  Md.  396;  [Stanhope  v.  Dodge,  52  Md. 

V.  Culbertson,  43  Iowa,  265.     Kansas:  483;    Partridge   v.    Shepard,    71    Cal. 

Samuel   v.    Holladay,   1  Woolw.  400.  470.] 

Kentucky:    Campbell    v.    Johnston,    4  ^  Iowa:   Newman    v.    Samuels,     IT 

Dana,  178.  Iowa,    528,   535.     Kansas:  Lenox   v, 

*  Woodruff  V.  Robb,  19  Ohio,  212;  Reed,  12  Kan.  223,  227.  Nebraska: 
Sargent  v.  Howe,  21  111.  148;  New-  Webb  v.  Hoselton,  4  Neb.  308.  Mich- 
man  v.  Samuels,  17  Iowa,  528,  535;  igaii:  Flint  etc.  R'y  Co.  v.  Auditor- 
Lenox  V.  Reed,  12  Kan.  223,  227;  General,  41  Mich.  635.  [Wisconsin: 
Webb  V.  Hoselton,  4  Neb.  308;  19  Wisconsin  Central  R.  R.  Co.  v.  Wia- 
Am.  Rep.  638;  Wright  v.  Bundy,  11  consin  River  Land  Co.,  71  Wis.  94.} 
Ind.  398,  405  (where  it  was  held  a  rail-  Texas:  Wright  v.  Henderson,  12  Tex. 
road  might  make  a  deed  of  trust  43;  Walker  v.  Johnson,  37  Tex.  127, 
under  an  authoiity  to  mortgage  its  129;  McLane  v.  Paschal,  47  Tex.  365; 
property);  Bennett  v.  Union  Bank,  5  Blackwell  v.  Barnett,  52  Tex.  326. 
Humph.  612  (a  bank  authorized  to  California:  A  deed  of  trust  is  not  a 
hold  land  mortgaged  to  it  for  security  mortgage:  Koch  v.  Briggs,  14  Cal. 
may  take  a  deed  of  trust);  Turner  v.  256;  73  Am.  Dec.  651;  Grant  v.  Burr, 
Watkins,  31  Ark.  429;  Blackwell  v.  54  Cal.  298;  Bateman  v.  Burr,  57  Cal, 
Barnett,  52  Tex.  326.  [See  also  Aus-  480;  [Partridge  v.  Shepard,  71  Cal. 
tin  V.  Sprague  Mfg.  Co.,  14  R.  I.  464;  470.]  As  to  the  distinction  between 
Jackson  v.  Harby,  65  Tex.  710;  Earth  mortgages  and  deeds  of  trust,  see 
V.  Devel,  11  Col.  494.]  Contra,  Koch  Wilkins  v.  Wright,  6  McLean,  340; 
V.  Briggs,  14  Cal.  256;  73  Am.  Dec.  Bank  of  Commerce  v.  Lanahan,  45 
651;  Grant  v.  Burr,  54  Cal.  298;  Bate-  Md.  396. 

man  v.  Burr,  57   Cal.  480.     See   also  *  Ingle  v.  Culbertson,  43  Iowa,  265; 

Wilkins  v.  Wright,    6    McLean,  340;  Smith  v.  Doe,   26   Miss.    291;  Crosby 

Bank  of   Commerce  v.    Lanahan,   45  v.  Huston,  1  Tex.  203.     But  see  Wii- 


1461 


EXPRESS    PRIVATE    TRUSTS. 


§  995 


ing  of  mortgages  embrace  deeds  of  trust,  without  special 
mention  of  the  latter/  as  also  do  those  relating  to  powers 
of  sale  contained  in  mortgages.^  While  a  mortgage  with 
power  of  sale  may  be  assigned,  in  the  absence  of  words 
restricting  an  assignment,  and  the  power  of  sale  passes 
thereby  to  the  assignee,  a  deed  of  trust  to  secure  a  debt, 
being  a  confidence  reposed,  cannot  be  delegated,  and  no 
a,ssignment  is  possible,  without  an  express  and  positive 
permission  in  the  deed.*     The  duties  of  the  trustee  of  a 


kins  V.  Wright,  6  McLean,  340.  An 
•entry  of  satisfaction  by  one  who 
fraudulently  pretends  to  be  the  holder 
■of  all  the  notes  described  in  the  deed 
does  not  discharge  the  property  as 
against  an  innocent  holder  for  value 
of  a  note  so  secured:  Gottschalk  v. 
Neal,  6  Mo.  App.  596. 

'  Woodruff  V.  Robb,  19  Ohio,  212; 
Crosby  v.  Huston,  1  Tex.  203,  239; 
Magee  v.  Carpenter,  4  Ala.  469;  Wood 
V.  Lake,  62  Ala.  4S9;  Schultze  v. 
Houfes,  96  111.  335. 

^  Alabama:  Code  1876,  sees.  2198, 
2877-2889;  [Code  1886,  sees.  1844, 
1879-1891.]  California:  Civ.  Code,  sec. 
2932;  but  see  Koch  v.  Briggs,  14  Cal. 
256;  73  Am.  Dec.  651;  Grant  v.  Burr, 
54  Cal.  298;  Bateman  v.  Burr,  57  Cal. 
480;  [Partridge  v.  Shepard,  71  Cal. 
470.]  Dakota:  Rev.  Code  1877,  pp. 
<jl  3-616,  275.  Illinois:  Rev.  Stats. 
1877,  p.  676;  [Hurd's  Rev.  Stats.  1889, 
■c.  95;]  and  see  Bloom  v.  Van  Rensse- 
laer, 15  111.  503;  Farrar  v.  Payne,  73 
111.  82.  Indiaiia:  2  Rev.  1876,  p.  261; 
[1  Rev.  Stats.  1888,  sees.  1096,  1097;] 
and  see  Rowe  v.  Beckett,  30  Ind.  154; 
D5  Am.  Dec.  676;  Martin  v.  Reed,  30 
Ind.  218.  Jowa:  Code  1873,  sec.  3319; 
see  also  Pope  v.  Durant,  26  Iowa,  233; 
Fanning  v.  Kerr,  7  Iowa,  450.  Kan- 
sas: Gen.  Stats.  1868,  c.  114,  sec.  18; 
2Dassler's  Stats.  1876,  sec.  5631.  Ken- 
lucky:  Rev.  Stats.  1873,  p.  588  [c.  63, 
art.  1];  see  also  Campbell  v.  Johnston, 
4  Dana,  178;  Lyons  v.  Field,  17  B. 
Hon.  543,  549;  Smith  v.  Vertrees,  2 
Bush,  63;  Reid  v.  Welsh,  11  Bush, 
450.  Maryland:  Code  1860,  p.  445; 
{2  Pub.  Gen.  Laws  1888,  art.  66.] 
Masmr/uixeUs:  Gen.  Stats.,  c.  140,  sees. 
S8-t4;  [Pub.  Stats.  18^2,  c.  181,  sees. 
14-20;]  Stats.  1868,  c.  197;  [Pub.  Stats. 
1882,  c.  24,  sec.  19.]  Mirhi'jan:  Conip. 
Laws  1871,  pp.   1921-1925;  [HowcU'a 


Stats.  1882,  0.  293.]  Minnesota:  Rev. 
1866,  pp.  562-565;  Stats,  at  Large 
1873,  pp.  900-907;  [2  Kelly's  Stats. 
1891,  c.  76,  tit.  1.]  Mississippi:  Laws 
1876,  p.  37.  Missouri:  Wagner's  Stats. 
1870,  p.  954,  sec.  2;  also  pp.  94,  956, 
1347;  see  also  Lass  v.  Sternberg,  50 
Mo.  124;  McKnightv.  Wimer,  38Mo. 
132;  latum  v.  Holliday,  59  Mo.  422. 
Ne^mda:  Comp.  Laws  1873,  sees.  1292- 
1295,  1309-1311;  [Gen,  Stats.  1885, 
sees.  325.3-3256,  3270-3272.]  New 
York:  2  Fay's  Dig.  of  Laws  1876.  pp. 
65-67;  [Code  Civ.  Proc,  sees.  2387- 
2409;]  and  see  Elliott  v.  Wood,  45 
N.  Y.  71;  53  Barb.  285;  Sherwood  v. 
Reade,  7  Hill,  431;  reversing  8  Paige, 
633;  Hubbell  v.  Sibley,  5  Lans.  51; 
Cohoes  Co.  V.  Goss,  13  Barb.  137; 
Lawrence  v.  Farmers'  etc.  Co.,  13  N. 
Y.  200.  Rhode  Island:  Gen.  Stats.,  c. 
165,  sec.  15;  [Pub.  Stats.  1882,  c.  176, 
sec.  15;  and  see  Austin  v.  Sprague 
Mfg.  Co.,  14  R.  I.  464.]  Tennessee: 
Code  1858,  sees.  2124-2127;  [Code 
1884,  sees.  2947-2950;]  and  see  Cald- 
well v.  Bowen,  4  Sneed,  415.  Vir- 
ginia: Code  1873,  c.  113,  sees.  5,  6 
[Code  1887,  sees.  2441,  2442,  2465- 
2468,  2498,  2935.]  This  state  has 
legislated  to  some  extent  on  deeds  of 
trust;  as  also  West  Virginia:  Code 
1870,  c.  72,  sees.  5-10;  and  Amend- 
ments 1870,  c.  51.  Wisconsin:  2  Rev. 
Stats.  187),  pp.  1777-1782;  [Sanborn 
and  Berry  man's  Stats.  1889,  sees.  3523- 
3543;  and  see  Wis.  Central  R.  R.  Co. 
V.  Wisconsin  River  Land  Co.,  71  Wis. 
94.] 

3  Whittelsey  v.  Hughes,  39  Mo.  13; 
McKnight  v.  Wimer,  38  Mo.  132;  and 
see  Pickett  v.  Jones,  63  Mo.  195,  199; 
[City  of  St.  Louis  v.  Priest,  88  Mo. 
(il2.  The  deed  may  provide  for  a 
successor  to  the  trustee  named:  Irish 
v.  Aatioch  College,  126  111.  638.] 


§  996  EQUITY    JURISPRUDENCE.  1462 

deed  of  trust  require  the  utmost  good  faith  and  impar- 
tiality as  regards  both  the  debtor  and  creditor.  He  is  per- 
sonally liable,  in  a  suit  at  law  for  damages  to  the  party 
aggrieved,  for  a  failure  to  use  reasonable  diligence,  or  an 
abuse  of  his  discretionary  powers;*  and  a  sale  may  be  en- 
joined or  set  aside  at  the  instance  of  the  injured  party.'^ 
It  is  not  necessary  that  the  person  who  is  to  execute  the 
power  in  a  trust  deed  should  join  in  the  deed,  or  execute 
any  formal  writing  showing  his  acceptance  of  the  trust;* 
nor  is  it  necessary  that  the  beneficiary  should  signify  his 
assent  by  any  formal  writing,  for  his  assent  is  presumed^ 
since  the  deed  is  for  his  benefit.'*  Where  a  trustee  has 
accepted  the  trust,  he  cannot  renounce  it  without  the  con- 
sent of  the  beneficiary,  or  of  a  court  of  equity;^  and  h© 
may  be  compelled  to  discharge  the  trust.' 

§  996.  Voluntary  Trusts. —  The  particular  question  to 
be  examined  under  this  head,  and  which  renders  it  one 
of  such  great  practical  importance,  is,  When  will  trusts^ 
and  transactions  in  the  nature  of  trusts,  which  are  purely 

*  Sherwood   v.    Saxton.  63  Mo.  78;  of  lota  en  masse:  Fairman  v.  Peck,  S7 

State  V.  Griffith,   63  Mo.'  545;  Ballin-  111.  156;  Farrar  v.   Payne,  73  111.  82. 

ger  V.  Bourland,  87  111.  513;  29  Am.  And  if  the  face  of  the  deed  does  uob 

Rep.  69;  the  remedy  is  at  law,  and  not  show  that  it  was  made  contrary  to  the 

in  equity,  for  a  failure  to  pay  over  to  terms  of   the  deed  of   trust,  a  subse- 

the  proper  party  the  excess  of  the  pro-  quent  grantee,   without  actual  notice 

ceeds   over   and   above   the  debt  and  of  any  defects  in  the  sale,  will  acquire 

reasonable  expenses.  such   title  as   will    not   be  set   aside; 

s  Terry  v.  Fitzgerald,  32  Gratt.  843;  Gunnell  v.  Cockerill,  84  111.  319;  Wat- 
Meyer  v.  Jefferson  Ins.  Co.,  5  Mo.  App.  son  V.  Sherman,  84  111.  263.  But 
245;  Eitelgeorge  v.  Mutual  etc.  Ass'n,  only  a  party  to  or  person  interested 
69  Mo.  52;  Cassidy  v.  Cook,  99  111.  in  a  trust  deed  can  complain  of  irregu- 
385,  389:  "A  trustee's  duties  are  not  latities  in  the  execution  of  the  trust: 
merely  formal.  It  is  his  duty,  in  the  Wade  v.  Thompson,  52  Miss.  367.  [See 
faithful  discharge  of  his  trust,  to  in-  also  Muller's  Adm'r  v.  Stone,  84  Va. 
form  himself  as  to  the  condition  of  the  834;  10  Am.  St.  Rep.  889,  and  note; 
property  which  he  is  about  to  sell,  and  Hurt  v.  Cooper,  63  Tex.  362;  Grover 
to  adopt  that  course  which,  in  his  v.  Hale,  107  111.  638;  Williamson  v, 
judgment,  will  bring  the  highest  Stone,  128  111.  129.] 
price."  But  the  fact  that  the  prop-  ^  LefHer  v.  Armstrong,  4  Iowa,  482; 
erty  was  bought  on  behalf  of  the  cred-  68  Am.  Dec.  672;  Crocker  v,  Lowen- 
itor,  or  that   the    price  bid  was  low,  thai,  83  111.  579. 

does  not  necessarily  invalidate  the  sale:         *  Wiswall    v.    Ross,   4    Port.    321; 

Landrum  v.  Union  Bank,  63  Mo.  48.  Shearer  v.  Loftin,  26  Ala.  703. 
But  a  Bale   will   not   be  set  aside,  as         *  Drane  v.  Gunter,  19  Ala.  731. 
against    innocent   remote    purchasers         *  Sargent  v.  Howe,  21  111.  148;  [Com- 

without  notice,  for  such  irregularities  mond  v.  Susquehanna  etc.  R.   R.   Co., 

as    over-statement    of    the    account  of  122  Pa.  St.  306.     Or  may  be  removed: 

indebtedness,  or   a   sale,  if  bona  fide,  Lewis's  Adm'r  v.  Glenn,  8  Va.  947.] 


1463  EXPRESS    PRIVATE    TRUSTS.  §  997 

voluntary,  virtual  gifts  be  treated  as  binding  and  enforce- 
able in  equity?  The  answer,  it  will  be  seen,  turns  u[)on 
the  distinction  between  trusts  which  are  executed  —  tluit 
is,  completely  created  or  declared  —  and  those  which  aro 
merely  executory,  incomplete,  —  that  is,  promises  to  create 
a  trust.  The  full  discussion  of  the  subject  also  involves 
the  difference  between  assignments  perfect  and  imperfect, 
and  declarations  of  trust.  Underlying  the  whole  theory 
of  voluntary  trusts  is  the  principle  that  while  the  maxim. 
Ex  nudo  pacto  non  oritur  actio,  operates  in  equity  even  more 
strictly  than  at  the  common  law,  so  that  a  promise  with- 
out any  valuable  consideration  has  no  binding  efficacy, 
still  a  valid  trust  may  be  created  without  any  valuable 
consideration;  if  a  trust  has  been  completely  declared, 
the  absence  of  a  valuable  consideration  is  entirely  im- 
material.^ Another  principle  frequently  applicable  in 
cases  of  this  kind  is,  that  equity  generally  regards  an  im- 
perfect conveyance  or  assignment  as  a  contract  to  convey 
or  assign;  but  whether  such  contract  is  binding  or  not 
must  depend  upon  the  circumstances.^ 

§  997.  The  General  Doctrine  —  Incomplete  Voluntary 
Trusts  not  Enforceable.  —  The  general  doctrine  is  well 
settled.  A  perfect  or  completed  trust  is  valid  and  en- 
forceable, although  purely  voluntary,  A  voluntary  trust 
which  is  still  executory,  incomplete,  imperfect,  or  promis- 
sory will  neither  be  enforced   nor  aided.*     In   order   to 

*  Ellison  V.  Ellison,  6  Ves.  656;  Pnl-  the  doctrine,  and  his  statement  lia3 
vertoft  V.  Pulvertoft,  18  Ves.  84;  E.^  been  apyn'oved  by  nearly  every  subse- 
parte  Pye,  18  Ves.  140;  Kekewich  v.  quent  decision:  "I  take  the  law  of 
Manning,  1  De  Gex  M.  &  G.  176,  190;  this  court  to  be  well  settled,  that  ia 
Dickinson  v.  Bnrrell,  L.  R.  1  Eq.  337,  order  to  render  a  voluntary  settlement 
343.  valid  and  eflectual,  the  settlor   must 

^  Parker  v.  Taswell,  2  De  Gex  &  J.  have  done  everything;  which,  accord- 

559.  ing   to   the   nature   of    the    property 

*  It  seems  appropriate,  in  order  to  il-  comprised  in  the  settlement,  was  ne- 
lustrate  this  general  doctrine,  of  wliich  cessary  to  be  done,  in  order  to  trans- 
all  the  decided  casas  are  mere  applica-  fer  the  property  and  render  the  set- 
tions,  to  quote  the  language  of  a  few  tlement  binding  upon  him.  He  may, 
leading  and  modern  cases  in  which  of  course,  do  this  by  actually  trans- 
the  subject  was  fully  examined  and  ferring  tlie  property  to  the  persona 
the  conclusions  accurately  stated.  In  for  whom  he  intends  to  provide,  and 
Milroy  V.  Lord,  4  DeGex.  F.  &  J.  204,  the  provision  will  then  be  effectual, 
274,    Turner,   L.  J.,  thus  formulated  and  it  will  be  equally  effectual  if  h< 


997 


EQUITY   JURISPRUDENCE. 


1464 


render  the  voluntary  trust  valid  and  effectual,  the  party- 
creating  it,  either  by  direct  transfer  or  by  declaration, 


transfers  the  property  to  a  trustee  for 
the  purposes  of  the  settlement,  or  de- 
clares that  he  himself  holds  it  in  trust 
for  those  purposes;  and  if  the  prop- 
erty be  personal,  the  trust  may,  as  I 
apprehend,  be  declared  either  in  writ- 
iug  or  by  parol;  but  in  order  to  ren- 
der the  settlement  binding,  one  or 
other  of  these  modes  must,  as  I  under- 
stand the  law  of  this  court,  be  re- 
sorted to,  for  there  is  no  equity  in  this 
court  to  perfect  an  imperfect  gift. 
The  cases,  I  think,  go  further,  to  this 
extent,  that  if  the  settlement  is  in- 
tended to  be  effectuated  by  one  of 
these  modes  to  which  I  have  referred, 
the  court  will  not  give  effect  to  it  by 
applying  another  of  those  modes.  If 
it  is  intended  to  take  effect  by  trans- 
fer, the  court  will  not  hold  the  in- 
tended transfer  to  operate  as  a  decla- 
ration of  trust,  for  then  every  imperfect 
instrument  would  be  made  effectual 
by  being  converted  into  a  perfect 
trust.  These  are  the  principles  by 
which  the  case  must  be  tried."  la 
Richards  v.  Delbridge,  L.  R.  18  Eq. 
11,  13,  Sir  George  Jessel,  M.  R.,  said: 
' '  The  principle  is  a  very  simple  one.  A 
man  may  transfer  his  property  without 
valuable  consideration  in  one  of  two 
Ways:  he  may  either  do  such  acts  aa 
amount  in  law  to  a  conveyance  or  as- 
signment of  the  property,  and  thus 
completely  divest  himself  of  the  legal 
ownership,  in  which  case  the  person 
who  by  those  acts  acquires  the  prop- 
erty takes  it  beneficially  or  on  trust, 
as  the  case  may  be;  or  the  legal  owner 
of  the  property  may,  by  one  or  other 
of  the  modes  recognized  as  amounting 
to  a  valid  declaration  of  trust,  consti- 
tute himself  a  trustee,  and  without 
an  actual  transfer  of  the  legal  title 
may  so  deal  with  the  property  as  to 
deprive  himself  of  its  legal  ownership, 
and  declare  that  he  will  hold  it  from 
that  time  forward  on  trust  for  the 
other  person.  It  is  true,  he  need  not 
use  the  words,  *I  declare  myself  a 
trustee,'  but  he  must  do  something 
which  is  equivalent  to  it,  and  use  ex- 
pressions which  have  that  meaning; 
for  however  anxious  the  court  may  be 
to  carry  out  a  man's  intention,  it  is 
not  at  liberty  to  construe  words  other- 
wise  tliau  according  to  their   proper 


meaning.  The  cases  in  which  the 
question  has  arisen  are  nearly  all 
cases  in  which  a  man,  by  documents 
insufficient  to  pass  a  legal  interest, 
has  said,  '  I  give  or  grant  certain 
property  to  A  B.'"  He  cites  Morgan 
V.  Malleson,  L.  R.  10  Eq.  475,  and 
Richardson  v.  Richardson,  L.  R.  3 
Eq.  686.  "The  true  distinction  ap- 
pears to  me  to  be  plain,  and  beyond 
dispute;  for  a  man  to  make  himself 
a  trustee  there  must  be  an  expression 
of  intention  to  become  a  trustee,  whereas 
words  of  present  gift  show  an  inten- 
tion to  give  over  property  to  another, 
and  not  retain  it  in  the  donor's  own 
hands  for  any  purpose,  fiduciary  or 
otherwise."  He  then  quotes  and  ap- 
proves the  language  cited  above  from 
Milroy  v.  Lord.  "If  the  decisions  in 
Morgan  v.  Malleson  and  Richardson 
V.  Richardson  were  right,  there  never 
could  be  a  case  where  an  expression 
of  present  gift  would  not  amount  to 
an  effectual  declaration  of  trust,  which 
would  be  carrying  the  doctrine  on 
that  subject  too  far.  It  appears  to 
me  that  these  cases  of  voluntary  gifts 
should  not  be  confounded  with  another 
class  of  cases  in  which  wortls  of  jjresent 
transfer  for  valuable  consideration  are 
held  to  be  evidence  of  a  contract  which 
the  court  will  enforce."  The  case  of 
Kekewich  v.  Manning,  1  De  Gex,  M. 
&  G.  176,  is  also  a  most  important  one, 
and  contains  an  examination  of  nearly 
all  the  previous  authorities.  See  also 
Warriner  v.  Rogers,  L.  R.  16  Eq.  340; 
Heartley  v.  Nicholson,  L.  R.  19  Eq. 
233;  Jones  v.  Lock,  L.  R.  1  Ch.  25. 
The  decisions  of  Page  Wood,  V.  C, 
in  Richardson  v.  Richardson,  L.  R.  3 
Eq.  686,  and  of  Lord  Romilly,  M.  R., 
in  Morgan  v.  Malleson,  L.  R.  10  Eq. 
475,  have  been  greatly  shaken,  even 
if  not  entirely  overruled,  by  the  sub- 
sequent cases  cited  above  in  the  six- 
teenth, eighteenth,  and  nineteenth 
volumes  of  Equity  Cases;  but  they 
are  approved  in  the  still  more  recent 
case  of  Baddeley  v.  Baddeley,  L.  R.  9 
Ch.  Div.  113. 

In  the  recent  case  of  Young  v. 
Young,  80  N.  Y.  422,  436,  36  Am.  Rep. 
634,  the  subject  was  examined  in  an  ex- 
haustive manner  by  Rapallo,  J.  I  quote 
his  very  instructive    opinion:    "  The 


1465 


EXPRESS    PRIVATE    TRUSTS. 


§997 


must  have  done  everything  which,  according  to  the  na- 
ture of  the  property  comprised  in  it,  was  necessary  to  be 


only  question  remaining  is,  whether  a 
valid  declaration  of  trust  is  made  out. 
....     The  difficulty  in  establishing 
such  a   trust   is,  that   the  douor  did 
not  undertake  or  attempt  to  create  it, 
but  to  vest  the  property  directly  in 
the  donees.    He  simply  signed  a  paper 
certifying  that  the  bonds  belonged  to 
his  sons.     He  did  not  declare  that  he 
held  them  in  trust  for  the  donees,  but 
that  they  owned  them,  subject  to  the 
reservation,  and  were  at  his  death  to 
have  them  absolutely.     If  this  instru- 
ment had  been  founded  upon  a  valu- 
able consideration,  equity  might  have 
interfered  and  effectuated  its  intent  by 
compelling  the  execution  of  a  declara- 
tion of  trust,  or  by  charging  the  bonds, 
while  in  his  hands,  with  a  trust  in  fa- 
vor of  the  equitable  owner:    Day  v. 
Roth,  18  N.  Y.  448.    But  it  is  well  set- 
tied  that  equity  will  not  interpose  to 
perfect  a  defective  gift,   or  voluntary 
settlement    made  without   considera- 
tion. If  legally  made,  it  will  be  upheld, 
but  it  must  stand  as  made,  or  not  at  all. 
Wlien,  therefore,  it  is  found  that  the 
gift  which  the  deceased  attempted  to 
make  failed  to  take  effect  for  want  of 
delivery   or   of   a   sufficient   transfer, 
and  it  is  sought  to  supply  this  defect 
and  carry  out  the  intent  of  the  donor 
by  declaring  a  trust  which  he  did  not 
himself   declare,  we  are  encountered 
by  the  rule  above  referred  to  [citing 
many  cases].     It  is  established  as  un- 
questionable law  that  a  court  of  equity 
cannot,  by  its  authority,  render  that 
gift  perfect  which  the  donor  has  left 
imperfect,  and  cannot  convert  an  im- 
perfect gift  into  a  declaration  of  trust 
merely  on  account  of   that  imperfec- 
tion: Heartley  v.  Nicholson,  L.  R.  19 
Eq.  233.     It  has,  in  some  cases,  been 
attempted  to  establish  an  exception  in 
in  favor  of  a  wife  and  cliildren,  on  the 
ground  that  the   moral   obligation   of 
the  donor  to  provide  for  them  consti- 
tuted what  was   called  a  meritorious 
consideration  for  the  gift;  but  Judge 
Story  says  the  doctrine  seems  now  to 
be   overthrown   (Eq.    Jur.,    sees   43.S, 
987),  and  that  the  general  principle  is 
established  that  in  no  case  whatever 
will  courts  of  equity  interefere  in  fa- 
vor of  mere  volunteers,  whether  it  be 
upon  a  voluntary  contract,  or  a  cove- 


nant, or  a  settlement,  however  meri- 
torious may  be  the  consideration,  and 
although  the  beneficiaries  stand  in  the 
relation  of  a  wife  or  child:  Holloway 
V.  Headington,  8  Sim.  325;  Jefferys  v. 
Jefferys,  1  Craig  &  P.  138,  141.  These 
positions  are  sustamed  by  many  au- 
thorities. To  create  a  trust,  the  acts  or 
words  relied  upon  must  be  unequivo- 
cal, implying  that  the  person  hoUls  the 
property  as  trustee  for  another:  Mar- 
tin V.  Funk,  75  N.  Y.  134;  31  Am.  Rep. 
446.  Though  it  is  not  necessary  that 
the  declaration  of  trust  be  in  terms  ex- 
plicit, the  donor  must  have  evinced, 
by  acts  which  admit  of  no  other 
interpretation,  that  such  legal  right 
as  he  retains  is  held  by  him  as  trus- 
tee for  the  donee:  Heartley  v.  Nich- 
olson, L.  R.  19  Eq.  233;  Richards 
V.  Delbridge,  L.  R.  18  Eq.  11.  The 
settlor  must  transfer  the  property  to  a 
trustee,  or  declare  that  he  holds  it  him- 
self in  trust:  Milroy  v.  Lord,  4  De  Gex, 
F.  &  J.  264.  In  cases  of  voluntary  set- 
lements  or  gifts,  the  court  will  not  im- 
pute a  trust,  where  a  trust  was  not  in 

fact   the   tiling  contemplated 

The  words  of  the  donor  in  the  present 
case  are,  that  the  bonds  are  owned  by 
the  donees,  but  that  the  interest  to  ac- 
crue theron  is  owned  and  reserved  by 
the  donor  for  so  long  as  he  shall  live, 
and  at  his  death  they  belong  abso- 
lutely to  the  donees.  No  intention  is 
here  expressed  to  hold  any  legal  title 
to  the  bonds  in  trust  for  the  donees. 
Whatever  interest  was  intended  to  be 
vested  in  them  was  transferred  to 
them  directly,  subject  to  the  reserva- 
tion in  favor  of  the  donor  during  his 
life,  and  free  from  that  reservation  at 
his  death.  Nothing  was  reserved  to 
the  donor  to  be  held,  in  trust  or  other- 
wise, except  his  right  to  the  accruing 
interest  which  should  become  payable 
during  his  life.  It  could  only  be  by 
reforming  or  supplementing  the  lan- 
guage used  that  a  trust  could  be 
created,  and  this  will  not  be  done  in 
case  of  a  voluntary  settlement  without 
consideration.  [Mr.  Justice  Kapallo 
then  reviews  the  two  cases  of  Richard- 
son V.  Richardson  and  Morgan  v. 
Malleson,  supra,  and  declares  that 
thev  have  been  overruled.]  In  Mooro 
V.  Moore,  43  L.   J.  Ch.,  N.  S.,  023, 


§  997 


EQUITY   JURISPRUDENCE. 


146G 


done  in  order  to  transfer  the   property  and  render  the 
transaction  binding  upon  him.     A  person  holding  prop- 


Hall,  V.  C,  says:  'I  think  it  very  im- 
portant, indeed,  to  keep  a  clear  and 
definite  distinction  between  these  cases 
of  imperfect  gifts  and  cases  of  declara- 
tions of  trust,  and  that  we  should  not 
extend  beyond   what  the   authorities 
have  already  established  the  doctrine 
of  declarations  of  trust,  so  as  to  sup- 
plement what  would  otherwise  be  mere 
imperfect  gifts.'     If  the  settlement  is 
intended  to  be  effectuated  by  gift,  the 
court  will  not  give  it  effect  by  constru- 
ing it  as  a  trust.     If  it  is  intended  to 
take  effect  by  transfer,  the  court  will 
not  hold  the  intended  transfer  to  op- 
erate as  a  declaration  of  trust,  for  then 
every  imperfect  instrument  would  be 
made  effectual  by  being  converted  in- 
to a  perfect  trust.     The  case  of  Martin 
V.    Funk,  and    kindred  cases,    cannot 
aid  the  respondent.     In  all  those  cases 
there  was   an  express   declaration   of 
trust.     In  the  one  nained,  the  donor 
delivered  the  money  to  the  bank,  tak- 
ing back  its  obligation  to  herself  in  the 
cfiaracter  of  trustee  for  the  donee,  thus 
parting  with  all   beneficial  interest  in 
the  fund,  and  having  the   legal  title 
vested  in  her  in  the  character  of  trustee 
only.     No  interposition  on  the  part  of 
the  court  was  necessary  to  confer  that 
character  upon  her;  nor  was  it  neces- 
sary, by  construction  or  otherwise,  to 
change  or  supplement  the  actual  trans- 
action." In  Martin  v.  Funk,  75  N.  Y. 
134,   137,   31  Am.    Rep.  446,  Church, 
C.    J.,    thus   sums  up    the   doctrine: 
"  It  is  clear  that  a  person  sui  juris,  act- 
ing freely  and  with  full  knowledge,  has 
the  power  to  make  a  voluntary  gift  of 
the  whole  or  any  part  of  his  property, 
while  it  is  well  settled  that  a  mere  in- 
tention, whether  expressed  or  not,  is 
not  suHEicient,  and  a  voluntary  promise 
to  make-a  gift  is  nudum  pactum,  and 
of  no  binding  force.     The  act  consti- 
tuting the  transfer  must  be  consum- 
mated, and  not  remain  incomplete,  or 
rest  in  mere  intention;  and  this  is  the 
rule,  whether  the  gift  is  by  delivery 
only,  or  bj'  the  creation  of  a  trust  in  a 
third  person,  or  in  creating  the  donor 
himself   a  trustee.     Enough  must  be 
done  to  pass  the  title,  although  when 
a  trust  is  declared,  whether  in  a  third 
person  or  in  the  donor,  it  is  not  essen- 
tial that  the  property   should  be  ac- 


tually possessed  by  the  cestui  que  trust, 
nor  is  it  even  essential  that  the  latter 
should  even  be  informed  of  the  tru^t." 
In  Estate  of  Webb,  49  Cal.  541,  545, 
Crockett,  J.,  said:  "In  such  cases 
the  point  to  be  determined  is,  whether 
the  trust  has  been  perfectly  created,  — 
that  is  to  say,  whether  the  title  has 
passed  and  the  trust  been  declared,  — 
and  the  trust  being  executed,  nothing 
remains  for  the  court  but  to  enforce  it. 
In  discussing  this  question,  the  court 
say  in  Stone  v.  Hackett,  12  Gray,  227: 
'It  is  certainly  true  that  a  court  of 
equity  will  lend  no  assistance  toward 
perfecting  a  voluntary  contract  or 
agreement  for  the  creation  of  a 
trust,  nor  regard  it  as  binding,  so 
long  as  it  remains  executory.  But 
it  is  equally  true  that  if  such  a 
contract  be  executed  by  a  convey- 
ance of  property  in  trust,  so  that 
nothing  ren,ains  to  be  done  by  the 
grantor  or  donor  to  complete  the  trans- 
fer of  title,  the  relation  of  trustee  and 
cestui  que  trust  is  deemed  to  be  estab- 
lished, and  the  equitable  rights  and 
interests  arising  out  of  the  conveyance, 
though  made  without  consideration, 
will  be  enforced  in  chancery.'  .... 
This  was  not  an  executed  trust,  but, 
at  most,  nothing  more  than  a  volun- 
tary executory  agreement  to  create 
a  trust  infuturo,  and  such  agreements 
cannot  be  enforced  in  equity." 

In  Bond  v.  Bunting,  78  Pa.  St.  210, 
an  opinion  by  Hare,  J.,  contains  a  val- 
uable discussion  of  the  doctrine,  but 
his  conclusions  are  somewhat  broader 
than  seems  to  be  sustained  by  tlie 
course  of  recent  authority:  Ellison  v. 
Ellison,  6  Ves.  65(5;  1  Lead.  Cas.  Eq., 
4th  Am.  ed.,  .382,  389,  415;  Pulvertoft 
V.  Pulvertoft,  18  Ves.  84;  Ex  parte 
Pye,  18  Ves.  140;  Antrobus  v.  Smith, 
12  Ves.  39;  Edwards  v.  Jones,  1  Myliie 
&  C.  22G;  Fortescue  v.  Barnett,  3 
Mylne  &  K.  36;  Colman  v.  Sarrel,  3 
Brown  Ch.  12;  1  Ves.  50;  Blakely  v. 
Brady,  2  Dru.  &  Walsh,  311;  Wheat- 
ley  V.  Purr,  1  Keen,  551;  Colyear  v. 
Lady  Muli^rave,  2  Keen,  81;  Godsal  v. 
Webb,  2  Keen,  99;  HoUoway  v.  Head- 
ington,  8  Sim.  324;  Beatson  v.  Beat- 
son,  12  Sim.  281,  294;  Searle  v.  Law, 
15  Sim.  95;  Dillon  v.  Coppin.  4  Mylne 
&  C.  647;  Jefferys  v.  Jefferys,  1  Craig 


1467 


EXPRESS    PRIVATE    TRUSTS. 


§  997 


erty,  real  or  personal,  and  intending  to  make  a  voluntary 
disposition  thereof  for  the  benefit  of  another,  may  do  so 
in  either  one  of  three  modes:  1.  He  may  make  a  simple 
conveyance  or  assignment  of  it  directly  to  the  donee,  so 
as  to  vest  in  the  latter  whatever  interest  and  title  the 
donor  has,  without  the  intervention  of  any  trust;  2.  He 
may  make  a  transfer  of  it  to  a  third  person  upon  trusts 


&  p.  138;  Bayley  v.  Boulcott,  4  Russ. 
345;  Farquharson  v.  Cave,  1  Coll.  C.  C 
356;  Meek  v.  Kettlewell,  1  Hare,  464; 

I  Phill.  Ch.  34-2;  Patersoa  v.  Murphy, 

II  Hare,  88;  Ward  v.  Audlami,  8 
Beav.  201;  James  v.  Bydder,  4  Beav. 
600;  Deniug  v.  Ware,  22  Beav.  184; 
Bridge  v.  Bridge,  16  Beav.  315,  327; 
Beech  v.  Keep,  18  Beav.  285;  Donald- 
son V.  Donaldson,  Kay,  711;  Voyle  v. 
Hughes,  2  Smale  &  G-.  18;  Airey  v. 
Hall,  3  Smale  &  G.  315;  Parnell  v. 
Kingston,  3  Smale  &  G.  337;  la  re 
Patterson's  Estate,  4  De  Gex,  J.  &  S. 
422;  In  re  Way's  Trust,  2  De  Gex,  J. 
&  S.  365;  Dillwyn  v.  Llewelyn,  4  De 
Gex,  F.  &  J.  517;  Crouch  v.  Waller, 
4  De  Gex  &  J.  302;  Scales  v.  Maude, 
6  De  Gex,  M.  &  G.  43;  Lister  v.  Hodg- 
son,  L.  R.  4  Eq.  30;  Baddeley  v.  Bad- 
deley,  L.  R.  9  Ch.  Div.  113;  Neves  v. 
Scott,  9  How.  196;  Adams  v.  Adams, 
21  Wall.  185;  Blanchard  v.  Sheldon, 
43  Vt.  512;  Davis  v.  Ney,  125  Mass. 
590;  28  Am.  Rep.  272;  Hunt  v.  Hunt, 
119  Mass.  474;  Clark  v.  Clark,  108 
Mass.  522;  Brabrook  v.  Five  Cent 
Sav.  Bank,  104  Mass.  228;  6  Am.  Rep. 
222;  Wason  v.  Colburn,  99  Mass.  342; 
Sherwood  v.  Andrews,  2  Allen,  79, 
81;  Stone  v.  Hackett,  12  Gray,  227; 
Ray  v.  Simmons,  11  R.  I.  266;  23  Am. 
Rep.  447;  Taylor  v.  Staples,  8  R.  L 
170,  176;  5  Am.  Rep.  558;  Stone  v. 
King,  7  R.  L  358;  84  Am.  Dec.  557; 
Minor  v.  Rogers,  40  Conn.  512;  16 
Am.  Rep.  69;  Trow  v.  Shannon,  78 
N.  Y.  446;  Curry  v.  Powers,  70  N.  Y. 
212,  219;  26  Am.  Rep.  577;  Wright  v. 
Miller,  8  N.  Y.  9;  59  Am.  Dec.  438; 
Hunter  v.  Hunter,  19  Barb.  631;  Gil- 
christ v.  Stevenson,  9  Barb.  9;  Acker 
V.  Phcenix,  4  Paige,  305;  Hayes  v. 
Kershow,  1  Sand.  Ch.  258,  261;  Bunn 
V.  Winthrop,  1  Johns.  Ch.  329,  337; 
Souverbye  v.  Arden,  1  Johns.  Ch.  240; 
Mintnru  v.  Seymour,  4  Johns.  Ch. 
497;  Owuea  v.  Owues,  23  N.  J.  Eq. 


60,  02;  Vreeland  v.  Van  Horn,  17 
N.  J.  Eq.  137,  139;  Carhart's  Appeal, 
78  Pa.  St.  100,  119;  Trough's  Estate, 
75  Pa.  St.  115;  Zimmerman  v.  Streeper, 
75  Pa.  St.  147;  Dellinger's  Appeal,  71 
Pa.  St.  425;  Crawford's  Appeal,  01  Pa. 
St.  52;  100  Am.  Dec.  609;  Priu-le  v. 
Pringle,  59  Pa.  St.  281;  Ritter's  Ap- 
peal, 59  Pa.  St.  9;  Cressman's  Appeal, 
42  Pa.  St.  147;  82  Am.  Dec.  498;  Lon.s- 
dale's  Estate,  29  Pa.  St.  407:  Dennison 
v.  Goehring,  7  Pa.  St.  175,  178;  47 
Am.  Dec.  505;  Jones  v.  Obencliain,  10 
Gratt.  259;  Dunbar  v.  Woodcock,  10 
Leigh,  628;  Reed  v.  Vaniiorsdale,  2 
Leigh,  569;  Taylor  v.  Henry,  48  Md. 
550;  30  Am.  Rep.  486;  Cox  v.  Hill,  6 
Md.  274:  McNuIty  v.  Cooper,  3  Gill 
&  J.  214;  Tolar  v.  Tolar,  1  Dev.  Eq. 
460;  18  Am.  Dec.  698;  Dawson  v. 
Dawson,  1  Dev.  Eq.  93,  400;  18  Am. 
Dec.  573;  Andrews  v.  Hobson,  23  Ala. 
219;  Pinckard  v.  Pinckard,  23  Ala. 
649;  Crompton  v.  Vesser,  19  Ala.  259; 
Evans  v.  Battle,  19  Ala.  398;  Lane  v. 
Ewing,  31  Mo.  75;  77  Am.  Dec.  0.S2; 
Henderson  v.  Henderson,  21  Mo.  379; 
Otis  V.  Beckwith,  49  111.  121,  128;  01- 
ney  v.  Howe,  89  111.  556;  31  Am.  Rep. 
105;  Clarke  v.  Lott,  11  111.  105;  Hus- 
ton V.  Markley,  49  Iowa,  162;  Wyble 
V.  McPheters,  52  Ind.  393.  [See  abo 
Breton  v.  Woolven,  17  Ch.  Div.  418; 
Allen  V.  Withrow,  llOU.  S.  130;  iSlil- 
ler  V.  Clark,  40  Fed.  Rep.  15;  Willis 
V.  Smytii,  91  N.  Y.  297;  Van  Colt  v. 
Prentice,  104  N.  Y.  52;  Beaver  v. 
Beaver.  117  N.  Y.  421;  15  Am.  St. 
Rep.  531 ;  Bartlett  v.  Remington,  59 
N.  H.  364;  Sargent  V.  Baldwin.  60  Vt. 
17;  Keyes  v.  Carlton,  141  Mass.  49; 
55  Am.  Rep.  44t5;  Wittingham  v. 
Lighthipe,  46  N.  J.  Eq.  429;  Titche- 
nell  V.  Jackson,  26  W.  Va.  460;  Wim- 
bish  V.  Montgomery  etc.  Ass'n,  69  Ala. 
575;  Cotton  v.  Graham,  84  Ky.  672; 
Flanders  v.  Blandy,  45  Ohio  St.  108; 
Hellman  v.  McWiUiams,  70  Cal.  449.J 


§  997  EQUITY   JURISPEUDENCB.  1468 

declared  in  favor  of  the  donee;  3.  He  may  retain  the 
title,  and  declare  himself  a  trustee  for  the  donee,  and 
thus  clothe  the  donee  with  the  beneficial  estate.  In 
either  of  these  modes,  if  the  transaction  is  imperfect 
and  executory,  equity  will  not  aid  nor  enforce  it;  and  if 
the  intention  of  the  party  is  to  adopt  one  of  the  methods, 
a  court  of  equity  will  not  resort  to  either  of  the  other 
methods  for  the  purpose  of  carrying  it  into  effect. 
Whenever  the  party  intends  to  make  a  transfer  directly 
to  the  donee,  he  must  do  all  that  is  necessary,  according 
to  the  nature  of  the  property,  to  pass  and  vest  the  title, 
by  valid  conveyance  in  case  of  real  property,  and  by  valid 
assignment  in  case  of  personal  property,  and  generally 
accompanied  by  an  actual  delivery  of  chattels  and  things 
in  action  where  the  donor  is  the  legal  owner.  Where  the 
donor  shows  an  intention  to  adopt  this  first  method,  and 
thus  to  vest  the  property  directly  in  the  donee,  and  the 
act  of  donation  is  simply  an  assignment  of  any  form,  but 
is  imperfect  so  that  it  does  not  pass  the  title,  a  court  of 
equity  will  not  treat  it  as  a  declaration  of  trust  constitut- 
ing the  donor  himself  a  trustee  for  the  donee;  an  imper- 
fect voluntary  assignment  will  not  be  regarded  in  equity 
as  an  agreement  to  assign  for  the  purpose  of  raising  a 
trust.  If  the  donor  adopts  the  second  or  third  mode,  he 
need  not  use  any  technical  words,  or  language  in  express 
terras  creating  or  declaring  a  trust,  but  he  must  employ 
language  which  shows  unequivocally  an  intention  on  his 
part  to  create  a  trust  in  a  third  person  or  to  declare  a 
trust  in  himself.  It  is  not  essential,  however,  that  the 
donor  should  part  with  the  possession  in  the  cases  where 
he  thus  creates  or  declares  a  trust.  These  conclusions 
are  sustained  by  the  decided  weight  of  authority,  and 
must  be  regarded  as  the  settled  rules  of  equity  jurispru- 
dence upon  the  subject.  The  general  doctrine  which  has 
been  thus  explained  may  find  its  application  under  two 
different  conditions  of  fact:  1.  Where  the  donor  is  the 
absolute  owner  of  the  property,  holding  the  legal  and 


1469 


EXPRESS    PRIVATE    TRUSTS. 


§  998 


equitaHe  title  thereof;  2.  Where  the  donor  is  only  the 
equitable  owner,  holding  only  the  equitable  estate,  the 
legal  title  being  vested  in  some  third  person  as  his  trus- 
tee.    These  two  conditions  will  be  examined  separately. 

§998.  Donor  the  Legal  Owner. — The  foregoing  gen- 
eral conclusions  determine  all  particular  questions  which 
can  arise  under  this  condition  of  fact.  If  the  donor  makes 
a  complete  conveyance  of  real  property  or  assignment  of 
personal  property  sufficient  to  vest  the  legal  title  in  the 
donee;  or  if  he  completely  conveys  or  assigns  the  property 
to  a  trustee  upon  trusts  effectually  created  on  behalf  of 
the  donee;  or  if  he  retains  the  legal  title,  but  effectually 
declares  himself  a  trustee  for  the  donee,  thus  clothing 
the  donee  with  all  of  the  beneficial  estate,  —  then,  in  each 
of  these  instances,  the  gift  is  valid  although  voluntary; 
the  donee's  rights  are  perfect,  and  equity  will  enforce 
them  against  the  donor,  and  all  persons  claiming  under 
him  as  volunteers.^     Where  the  donor  has  the  legal  title, 


^  The  practical  question  always  is, 
■whether  the  conveyance  or  assignment 
is  sufficient  to  pass  the  legal  title;  or 
whether  a  trust  has  been  effectually  cre- 
ated or  declared.  While  no  particu- 
lar express  words  are  necessary  either 
to  create  a  trust  in  third  persons,  or 
to  declare  the  donor  a  trustee,  some 
words  unequivocally  showing  such 
intent  are  indispensable.  A  mere 
imperfect  assignment,  without  words 
indicating  an  intent  to  create  a  trust 
or  to  declare  the  donor  a  trustee,  can- 
not be  construed  as  a  declaration  of 
trust,  so  as  to  raise  a  trust  in  the 
donee's  favor,  which  equity  may  en- 
force. Where  the  subject-matter  is 
personal  property,  a  parol  declaration 
of  trust,  if  otherwise  sufficient,  is  ef- 
fectual: See  the  cases  cited  in  the 
last  note,  and  especially  the  quota- 
tions. I  add  the  facts  of  a  few  instruct- 
ive cases  by  way  of  illustration. 

In  Mitchell  v.  Smith,  in  re  Patter- 
son's Estate,  4  De  Gex,  J.  &  S.  422,  A, 
the  payee  of  certain  promissory  notes, 
brought  them  to  his  nephew,  B,  and 
said,  "I  give  you  these  notes,"  and 
added  that  B  should  have  them  at 
A's  death,  but  the  latter  would  like 
to  bo  master  of   them  as  long  as  be 


lived.  A  then  indorsed  the  notes  as  fol- 
lows: "I bequeath, — pay  the  within 
contents  to  B,  or  his  order,  at  my 
death."  A  retained  possession  of  the 
notes  until  his  death,  a  few  months 
afterwards.  Held,  that  B  had  ob- 
tained no  rights  whatever  in  the  notes. 
This  case  is  a  good  illustration  of  an 
attempted  assignment  which  fails  to- 
pass  the  legal  title.  In  Milroy  v.  Lord, 
4  De  Gex,  F.  &  J.  264,  A  owned  fifty 
shares  of  stock  of  a  bank,  which  stood 
upon  the  books  of  the  bank  in  his  name. 
By  the  charter  of  the  bank  its  shares 
were  transferable  only  by  entry  made 
in  the  transfer-books  of  the  corporation. 
A  executed  a  voluntary  deed,  by  which 
he  purported  to  assign  these  shares  to 
B,  in  trust  for  the  plaintiff,  C,  but  no 
transfer  was  made  upon  the  bank's 
books.  Held,  that,  as  the  assignment 
was  incomplete  and  inoperative  to 
pass  the  legal  title  to  the  trustee,  B, 
no  trust  was  effectually  created  in  C'a 
favor;  and  also,  since  the  plain  inten- 
tion was  to  vest  the  trust  in  B,  and 
not  to  constitute  the  donor  a  trustee, 
the  assignment  could  not  be  con- 
strued as  a  declaration  of  trust  bind- 
ing the  sliares  in  the  donor's  hands^ 
lu  Scales  v.  Maude,  6  De  Gex,  M.  &  G» 


§  998 


EQUITY   JURISPRUDENCE. 


1470 


and  the  property  is  of  sucli  a  nature  that  a  U^gal  estate 
can  be  transferred.  —  that  is,  is  land,  chattels,  money,  and 


43,  a  mortgagee  had  written  various 
letters  to  the  mortgagor  about  the 
mortgage,  in  which  he  said:  "I  now 
give  this  gift  to  become  due  at  my 
•  ieath,  unconnected  with  mj'  will  ";  "  I 
hereby  request  my  executors  to  cancel 
the  mortgage  deed";  "  I  again  direct 
and  promise  that  my  executors  shall 
comply  with  my  former  request;  that 
is,  to  cancel  all  deeds  and  papers  I  may 
liave  chargeable  on  the  R.  estate, "etc. 
Held,  that  these  expressions  did  not 
constitute  a  valid  gift  nor  operate  as 
a  declaration  of  trust.  In  his  opinion 
Lord  Cranworth  said:  "  Mere  declara- 
tion of  trust  by  the  owner  of  prop- 
erty, in  favor  of  a  volunteer,  is  in- 
operative, and  this  court  will  not  in- 
terfere in  such  a  case."  This  broad 
dictum  is  clearly  erroneous,  for  a  mere 
declaration  of  trust  by  the  owner, 
in  favor  of  a  volunteer,  if  effectually 
made,  is  operative.  In  the  subse- 
quent case  of  Jones  v.  Lock,  Lord 
Cranworth  frankljr  aduiitted  his  mis- 
take. In  Jones  v.  Lock,  L.  R.  1  Ch. 
25,  28,  a  father  put  a  check  into  the 
hand  of  his  infant  son,  and  said,  "I 
give  this  to  baby  for  himself,"  and 
tlien  took  it  back  and  put  it  away. 
He  also  expressed  the  intention  of 
giving  the  amount  of  it  to  his  son. 
Shortly  afterwards  the  father  died, 
and  the  check  was  found  among  his 
papers.  Held,  that  there  was  no  valid 
gift,  and  no  declaration  of  trust  con- 
stituting the  donor  a  trustee.  Loid 
Cranworth  said  that  the  owner  of 
property  may  by  a  declaration  of 
trust  constitute  himself  a  trustee  on 
behalf  of  a  volunteer,  and  that  a  parol 
declaration  of  trust  of  personalty  may 
be  valid  in  such  a  case.  When  there 
has  been  a  declaration  of  trust,  it  will 
be  enforced  even  in  favor  of  volun- 
teers; but  an  imperfect  gift  cannot 
be  enforced.  In  Richardson  v.  Rich- 
ardson, L.  R.  3  Eq.  686,  E.,  by  a  vol- 
untary deed,  assigned  certain  specific 
property,  and  "all  other  the  personal 
estate,  whatsoever  and  wheresoever," 
of  the  assignor  to  R.  absolutely.  At 
the  date  of  the  assignment,  E.  was 
owner  of  certain  promissory  notes. 
These  were  not  mentioned  in  the  as- 
signment. On  R.'s  death  these  notes 
were  found  in  his  possession,  but  not 


indorsed  by  E.,  and  there  was  no  evi- 
dence of  any  delivery  of  the  notes  by 
E.    to   R.     "Page  Wood,   V.   C,    held 
that     although    the    assignment    did 
not  operate  as  such  to  pass  the  legal 
title  to  the  notes,  still  it  operated  as  a 
declaration  of  trust  by  E.  in  R.  's  favor, 
and  R.  thereby  became  entitled  to  the 
notes.     In  Morgan  v.  Mallesou,  L.  R. 
10  Eq.  475,  S.,  the  owner  of  a  certain 
India  bond,  signed  the  following  vol- 
untary instrument  and  delivered  it  to 
M.,  but  did  not  deliver  the  bond  it- 
self: "  I  hereby  give  and  make  over  to 
M.  an   India   bond,  value   one  thou- 
sand pounds."     On  the  death  of   S., 
a  contest  arose  between  M.  and  the 
executors   of    S.,    and   Lord   Romilly 
held  that  the  assignment  was  operative 
as  an  effectual  declaration  of  trust  in 
M.'s  favor,  and  he  was  entitled  to  the 
bond.    The  Judge  said  that  the  assign- 
ment was  equivalent  to  the  words  "I 
undertake  to  hold  the  bond  for  you." 
These  two  cases  have  been  severely 
criticised  both  in  England  and  in  this 
country;   they  must   be   regarded   as 
contrary  to   the   doctrine   settled   by 
the  weight  of  authority,  and  as  vir- 
tually   overruled.      In    Warriner    v. 
Rogers,  L.  R.    16  Eq.  340,  a  wealthy 
lady  gave  her  servant,  the  plaintiff,  a 
box,  which  she  locked  and  handed  to 
him,  saying  that  it  would  be  of  service 
to  him,  but  that  it  must  not  be  opened 
until  after  her  death,  and  she  retained 
the  key.     At  her  death  the  box  was 
openeil,  and  in  it  was  found  a  writing 
signed  by  the  lady,  addressed  to  the 
plaintiff,  stating  that  the  contents  of 
the  box  were  a  deed  of  gift  of  certain 
real    and    personal    estate    specified. 
The  box  also  contained  certain  title 
deeds  of  real  property,  bat  no  deed  to 
the  plaintiff,  and  no  instrument  of  any 
sort  purporting  to  assign  property  to 
him,  further  than  the  first-mentioned 
writing.  There  was  also  another  paper 
left  by  the  deceased,  to  the  effect  that 
the   deeds  were   to   be   given   to   the 
plaintiff.    Held,  that  all  these  writings 
did  not  constitute  a  valid  declaration 
of  trust  in  plaintiff's  favor.     Bacon, 
V.   C,   in   his    opinion    strongly   dis- 
sented  from   the   two   last- mentioned 
cases.    In  Richards  v.  Delljridge,  L.  R. 
18  Ec[.  11,  D.,  who  owned  leasehold 


1471 


EXPRESS    PRIVATE   TRUSTS. 


998 


some  species  of  things  in  action,  —  an  imperfect  convey- 
ance or  assignment,  which  does  not  pass  the  legal  title, 


premises  and.  a  stock  in  trade,  pur- 
ported to  make  a  voluutary  transfer  or 
gift  of  the  whole  to  liis  grandson,  E., 
by  means  of  the  following  memoran- 
tUi.n,  which  he  wrote  upon  the  lease 
and  signed:  "This  deed,  and  all 
thereto  belonging,  I  give  to  E.  from 
tliis  time  forth,  with  all  the  stock  in 
trade."  The  lease  with  the  memoran- 
dum was  then  delivered  to  E.  's  mother, 
and  the  donor  soon  afterwards  died. 
Held,  that  there  was  no  valid  assign- 
)iient  so  as  to  constitute  a  perfected 
gift,  and  that  there  was  no  valid 
ileclaration  of  trust:  See  the  extract 
from  the  opinion  of  Jessel,  M.  R. , 
quoted  in  the  preceding  note.  In 
Heartley  v.  Nicholson,  L.  R.  19  Eq. 
233,  the  owner  of  a  share  in  a  coal 
mine,  in  letters  and  by  a  brief  written 
memorandum  indicated  his  intention 
to  give  the  share  to  the  plaintiff,  his 
daughter,  and  some  of  the  writings 
spoke  of  the  share  as  alieady  given. 
Nothing  was  done,  however,  sufficient 
to  transfer  the  legal  title  to  the  share. 
Held,  that  these  expressions  of  gift,  or 
of  an  intention  to  ghe,  did  not  amount 
to  a  declaration  of  trust,  and  did  not 
constitute  the  father  a  trustee  of  the 
share  for  his  daughter.  Nothwith- 
stauding  these  criticisms,  the  supreme 
court  of  Pennsj'lvania,  in  Bond  v. 
Bunting,  78  Pa.  St.  210,  seem  to  have 
accepted  and  followed  the  decisions  in 
Richardson  v.  Richardson  and  Morgan 
V.  Malleson,  as  correct. 

In  Martin  v.  Funk,  75  N.  Y. 
134,  31  Am.  Rep.  446,  Mrs.  Susan 
B.  deposited  in  a  savings  bank  a 
sum  of  money  belonging  to  her,  de- 
claring at  the  time  that  she  wanted 
the  account  to  be  in  trust  for  the 
plaintiff.  The  account  was  so  entered 
in  the  books  of  the  bank,  and  a 
pass-book  was  delivered  to  her,  con- 
taining the  following:  "The  Citizens' 
Savings  Bank,  in  account  with  Susan 
Boone,  in  trust  for  Li  Hie  Willard,  five 
hundred  dollars."  Mrs.  B.  retained 
possession  of  the  pass-book,  and  the 
money  remained  in  the  bank  until  her 
death.  Plaintiff  was  ignorant  of  the 
deposit  until  after  the  donor's  death. 
Held,  that  the  transaction  was  an  ef- 
fectual declaration  of  trust,  constitut- 
ing the  donor  a  trustee  for  the  plain- 


tiff, and  clothing  the  plaintiff  with  the 
beneticial  ownership  of  the  money; 
that  the  donor's  retention  of  the  pass- 
book was  not  inconsistent  with  her 
position  as  a  trnstee,  and  that  notice 
to  the  cestui  que  ii-ust  was  not  necessary 
in  order  to  constitute  a  valid  trust: 
See  extract  from  the  able  opinion  of 
(Jhurch,  C.  J.,  in  the  preceding  note. 
In  Minor  v.  Rogers,  40  Conn.  512,  16 
Am.  Rep.  69,  and  Ray  v.  Simmons, 
11  R.  I.  206,  23  Am.  Rep.  447,  the 
facts  were  quite  similar,  and  the 
trusts  were  upheld;  [also  in  Willis  v. 
Smyth,  91  N.  Y.  297.]  In  Young  v. 
Young,  80  N.  Y.  422,  36  Am.  Rep. 
634,  Young  placed  certain  bonds  in 
two  envelopes,  and  wrote  on  each 
envelope  a  memorandum,  signed  by 
him,  that  a  specilied  number  of  the 
bonds  therein  belonged  to  his  son  W., 
and  the  residue  to  his  sou  J.,  but  that 
the  interest  to  become  due  thereon 
was  "owned  and  reserved"  by  him- 
self during  his  life,  and  that  at  his 
death  "they  belong  absolutely  and 
entirely  to  W.  and  J.  and  tlieir  heirs." 
The  donor  showed  these  envelopes  and 
memoranda  to  the  wives  of  his  sons, 
and  made  statements  to  them  express- 
ing his  intention  that  the  gift  was  to 
be  complete  and  valid.  The  donor 
retained  possession  of  the  envelopes 
and  contents  until  his  death,  about  a 
year  afterwards.  Held,  that  there 
w^as  no  executed  and  valid  gift  passing 
the  legal  title,  and  no  valid  declara- 
tion of  trust  constituting  the  father  a 
trustee  for  the  donees:  See  opinion  of 
Rapallo,  J.,  quoted  in  previous  note. 
In  Estate  of  Webb,  49  Cal.  541,  a  per- 
son had  written  a  letter  to  his  sister, 
in  which  he  promised  to  assign  some 
securities  to  her,  and  this  was  held 
not  an  executed  gift  nor  a  valid  trust. 
In  Taylor  v.  Henry,  48  Md.  550,  one 
H.  deposited  in  a  bank  a  sum  of  money, 
belonging  to  himself,  to  the  credit  of 
himself  and  his  sister  M.,  so  that  the 
account  was  entered,  "H.,  M.,  and 
the  survivor  of  them,  subject  to  the 
order  of  either,  received  $1,850."  A 
short  time  after,  H.  drew  out  fifty  "dol- 
lars, and  died  in  about  a  month,  leav- 
ing the  eighteen  hundred  dollars  on 
deposit.  Held,  that  since  H.  retained 
the   power    and    dominion   over    the 


§  999  EQUITY   JURISPRUDENCE.  1472 

will  not  be  aided  or  enforced  in  equity.  But  if  the  prop- 
erty is  not  of  such  a  nature  that  the  legal  title  can  be 
transferred,  then,  if  nothing  more  remains  to  be  done  or 
can  be  done  by  the  grantor  or  donor,  —  if,  as  far  as  he  is 
concerned,  the  conveyance  or  assignment  is  complete,  and 
he  has  done  all  that  is  necessary  to  be  done,  having  re- 
gard to  the  nature  of  the  property,  —  the  conveyance  or 
assignment  will  be  effectual  in  equity,  and  will  be  enforced 
on  behalf  of  the  donee/  It  should  be  observed,  however, 
that  by  recent  statutes  nearly  all,  if  not  quite  all,  legal 
things  in  action  have  been  rendered  assignable  at  law,  so 
that  the  cases  in  which  the  last-mentioned  rule  can  apply 
have  been  very  much  limited. 

§  999.  Donor  the  Equitable  Owner.  —  Where  the  donor 
is  only  the  equitable  owner,  the  legal  estate  being  vested 
in  a  third  person,  he  may  make  a  voluntary  transfer  of 
his  interest  by  conveyance  or  assignment;  and  if  he  has 
done  all  that  is  within  his  power  to  pass  the  property 
directly  to  the  donee,  or  to  declare  a  trust  in  favor  of  the 
donee,  the  donee's  rights  will  be  protected  and  enforced  by 
a  court  of  equity.^  Also,  the  donor  holding  the  equitable 
estate  may  direct  the  trustee  in  whom  is  vested  the  legal 
title  to  hold  the  property  in  trust  for  the  donee;  and  this 
will  create  a  valid  trust  in  favor  of  the  donee,  and  will 

money,  there  was  not  a  complete  gift,  &  Walsh,  311;   Kiddill  V.  Farnell,  3 

and  the  transaction  did  not  constitute  Smale  &  G.  428. 

a  valid   declaration  of   trust  in  M.'s         ^  Kekewich  v.  Manning,  1  De  Gex, 

favor.     See  also  Boykin  v.  Pace's  Ex'r,  M.  &  G.   176;  In  re  Way's  Trusts,  2 

64   Ala.   68;    Hill  v.    Den,  54  Cal.  6;  De   Gex,    J.    &   S.  365;   Baddeley    v. 

Gadsden  v.  Whaley,  14  S.  C.  210.  Baddeley,  L.  K  9  Ch.  Div.  113;  Gil- 

'  Illustrations    of     the    first    class,  bert  v.  Overton,  2   Hem.  &  M.    110; 

■where  the  assignment  was  incomplete,  Donaldson   v.    Donaldson,    Kay,  711; 

and  the  donee  acquired  no  right:  An-  Yoyle  v.  Hughes,  2  Smale  &  G.   18; 

trobus  V.  Smith,  12  Ves.  39;  Searle  v.  Pearson    v.    Amicable    Ass.    Co.,    27 

Law,  15   Sim.  95.     Examples  of   the  Beav.  229;  and  see  Bridge  v.   Bridge, 

second  class,  where  the  donor  did  all  16  Beav.  315;  Beech  v.  Keep,  18  Beav. 

that   the  nature  of   the  property  ad-  285.      Notice    to    the    trustee  is   not 

mitted:  Edwards  v.  Jones,  1  Mylne  &  necessary  to  perfect  the  trust:  Don- 

C.  226,  238;  Fortescue  v.  Barnett,  3  aldson  v.  Donaldson,  supra;  Tierney 

Mylne  &  K.  36;  Pearson  v.  Amicable  v.  Wood,    19  Beav.  330;  but  may  be 

Ass.    Co.,    27    Beav.    229;    Weale    v.  necessary  to  protect  the  donee  against 

OUive,  17  Beav.  252;  Pedder  v.  Mosely,  third  persons:    Donaldson  V.  Donald- 

31  Beav.  159;  Woodford  v.  Cliarnley,  son,  Kay,  711.  719. 
28  Beav.  96;  Blakely  v.  Brady,  2  Dru. 


1473  EXPRESS    PRIVATE   TRUSTS.  §  1000 

clothe  him  with  the  beneficial  interest,  even  though  the 
direction  is  voluntary;  and  it  is  not  necessary  that  the 
trustee  should  give  his  assent.*  Finally,  the  holder  of 
the  equitable  estate  may,  by  a  suflBcient  declaration  of 
trust,  constitute  himself  a  trustee  for  the  donee  with  re- 
spect to  the  property,  subject  to  the  same  limitations 
which  apply  to  such  declarations  of  trust  by  a  donor  who 
holds  the  legal  estate.  In  conclusion,  it  may  be  truly  said 
that  each  case  of  voluntary  trust  or  transfer  depends 
largely  upon  an  interpretation  of  the  language  used  by 
the  donor;  whether  the  language  operates  as  a  complete 
transfer,  or  is  an  effectual  declaration  of  trust,  must 
always  be  the  vital  question. 

§  1000.  Executed  and  Executory  Trusts.  —  This  dis- 
tinction between  "executory"  and  "executed"  trusts  is 
solely  concerned  with  questions  of  construction  and  inter- 
pretation of  the  instrument  creating  the  trust,  and  of 
enforcement  of  the  trust  thus  created,  —  namely,  whether 
the  strict  rules  of  law  governing  limitations,  and  espe- 
cially the  rule  in  Shelley's  case,  are  or  are  not  to  be  applied 
in  such  construction,  interpretation,  and  enforcement. 
Whenever  a  trust  is  executed,  it  is  always  construed  in 
conformity  with  the  strict  legal  rules  concerning  limita- 
tions of  estates,  and  the  rule  in  Shelley's  case  is  made 
operative  if  the  terms  of  the  successive  trusts  bring  it 
within  that  rule,  even  though  the  apparent  intention  of 
the  one  creating  the  trust  is  thereby  defeated.  Wherever 
a  trust  is  executory,  the  intention  of  the  party  is  followed 
in  its  construction  and  enforcement,  the  strict  legal  rules 

•  McFadden  V.  Jenkyns,  1  Phill.  Ch.  Paterson  v.  Murphy,  11  Hare,  88.  A 
153;  Meek  V.  Kettlewell,  1  Phill.  Ch,  banker  who  debits  himself  in  his  books 
342;  Bill  v.  Cureton,  2  Mylne  &  K.  with  money  on  behalf  of  another  per- 
503;  Rycroft  v.  Christy,  3  Beav.  238;  son  thereby  declares  himself  a  trustee 
Bentley  v.  Mackay,  15  Beav.  12;  Gil-  of  it:  Stapletoa  v.  Stapleton,  14  Sim. 
bert  y.  Overton,  2  Hem.  &  M.  110.  186;  and  a  declaration  of  trust  other- 
A  receipt  in  the  form,  "Received  of  wise  sufficient  will  be  valid,  although 
B,  for  the  use  of  A,  one  hundred  the  donor  retain  possession  and  con- 
pounds,  to  be  paid  to  A  at  B's  death,"  trol  of  the  fund:  Wheatley  v.  Purr,  I 
is  a  sufficient  declaration  of  trust:  Keen,  551;  Vandenberg  v.  Palmer,  4 
Moore  v.  Darton,  4  De  Gex  &  S.  517;  Kay  &  J.  204. 
Grant  v.  Grant,  34  Beav,  623,  626; 
2  Eq.  JuR.  — 93 


§  1001  EQUITY   JURISPRUDENCB.  1474 

concerning  limitations  are  not  invoked,  and  the  rule  in 
Shelley's  case  is  not  permitted  to  operate.  Executory- 
trusts  and  questions  concerning  them  ordinarily  arise 
from  marriage  articles  or  inchoate  marriage  agreements 
in  which  a  complete  settlement  is  not  made,  but  the  party 
covenants  that  he  will  settle  property  or  convey  property 
upon  trusts  for  the  benefit  of  his  family,  and  from  wills 
in  which  the  testator  does  not  devise  property  upon  com- 
pleted trusts,  but  devises  to  trustees  upon  trusts  for  them 
to  settle  it.  In  these  and  similar  instances  a  court  of 
equity  is  called  upon  to  determine  the  nature  of  the  set- 
tlements to  be  made,  and  in  doing  so  it  carries  out  the 
intention  of  the  covenantor  or  testator,  actual  or  pre- 
sumed, without  regard  to  the  strict  legal  rules  of  limita- 
tion. As  such  instruments  are  comparatively  infrequent 
in  this  country,  and  the  subject  rarely  comes  before  the 
American  courts,  it  will  be  sufiicient  to  state  the  more 
general  doctrines  as  established  by  decisions,  without 
going  into  any  minute  detail  of  special  rules.^ 

§  1001.  Definition  and  Description. — A  trust  is  exe- 
cuted when  no  act  is  necessary  to  be  done  to  give  effect  to 
it  when  the  trust  is  fully  and  finally  declared  in  the  in- 
strument creating  it.  A  conveyance  of  land  to  A  in  trust 
for  B,  a  devise  of  land  to  A  in  trust  to  receive  the  rents 
and  profits  and  apply  them  to  the  use  of  B,  are  examples. 
It  is  plain  that  all  ordinary  express  passive  or  active 
trusts  are  thus  executed.  A  trust  is  executory  when  some 
further  act  is  directed  to  be  done,  in  order  to  complete 
and  perfect  the  trust  intended  to  be  created.  A  miscon- 
ception should  here  be  guarded  against.  When,  by  the 
terms  of  the  trust  as  created,  and  for  the  purpose  of  carry- 
ing it  into  effect,  the  trustee  is  directed  to  do  some  act 
with  the  property,  the  trust  is  not  thereby  executory. 
Giving  property  to  a  trustee  upon  trust  to  convey  to  a 
person,  or  upon  trust  to  convey  it  upon  certain  specified 

'  The  doctrine  of  executory  trusts  is  Lord  Glenorchy  v.  Bosville,  Cas.  t. 
one  of  great  practical  importance  in  Talb.  3;  1  Lead.  Cas.  Eq.,  4th  Am. 
Euylaud.      It    is   fully    discussed    iu     ed.,  1,  13,  3G,  and  the  editors' notes. 


1475  EXPRESS    PRIVATE    TRUSTS.  §  1001 

irusts,  does  not*  render  the  trust  executory.  In  all  express 
active  trusts  the  trustee  is  directed  to  do  some  acts  with 
the  property.  The  essence  of  an  executory  trust  does  not 
consist  in  acts  directed  to  be  done  by  the  trustee  with 
respect  to  the  property,  but  in  acts  directed  to  be  done 
in  perfecting  and  completing  the  trust  itself  which  was 
not  fully  declared  in  the  original  instrument  of  creation. 
■"If  the  scheme  has  been  imperfectly  declared  at  the  out- 
set, and  the  creator  of  the  trust  has  merely  denoted  his 
ultimate  object  imposing  on  the  trustee  or  on  the  court 
the  duty  of  effectuating  it  in  the  most  convenient  way, 
the  trust  is  called  executory."''  "All  trusts  are  in  a  sense 
executory,  because  a  trust  cannot  be  executed  except  by 
conveyance,  and  therefore  there  is  something  always  to 
be  done.  But  that  is  not  the  sense  which  a  court  of  equity 
puts  upon  the  term  'executory  trust.'  A  court  of  equity 
considers  an  executory  trust  as  distinguished  from  a  trust 
executing  itself,  and  distinguishes  the  two  in  this  man- 
ner: Has  the  testator  [or  settlor]  been  what  is  called,  and 
very  properly  called,  his  own  conveyancer?  Has  ho  left 
it  to  the  court  to  make  out  from  general  expressions  what 
his  intention  is?  or  has  he  so  defined  that  intention  that 
you  have  nothing  to  do  but  to  take  the  limitations  he  has 
given  you,  and  to  convert  them  into  legal  estates?"'     In 

^  [In  the  first  edition  of  this  -work,  erty  to  himself  in  trust  for  the  future 

the  word  "not,"  which,  obviously,  is  wife's  sole  use  and  benefit,  etc.,  and 

necessary  to  the  sense  of  the  passage,  declaring  that  he  held  the  premises 

•was,  by  typographical  error,  omitted.]  only  in  trust  for  the  sole  and  separate 

*  This   very   accurate   statement   is  use  of  the  intended  wife.     The  deed 

<[uoted    from    the    text    of    Adams's  went  on  to  declare  specific  trusts  in 

Equity,  127,  m.  p.  40.  favor  of  the  wife;  that  she  should  have 

^  Egerton  v.  Brownlow,  4  H.  L.  Cas.  possession,    should   receive   the   rents 

1,  210,  per  Lord  St.  Leonards.     The  and    profits,    etc.,    ami    added,     "on 

whole  subject  was  very  fully  and  ably  the    further    trust    that     he    would, 

discussed  in  the  recent  case  of  Gushing  whenever   required    by   her,  in  writ- 

V.  Blake,   30  N.  J.  Eq.  689,   and  as  ing,  during   her  lifetime,  convey  the 

8uch     discussions    are    comparatively  property  to  such  person  as  she  should 

rare  in  our  reports,  it  may  be  proper  appoint,    and   at    her   death   to   such 

to  quote  from  the  case  at  some  length,  person    as    she    should    bj'    her   will 

William     Durbridge,      contemplating  have  appointed,  and  on  failure  of  such 

tnarriage,  conveyed   certain   lands   to  will,  to  her  heirs  at  law,  to  hold  to 

Blake,  for  the  benefit  of  his  intended  them,  their  heirs  and  assigns,  forever." 

wife,  a  daughter  of  Blake.     Mr.  Blake  The    marriage   took    place;    the   wife 

executed  a  dted,  reciting  the  intended  died,  leaving  one  child,  and  without 

marriage,  the  conveyance  of  the  prop-  having  disposed  of   any   part  of   the 


§1001 


EQUITY   JURISPRUDENCE. 


1476 


a  word,  the  distinction  consists  in  the  manner  in  which 
the  trust  is  declared.     The  doctrine  of  executory  trusts 


property  during  her  lifetime,  and 
without  making  a  will.  Her  husband 
survived  her,  and  after  her  death  con- 
veyed his  life  estate  in  the  land  to  the 
complainant,  who  filed  a  bill  for  a 
decree  declaring  that  the  husband  ob- 
tained an  equitable  estate  by  the 
curtesy  in  the  premises,  and  establish- 
ing his  own  title  thereto.  From  the 
decree  in  favor  of  the  complainant  the 
defendant  appealed.  Depue,  J.,  after 
discussing  the  nature  of  equitable  es- 
tates, and  whether  dower  and  curtesy 
are  allowed  in  them,  says  (p.  697): 
"In  the  present  case  the  limitation 
over  after  the  death  of  the  wife,  in 
default  of  an  appointment  by  her,  is 
to  her  heirs  at  law,  to  hold  to  them 
their  heirs  and  assigns  forever.  Under 
the  rule  in  Shelley's  case,  such  a  limi- 
tation gives  to  the  wife  an  estate  in  fee- 
simple,  in  which  the  husband,  having 
issue  by  her,  would  be  entitled  to 
curtesy,  if  her  estate  was  a  legal 
estate.  The  rule  in  Shelley's  case  is 
applicable  to  equitable  as  well  as  to 
legal  estates:  Croxall  v.  Shererd,  5 
Wall.  268;  and  in  no  case  whatever, 
of  a  trust  executed,  have  the  words 
'heirs'  or  'heirs  of  the  body,'  following 
a  limitation  to  the  ancestor  for  life,  re- 
ceived a  construction  in  equitable  es- 
tates different  from  that  which  the 
same  limitations  would  receive  in  legal 
estates:  1  Preston  on  Estates,  386.  The 
counsel  for  the  defendant  has  there- 
fore placed  his  denial  of  the  right  of 
the  husband  to  curtesy  on  the  ground 
that  the  trust  in  this  instance  was  an 
executory  trust.  In  some  cases,  and 
for  certain  purposes,  a  court  of  equity, 
where  the  trust  is  what  is  known  as 
an  executory  trust,  will  so  deal  with 
it  as  to  give  effect  to  the  general  in- 
tent of  the  creator  of  it,  without  ad- 
herence to  the  strict  legal  effect  of  the 
terms  in  which  it  is  expressed.  In 
one  sense,  every  trust  is  executory. 
At  common  law  every  use  was  a  trust. 
But  by  the  statute  of  uses  certain  uses 
were  converted  into  legal  estates,  and, 
strictly  speaking,  every  trust  executed 
is  a  legal  estate.  In  this  sense  the 
trust  must  be  executory,  to  bring  the 
case  at  all  within  the  jurisdiction  of 
chancery:  Bagshaw  v.  Spencer,  1  Ves. 
Sr.  142,  152.     But  this  is  not  the  sense 


in  which  the  term  'executory  trust'  is 
used  as  applicable  to  that  class  of  cases 
in  which  equity  will  deal  with  the  sub- 
ject without  regard  to  the  legal  sig- 
nification of  the  terms  in  which  the 
trust  is  declared.  The  earliest  re- 
ported case  in  which  the  distinction 
is  taken  between  executed  and  execu- 
tory trusts  as  administered  in  the 
court  of  chancery  is  Leonard  v.  Coun- 
tess of  Sussex,  2  Vern.  526.  This  dif- 
ference was  first  fully  explained  by 
Lord  Chancellor  Cowper  in  Earl  of 
Stamford  v.  Hobart,  3  Brown  Pari.  C. 
31;  and  notwithstanding  the  doubt 
expressed  by  Lord  Hardwicke  in  Bag- 
shaw V.  Spencer,  this  distinction  is 
completely  settled  in  the  English 
courts.  The  leading  cases  on  the  sub- 
ject are  Wright  v.  Pearson,  1  Eden, 
119;  Austen  v.  Taylor,  1  Eden,  361; 
Jervoise  v.  Duke  of  Northumberland, 
1  Jacob  &  W.  559;  Boswell  v.  Dillon, 
Dru.  291,  and  Rochfort  v.  Fitzmau- 
rice,  2  Dru.  &  War.  1,  in  which  Lord 
Chancellor  Sugden  discusses  the  ear- 
lier cases  on  the  subject.  From  an 
examination  of  these  cases  and  others, 
the  distinction  will  be  found  to  rest 
on  the  mavner  in  which  the  trust  is  de- 
clared. Where  the  limitations  and 
trusts  are  fully  and  perfectly  declared, 
the  trust  is  regarded  as  an  executed 
trust.  In  such  a  case  equity  will  nob 
interfere  and  give  effect  to  it  on  a  con- 
struction different  from  what  it  would 
receive  in  a  court  of  law.  It  is  only 
where  the  limitations  are  imperfectly 
declared,  and  the  intent  of  the  creator 
is  expressed  in  general  terms,  leaving 
the  manner  in  which  his  intent  is  to 
be  carried  into  effect  substantially  in 
the  discretion  of  trustees,  that  a  court 
of  equity  regards  the  trust  as  an  exec- 
utory trust,  and  will  assume  jurisdic- 
tion to  direct  the  trust  to  be  executed 
upon  a  construction  different  from 
that  which  the  instrument  creating 
it  would  receive  in  a  court  of  law. 
These  principles  are  so  clearly  and 
fully  stated  by  Lord  Chancellor  Sug- 
den in  Boswell  v.  Dillon,  supra,  that 
the  following  quotation  may  be  profit- 
ably made  from  his  opinion:  'By  the 
term  "executory  trust,"  when  used 
in  its  proper  sense,  we  mean  a  trust 
in  which  some  further  act  is  directed 


1477 


EXPRESS    PRIVATE    TRUSTS. 


§  1001 


finds  one  of  its  most  striking  applications  in  the  mode 
of  carrying  into  effect  and  enforcing  marriage  articles. 


to  be  done.     Executory  trusts  in  this 
way  may  be  divided  into  two  classes; 
one,    in    which    though   something   is 
required  to  be   done  (for   example,  a 
settlement   to   be   executed),  yet   the 
testator  has  acted  as  his  own  convey- 
ancer, as  it  is  called,  and  defined  the 
settlement  to  be  made,  and  the  court 
has   nothing  to  do  but  to  follow  out 
and  execute  the  intention  of  the  party 
as  appearing  in  the  instrument.     Such 
trusts,  though  executory,  do  not  dif- 
fer   from    ordinary    limitations,    and 
must   be   construed  according  to  the 
principles  applicable  to  legal    estates 
depending  upon  the  same  words.     [I 
would   remark    that   it   seems   to   be 
alike   unnecessary   and    confusing   to 
call  such  trusts  executory;  if  they  are 
80  called,  then  all  trusts  to  convey  or 
to  sell,  and  the  like,  should   also  be 
included  under  the  same  name.]     The 
other   species   of    executory  trust   is, 
where  the  testator,  directing  a  further 
act,  has  imperfectly  stated  what  is  to 
be  done.     In  such  cases  the  court  is 
invested  with  a  larger  discretion,  and 
gives  to  the  words  a  more  liberal  in- 
terpretation  than    they   would    have 
borne  if    they   had    stood   by   them- 
aelves.'"      Mr.    Justice    Depue    then 
cites  and  quotes  from  earlier  New  Jer- 
sey decisions  in  which  the  distinction 
had  been  adopted,  —  viz. :  MuUany  v. 
Mullany,  4  N.  J.  Eq.  16;  31  Am.  Dec. 
238;  Price  v.  Sissou,  13  N.  J.  Eq.  168; 
Weehawken  Ferry  Co.  v.   Sisson,    17 
N.  J.  Eq.  475,  — and  proceeds:  "It  is 
obvious   from  what  has  already  been 
said  that  a  mere  direction  to  the  trus- 
tee to  convey  in  accordance  with  trusts 
which   have   been   fully   defined   will 
not  convert  a  trust  into  an  executory 
trust  in  the   true  sense  of  the  term: 
Egerton   v.  Brownlow,  4  H.  L.  Cas. 
1,  210.      In   Price   v.    Sisson,    supra, 
the  deed  creating  the  trust  contained 
a  direction  to  the  trustee  to  convey, 
and  yet  the  chancellor  and  this  court 
regarded   it   as  creating   an  executed 
trust,  and  subject  to  have  its  limita- 
tions construed  by  rules  applicable  to 
legal  estates.     The  cases  to  the  con- 
trary are  those  in  which  the  intent  is 
expressed   in    general   language,    and 
the   trusts   are  therefore   imperfectly 
declared,  so  that  it  is  apparent  on  the 


face  of  the  instrument  that  it  was  con- 
templated  that   they   should   be  exe- 
cuted by  the  trustees  in  a  more  accu- 
rate manner,  to  give  effect   to  the  in- 
tent   expressed:    Lord    Glenorchy   v. 
Bosville,    Cas.    t.    Talb.    3;    Leonard 
V.  Lady  Sussex,  '2  Vern.  526;  Rochfort 
V.  Fitzmaurice,  2  Dru.  &  War.   1.    Or 
where  some  of  the  limitations  are  ille- 
gal, and   the  court  is  called  upon  to 
carry  into  effect  the  trusts  declared  as 
far  as    the  rules  of  law  will    permit: 
Earl  of  Stamford  v.  Hobart,  3  Brown 
Pari.  C.  31;  Humbertson  v.  Humbert- 
son,  2  Vern.  737.     A  conveyance  by 
the  trustee  may  be  necessary  for  the 
purpose   of    investing    the   cestui   que 
trust  with  the  legal  estate;  but  if  the 
trusts    are    fully  and    accurately  ex- 
pressed, the  rights  of  the  beneficiaries 
are  not  affected  by  the  direction  to  con- 
vey; the  conveyance  must  conform  to 
their  rights  as  declared,  and  the  equi- 
table estate  immediately  vests  accord- 
ingly; Stanley  V.  Stanley,  16  Ves.  491; 
Phipps  V.  Ackers,  9   Clark  &  F.  583, 
594,   599,   601,  604;   Bo  wen  v.  Chase, 
94    U.  S.    812,    818.     It   was   further 
contended  that  this  case  is  excepted 
out  of  these  rules  for  the  construction 
of  trusts  in  a  court  of  equity,  by  the 
fact  that  the  trust  in  question  was  in 
the  nature  of  a  marriage  settlement. 
There  is  a  difference  in  one  respect  be- 
tween marriage  articles  and  a  devise 
by  will.     Under   the  artificial  rule  in 
Shelley's  case,  a  gift  to  the  ancestor  for 
life,  with  a  limitation  over  to  heirs  or 
heirs  of  the  body,  creates  in  him  an 
estate  in  fee-simple  or  in  tail,  and  the 
limitation  over  is  capable  of  destruc- 
tion by  him,  by  conveyance  or  devise 
if    the  estate  be  a  fee-simple,  or  by 
fine  and  common   recovery  if  it  be  a 
fee-tail.     When  these  technical  terms 
are  used  in  an  agreement  for  a  settle- 
ment  in  view  of  marriage,  the  court 
will    infer,  from   the    nature   of    the 
agreement,  that   the   parties  contem- 
plated provisions  for  the  issue  of  the 
marriage,  which  should  not  be  liable 
to  immediate  destruction  by  the  act 
of    the   parties,    and   will   direct   the 
settlement  to  be  made  in  such  a  man- 
ner as  will  prevent  the  destruction  of 
the  limitations  over  to  issue:    Black- 
burn V,  Stables,  2  Ves.  &  B.  367;  Jer- 


§  1001 


EQUITY   JURISPRUDENCE. 


147S 


Where  sucli  articles  or  agreements  to  settle  are  general  in 
their  terms,  a  court  of  equity  presumes  that  it  was  the 
intention  of  the  parties  to  provide  for  the  issue  of  the 
marriage,  and  will  therefore  direct  a  settlement  to  he 
made  which  does  provide  for  the  children;  and  if  the 
agreement  contains  technical  terms,  which  in  a  fully  exe- 
cuted trust  would  admit  the  operation  of  the  rule  in 
Shelley's  case,  and  thus  render  the  limitations  in  favor  of 
the  children  liable  to  be  destroyed,  the  court  will  order 
the  settlement  to  be  made  in  such  a  manner  as  to  pre- 
vent the  operation  of  that  rule  and  the  destruction  of 
the  limitations  to  the  issue.  This  doctrine  is  applicable,, 
however,  only  when  the  marriage  articles  are  an  agree- 


voise  V.  Duke  of  Northumberland,  1 
Jacob  &  W.  559;  Rochfort  v.  Fitz- 
maurice,  2  Dru.  &  War.  1,  18;  Sack- 
ville  -West  v.  Viscount  Holmesdale, 
L.  R.  4  H.  L.  543.  But  this  doctrine 
is  applicable  only  so  long  as  the  agree- 
ment for  a  settlement  remains  a  mat- 
ter of  contract.  If  the  parties  have 
themselves  completed  the  settlement 
by  a  deed  complete  in  itself  and  per- 
fect, so  that  it  requires  only  to  be 
obeyed  and  fulfilled  by  the  trustees, 
according  to  the  provisions  of  the 
settlement,  the  trust  will  be  construed 
iu  the  same  manner  as  similar  trusts 
created  for  other  purposes:  Neves  v. 
Scott,  9  How.  196;  Tillinshast  v. 
Coggeshall,  7  R.  I.  383;  Carroll  v.  Re- 
nich,  7  Smedes  &  M.  798."  The  court 
held  that  the  settlement  was  a  final 
deed  of  settlement,  and  not  a  mere 
agreement  to  settle;  that  the  trusts 
were  executed,  and  therefore  that  the 
husband  was  entitled  to  curtesy  in  his 
wife's  equitable  estate  in  fee-simple: 
See  also  Lord  Glenorchy  v.  Bosville, 
Cas.  t.  Talb.  3;  1  Lead.  Cas.  Eq.  1, 
13,  36;  Egerton  V.  Earl  of  Brownlow, 
4  H.  L.  Cas.  1;  Sackville-West  v. 
Viscount  Holmesdale,  L.  R.  4  H.  L. 
543;  Phipps  V.  Ackers,  9  Clark  &  F. 
583,  594,  599,  601,  604;  Thompson  v. 
Fisher,  L.  R.  10  Eq.  207;  Phillips  v. 
James,  3  De  Gex.  J.  &  S.  72;  Viscount 
Holmesdale  v.  West,  L.  R.  12  Eq. 
280;  Magrath  v,  Morehead,  L.  R.  12 
Eq.  491;  Loch  v.  Bagley,  L.  R.  4  Eq. 
122;  In  re  Bellasis's  Trust,  L.  R.  12  Eq. 
218;  Rochfort  v,  Fitzmaurice,   2  Dru. 


&  War.  1;  Boswell  v.  Dillon,  Dru, 
291;  Leonard  V.  Lady  Sussex,  2  Vern. 
526;  Earl  of  Stamford  v.  Hobart,  3 
Brown  Pari.  C.  31;  Humbertson  v. 
Humbertson,  2  Vern.  737;  Wright  v. 
Pearson,  1  Eden,  119;  Austen  v.  Tay- 
lor, 1  Eden,  361 ;  Sweetapple  v.  Bindon, 
2  Vern.  536;  Papillon  v.  Voice,  2  P. 
Wms.  471;  Lord  Deerhurst  v.  Duk© 
of  St.  Albans,  5  Madd.  232,  260;  Jer- 
voise  v.  Duke  of  Northumberland,  1 
Jacob  &  W.  559;  Bowen  v.  Chase,  94 
U.  S.  812,  818;  Croxall  v.  Shererd,  5 
Wall.  268,  281;  Neves  v.  Scott,  9  How. 
196;  Tillinghast  v.  Coggeshall,  7  R.  I. 
383;  Imlay  v.  Huntington,  20  Conn. 
146,  162;  Wood  V.  Burnham,  6  Paige, 
513,  518;  Tallman  v.  Wood,  26  Wend. 
9,  19;  Wagstaff  v.  Lowerre,  23  Barb. 
209,  215;  Mullany  v.  Mullany,  4  N.  J. 
Eq.  10;  31  Am.  Dec.  238;  Price  v.  Sis- 
son,  13  N.  J.  Eq.  168;  Weehawken  F. 
Co.  v.  Sisson,  17  N.  J.  Eq.  475;  Denni- 
son  V.  Goehring,  7  Pa.  St.  175.  177;  47 
Am.  Dec.  505;  Lessee  of  Findlay  v.  Rid 
die,  3  Binn.  139,  152;  5  Am.  Dec.  355 
Home  V.  Lyeth,  4  Har.  &  J.  431,  434 
Saunders  v.  Edwards,  2  Jones  Eq.  1.34 
Porter  v.  Doby,  2  Rich.  Eq.  49;  Gar 
ner  v.  Garner.  1  Desaus.  Eq.  437,  444 
Berry  v.  Williamson,  11  B.  Mon.  245, 
251;  Riddle  v.  Cutter,  49  Iowa,  547 
[Cockerell  v.  Earl  of  Essex,  26  Ch 
Div.  538;  Nash  v.  Allen,  42  Ch.  Div 
54;  Ballance  v.  Lanphier,  42  Ch.  Div 
62;  Pillot  V.  Landon,  46  N.  J.  Eq.  310 
Petition  of  Angell,  12  R.  I.  630;  and 
see  Gaylord  V.  City  of  Lafayette,  11& 
lud.  423.] 


1479  EXPRESS    PRIVATE    TRUSTS.  §  1002 

ment  for  a  settlement,  and  not  when  the  settlement  has 
been  completed.  In  the  case  of  a  will  there  is  no  pre- 
sumption of  an  intent  to  provide  for  children;  the  provis- 
ions of  the  will  itself  are  the  only  guide  in  construing  its 
terms.  "If  technical  words  are  used,  and  are  not  modi- 
fied or  explained  by  the  context,  it  seems  that  the  trusts, 
whether  executory  or  not,  must  be  construed  in  accordance 
with  their  technical  sense.  Still,  in  the  case  of  an  execu- 
tory trust  created  by  a  will,  the  intention  so  to  modify  the 
terms  may  be  collected  from  slighter  indications  than 
would  be  suflBcient  in  that  of  an  executed  trust."*  It 
should  be  observed,  in  this  connection,  that  the  statutory 
abrogation  of  the  rule  in  Shelley's  case  has  removed  one 
of  the  most  important  occasions  for  applying  the  distinc- 
tion between  executed  and  executory  trusts  in  many  of 
the  American  states. 

§  1002.    Powers  in  Trust,  —  Analogous  to  trusts  proper, 
but  differing  from  them  in  one  essential  feature,  are  pow- 

'  Adams's   Equity,   129;   see  Black-  a  settlement  made  by  a  young  woman 

burn  V.  Stables,  2  Ves.  &  B.  367;  Jer-  which  does  not  contain  the  provisions 

voise  V.  Duke  of  Northumberland,   1  usually  inserted  to  protect  the  rights 

Jacob  &  W.  559;  Rochfort  v,  Fitzmau-  of  the  wife  or  children.     No  frauil  or 

rice,  2  Dru.  &  War.  1,  18;  Sackville-  undue  influence  or  mistake  need    be 

West  V.   Lord   Holmesdale,   L.   R.  4  shown;   the   power   is   a   part  of   the 

H.    L.   543;   Trevor  v.   Trevor,    1    P.  jurisdiction    of    equity   over    married 

Wms.  622;  Austen  v.  Taylor,  1  Eden,  women  and   infants,  with  respect  to 

361;  Neves  v.  Scott,  9  How.  196;  Til-  their  property.     It  is  used  to  prevent 

linghast  v.   Coggeshall,  7   R.  I.  383;  improvident  settlements   made  with- 

CarroU  v.  Reuich,  7  Smedes  &  M.  798;  out  advice,  or  without  a  due  regard 

Berry  v.  Williamson,  11  B.  Mon.  245,  for  the  rights  of  the  wife  or  children. 

251;  Imlay  v.  Huntington,  20  Conn.  A   settlement   may   therefore    be   set 

146;  [Petition  of  Angell,  13  R.  I.  630;]  aside  and  modified  after  the  death  of 

and  cases  in  last  note.  the  husband.     If  this  particular  juris- 

As  to  executory  trusts  of  chattels  diction  is  ever  exercised  by  American 

and  other  personal  property,  see  Duke  courts  of  equity,  the  occasions  for  it 

of  Newcastle  v.  Countess  of  Lincoln,  must    be    extremely    rare:    Smith    v. 

3  Ves.  387;    12  Ves.  218;  Stanley  v.  Iliflfe,  L.  R.  20  Eq.   666,  668;  VVolter- 

Leigh,  2  P.  Wms.  686,  690;  Lord  Deer-  beek  v,  Barrow,  23  Beav.  4'J3:  Hobsoi> 

hurst  V.  Duke  of  St.  Albans,  5  Madd.  v.  Ferraby.  2   Coll.  C.  C.   412;    Har- 

232;  Rowland  v.  Morgan,  2  Phill.  Ch.  bidge  v.   Wogan,  5  Hare,  258;  Torre 

764;  Lord  Scarsdale  V.  Curzon,  1  Johns,  v.  Torre,  1  Smale  &  G.  518;  Cogan  v. 

&  H.  40;  Shelley  v.  Shelley,  L.  R,  6Eq.  Duffield,  L.  R.  20  Eq.  789;  Taggart  v. 

540,  546.  Taggart,  1  Schoalea  &  L.  84;  Warwick 

English  courts  of  equity  exercise  the  v.  Warwick,  3  Atk.  291,  293;  see  Neves; 

very  high  jurisdiction  of  setting  aside  v.  Scott,  9  How.  196;  Garnsey  v.  Mun- 

or  modifying  a  settlement  which  does  dy,  24  N.  J.  Eq.  243  (a  conveyance  in 

not  carry  out  the  presumptive  intention  trust  was  set  aside  because  iinprovi- 

of  the  articles,  and  is  not  such  a  one  dent,  etc.,  even  though  infant  children 

as  ought  to  have  been  made,  and  also  of  the  grantor  were  beueiiciaries). 


§  1002  EQUITY   JURISPRUDENCE.  1480 

ers  in  trust.  In  a  true  trust  the  legal  title  is  in  and  by 
its  creation  always  vested  in  the  trustee,  but  to  be  held 
for  the  benefit  of  the  beneficiary.  In  a  trust  power,  as 
distinguished  from  a  trust,  the  legal  title  is  vested,  not  in 
the  trustee,  but  in  a  third  person,  and  the  trustee  has 
authority  to  convey  or  dispose  of  the  property  to  or  for 
or  among  the  beneficiaries.  A  power  generally  is  an  au- 
thority given  to  A  to  convey  or  dispose  of  an  interest 
w^hich  he  does  not  himself  hold,  and  of  which  the  com- 
plete legal  title  is  vested  in  another  person,  B.*  Where 
the  power  is  not  coupled  with  a  trust,  A  is  clothed  with  a 
complete  discretion  whether  he  will  or  will  not  execute 
it;  courts  of  equity  do  not  control  that  discretion;  if  he 
utterly  fails  to  make  any  appointment,  they  do  not  relieve 
the  expected  beneficiaries  to  or  among  whom  the  disposi- 
tion might  have  been  made.  Where  the  power  is  in  trust, 
A  may  have  some  discretion  with  respect  to'  the  mode  in 
which  he  shall  exercise  it,  with  respect  to  the  amounts 
distributed  among  a  designated  class  of  beneficiaries,  and 
the  like;  but  he  has  no  discretion  as  to  whether  he  will 
or  will  not  exercise  it  at  all.  It  partakes  so  much  of  the 
nature  of  a  trust,  that  an  obligation  rests  upon  him,  and 
an  equitable  right  is  held  by  the  beneficiaries,  —  a  right 
which  equity  recognizes,  and  to  a  certain  extent  protects; 
so  that  if  A  does  not  discharge  the  duty  resting  upon  him, 
£L  court  of  equity  will,  to  a  certain  extent,  discharge  the 
duty  in  his  stead.  A  trust  power  may  therefore  be  de- 
fined as  follows:  It  is  an  authority  given  to  A  to  dispose 
of  property  of  which  the  legal  title  is  held  by  B,  to  or 
among  a  specified  beneficiary  or  class  of  beneficiaries, 
■conferred  in  such  terms  that  a  fiduciary  or  trust  obliga- 
tion rests  upon  A  to  make  the  disposition,  although  he 
may  be  clothed  with  some  discretion  as  to  the  amounts  or 

'  There  are  various  species  of  powers,  est  whatever,  and  be  clothed  with  a 

in  part  depending  upon  the  question  naked  power  to  dispose  of  property  en- 

whetherthe  donee,  A,  has  any  interest  tirely  held  by  another.    It  is  unneces- 

in  the  property.     Thus  he  might  have  sary  to   go   into  the  classification  of 

a  life  estate  and  have  power  to  dispose  powers, 
of  the  fee;  or  he  might  have  no  inter- 


1481  EXPRESS    PRIVATE    TRUSTS.  §  1002 

shares  whick  he  shall  confer  upon  the  individuals  con- 
stituting a  class  of  beneficiaries,  or  even  as  to  the  persons 
whom  he  shall  select  from  the  class  to  receive  the  entire 
benefit.  On  the  other  hand,  the  beneficiaries  may  be  so 
specified  that  no  discretion  with  respect  to  them  exists.' 
When  the  trust  power  is  of  such  a  nature  that  the  donee- 
trustee  is  authorized  to  dispose  of  the  property  among  a 
class,  and  is  clothed  with  a  discretion,  a  court  of  equity 
will  not  interfere  to  control  that  discretion,  or  interfere 
with  the  mode  of  exercising  it,  if  he  does  in  fact  make 
an  appointment.  If,  however,  the  donee-trustee  fails  to 
act  at  all,  and  makes  no  appointment,  it  is  a  settled  rule 
that  a  court  of  equity,  in  enforcing  the  power  on  behalf 
of  the  beneficiaries,  will  always  decree  an  equal  distribu- 
tion of  the  property  among  all  the  persons  constituting 
the  class.  In  New  York,  and  other  states  which  have 
followed  the  New  York  type  of  legislation,  the  subject  of 
powers  in  trust  has  assumed  a  considerable  importance. 
The  statutes,  while  abolishing  all  express  trusts,  with  few 
specified  exceptions,  provide  that  a  disposition  in  the 
form  of  a  trust,  but  not  valid  as  a  true  trust  under  the 
statute,  may  still  be  valid  and  take  effect  as  a  power  in 
trust.  It  follows  that  every  kind  of  express  active  trust 
possible  under  the  former  system  may  now  be  created 
and  made  efiectual  as  a  power  in  trust.^ 

'  In  the  leading  case,  Brown  v.  Russ.  292;  Penny  v.  Turner,  2  Phill, 
Higgs,  8  Ves.  561,  570,  Lord  Eldon  Ch.  49.3;  Fordyce  v.  Bridges,  2  Phill. 
said:  "There  are  not  only  a  mere  Ch.  497;  Goagh  v.  Bult,  16  Sim.  45; 
trust  and  a  mere  power,  but  there  is  Brown  v.  Pocock,  6  Sim.  257;  Croft  v. 
also  known  to  this  court  a  power  which  Adam,  12  Sim.  639;  Cole  v.  Wade,  16 
the  party  to  whom  it  is  given  is  in-  Ves.  27,  42;  Izod  v.  Izod,  32  Beav. 
trusted  and  required  to  execute;  and  242;  In  re  V\''hite's  Trusts,  Johns.  656; 
with  regard  to  that  species  of  power  Brook  v.  Brook,  3  Smale  &  O.  280; 
the  court  considers  it  as  partaking  so  Gude  v.  Worthington,  3  De  Gex  &  S. 
much  of  the  nature  and  qualities  of  a  3S9;  Salusbury  v.  Denton,  3  Kay  &  J. 
trust,  that  if  the  person  who  has  that  529;  Minors  v.  Battison,  L.  R.  1  App.  C. 
duty  imposed  upon  him  does  not  dis-  428;  Willis  v.  Kymer,  L.  R.  7  Ch.  Div. 
charge  it,  the  court  will,  to  a  certain  181  (the  trustee's  discretion);  Smith  v, 
extent,  discharge  the  duty  in  his  own  Bowen,  35  N.  Y.  83;  Whiting  v.  Whit- 
room  and  place."  ing,  4  Gray,  236,  240;  Chase  v.  Chase,  2 

2  Harding  v.  Glyn,   1   Atk.   469;  2  Allen,  101;  Miller  v.  Meetch,  8  Pa.  St. 

Lead.  Cas.   Eq.,  4th    Am.    ed.,   1833,  417;  Whitehurst  v.  Harker,  2Ired.  Eq. 

1848,    1857;    Burrough  v.    Philcox,   5  29-2;  Withers  v.  Yeadon,  1   Rich.   Eq. 

Mylne  &  C.   72;  Grant  v.   Lynam,  4  324;  Collins  v.  Carlisle,  7  B.  Mon.  13; 


§  1003 


EQUITY    JURISPRUDENCE. 


1482 


§  1003.  Legislation  of  Various  States.  —  Trusts  have 
been  regulated  and  limited  by  statute  in  several  of  the 
leading  states,  and  this  statutory  system  is  so  important 
that  it  demands  a  separate  notice,  and  at  least  a  general 
description.*     The   prevailing   type    originated   in   New 


Gibba  v.  Marsh,  2  Met.  243;  [Kintner 
V.  Jones,  122  Ind.  148;  Read  v.  Pat- 
terson,  44  K  J.  Eq.  211;  6  Am.  St. 
Rep.  877;  Tempest  v.  Lord  Camoys, 
21  Ch.  Div.  571;  Read  v.  Williams, 
125  N.  Y.  560;  21  Am.  St.  Rep.  748 
(a  power  in  trust  to  distribute  the 
residue  of  an  estate  among  such  chari- 
ties as  certain  persons  named  shall 
choose  is  void  for  uncertainty,  as  no 
class  is  designated  from  which  to 
make  a  choice).]  In  many  of  the  Eng- 
lish cases  the  appointment  is  to  be 
made  by  way  of  a  testamentary  dispo- 
sition, and  the  beneficiaries  are  aided 
after  the  death  of  the  donee-trustee 
without  making  any  appointment.  Un- 
der the  legislation  of  American  states, 
where  an  express  active  trust  takes 
effect  only  as  a  power  in  trust,  the 
power  may  clearly  be  enforced  inter 
vivos  against  tlie  trustee  himself,  under 
the  same  circumstances  in  which  a 
true  trust  might  be  enforced.  Exam- 
ples will  be  found  post,  under  §  1003, 
in  connection  with  this  modern  legis- 
lation. [And  see  Henderson  v.  Hen- 
derson, 113  N.  Y.  1;  Syracuse  Savings 
Bank  v.  Holden,  105  N.  Y.  415;  Ran- 
dall v.  Constans,  33  Minn.  329;  Towns- 
hend  v.  Frommer,  125  N.  Y.  446.  In 
general,  on  the  subject  of  this  para- 
graph, see  §§  835,  920.] 

'  N.  Y.  Rev.  Stats.,  pt.  2,  tit.  2,  c.  1, 
art.  2,  sec.  45:  Uses  and  trusts  abol- 
ished, except  as  herein  authorized. 
Sees.  46-49:  In  passive  trusts  by  will  or 
deed,  the  whole  estate  passes  directly 
to  the  beneficiary.  Sec.  55:  Express 
trusts  may  be  created  for  any  or  either 
of  the  following  purposes:  1.  To  sell 
lands  for  the  benefit  of  creditors;  2. 
To  sell,  mortgage,  or  lease  lands  for 
the  benefit  of  legatees,  or  for  the  pur- 
pose of  satisfying  any  charge  thereon; 
3.  To  receive  the  rents  and  profits  of 
land,  and  apply  them  to  the  use  of  any 
person,  during  the  life  of  such  person, 
or  for  any  shorter  term,  subject  to  the 
rules  concerning  the  suspension  of  the 
power  of  alienation;  4.  To  receive 
rents   and    profits   of     lands,    and   to 


accumulate  the  same  for  the  benefit 
of  minors,  for  and  during  their  mi- 
nority. Sec.  60:  In  all  these  express 
trusts  the  whole  estate  is  vested  in  the 
trustee;  the  beneficiary  takes  no  estate 
in  the  land,  but  only  the  right  to 
enforce  a  performance  by  the  trus- 
tee. Sec.  63:  In  the  third  and  fourth 
classes,  the  beneficiary  cannot  assign 
or  in  any  manner  dispose  of  his  inter- 
est. Sec.  65:  And  the  trustee  is  also 
unable  to  convey  his  interest  if  the 
trust  is  expressed  in  the  instrument 
from  which  he  derives  his  estate. 
Sees.  75,  77,  78:  Express  trusts  not 
valid  under  this  statue  are  valid  and 
effectual  as  powers  in  trust. 

In  the  same  chapter  (sees.  1-21)  it 
is  provided  that  the  power  of  aliena- 
tion cannot  be  suspended  by  a  trust 
or  other  disposition,  longer  than  dur- 
ing the  continuance  of  two  lives  in 
being  at  the  time  when  the  trust  or 
other  disposition  commences.  The 
foregoing  provisions  concerning  ex- 
press trusts  relate  exclusively  to 
trusts  of  real  property.  Trusts  of 
personal  property,  with  respect  to 
their  form  and  kind  and  object,  are 
not  restricted,  except  that  they  are 
all  subject  to  the  limitations  concern- 
ing the  suspension  of  the  power  of 
alienation. 

Midtigan.  —  2  Comp.  Laws  1871,  p. 
1331  [Howell's  Stats.  1882,  c  214]: 
The  system  is  substantially  the  same 
as  that  of  New  York,  with  some  addi- 
tions to  the  express  trusts  allowed. 
Sec.  11:  The  following  express  trusts 
are  authorized:  The  first,  second, 
and  third  classes  are  identical  with 
the  corresponding  classes  of  the  New 
York  statute:  4.  To  receive  the  rents 
and  profits  of  lands,  and  to  accumu- 
late the  same  for  the  benefit  of  any 
married  woman,  or  for  the  benefit  of 
minors  during  their  minority.  5.  For 
the  beneficial  interest  of  any  person 
or  persons,  when  such  trust  is  fully 
expressed  and  clearly  defifted  upon  the 
face  of  the  instrument  creating  it,  sub- 
ject to  the  limitations  concerning  the 


1483 


EXPRESS    PRIVATE    TRUSTS. 


§  1003 


York,  and  has  been  followed  in  Michigan,  Wisconsin, 
Minnesota,  California,  and  Dakota.  The  important  and 
distinctive  features  which  constitute  this  type,  so  far  as  it 


suspension  of  the  power  of  alienation. 
2  Comp.  Laws  1871,  p.  13'26,  sec.  15 
[Howell's  Stats.  1882,  sec.  5531]:  The 
power  of  alienation  can  only  be  sus- 
pended during  two  lives  in  being,  as 
in  New  York. 

Wisco}isin.  —  2  Taylor's  Rev.  Stats. 
1872,  p.  1129,  sec.  11  [1  Sanborn  and 
Berryman's  Stats.  18S9,  sec.  2081]: 
The  express  trusts  authorized  are  iden- 
tical with  those  of  the  Michigan  stat- 
ute. [Subdivision  6  authorizes  trusts 
for  the  perpetual  preservation  and  re- 
pair of  tombs  and  cemeteries.]  2  Tay- 
lor's Rev.  Stats.  1872,  p.  1124,  sees. 
15,  16  [1  Sanborn  and  Berryman's 
Stats.  1889,  sees.  2039,  2040]:  The 
limitations  upon  the  suspension  of  the 
power  of  alienation  are  the  same  as  in 
New  York  and  Michigan. 

Minnesota.  —  Young's  Gen.  Stats. 
1878,  p.  553,  sec.  11  [Kelly's  Stats. 
1891,  sec.  4013]:  The  four  classes  of 
express  trusts  of  land  authorized  are 
the  same  as  the  four  classes  of  the  New 
York  statute.  To  these  is  added:  5. 
To  receive  and  take  charge  of  any 
money,  stocks,  bonds,  or  valuable 
chattels  of  any  kind,  and  to  invest 
and  loan  the  same  for  the  benefit  of 
the  beneficiaries  of  such  trust,  subject 
to  the  control  of  the  courts  over  the 
acts  of  the  trustee. 

California.  —  Civ.  Code:  The  general 
system  is  the  same  as  that  of  New 
York.  Sec.  847:  No  trusts  permitted, 
except  those  authorized.  Sec.  863: 
In  all  express  trusts,  the  whole  estate 
vests  in  the  trustee.  Sec.  867:  The 
beneficiary  may  be  restrained  from 
disposing  of  his  interest.  Sees.  869, 
879:  If  the  trust  is  declared  in  the 
conveyance  to  the  trustee,  every  act 
or  transfer  of  his  in  contravention  of 
the  trust  is  absolutely  void;  if  the 
trust  is  not  so  declared,  it  is  invalid  as 
against  a  bonnjide  purchaser  from  the 
trustee.  The  express  trusts  author- 
ized are  somewhat  broader  than  those 
of  the  New  York  statute.  Sec.  857: 
The  following  classes  of  express  trusts 
are  authorized:  1.  To  sell  real  prop- 
erty and  apply  or  dispose  of  the  pro- 
ceeds in  accordance  with  the  instru- 
ment creating  the  trust;  2.  To  mort- 


gage or  lease  real  property  as  in  same 
class  of  the  New  York  statute;  3.  To 
receive  the  rents  and  profits  of  real 
property,  and  pay  them  to  or  apply 
them  to  the  use  of  any  person,  whether 
ascertained  at  the  time  of  the  creation 
of  the  trust  or  not,  for  himself  or  for 
his  family,  during  the  life  of  such  per- 
son, or  for  any  shorter  time,  subject 
to  the  rules  concerning  the  suspen- 
sion of  the  power  of  alienation;  4.  To 
receive  rents  and  profits  and  accumu- 
late the  same  for  minors,  as  in  New 
York.  Sees.  715,  716,  722-726,  771: 
Suspension  of  the  power  of  alienation 
can  only  last  during  the  continuance 
of  lives  in  being  (not  two  lives)  at  the 
creation  of  the  trust.  Sec.  2220:  Ex- 
press trusts  of  personal  property  are 
allowed  for  any  purpose  for  which  a 
contract  may  lawfully  be  made. 

Dakota. —Cbf.  Code  1880,  p.  243, 
sec.  282:  Identical  with  that  of  Cali- 
fornia. 

Georgia.  — Although  the  legislation 
of  this  state  does  not  follow  the  fore- 
going type,  the  code  contains  the  fol- 
lowing provisions,  which  may  limit 
the  extent  to  which  express  trusts  can 
be  created.  Code  1873,  p.  399,  eec. 
2.305:  "Estates  may  be  created,  not 
for  the  benefit  of  the  grantee,  but  for 
the  use  of  some  other  person.  They 
are  termed  trust  estates.  No  formal 
words  are  necessary  to  create  such  an 
estate.  Whenever  a  manifest  inten- 
tion is  exhibited  that  another  person 
shall  have  the  benefit  of  the  property, 
the  grantee  shall  be  declared  a  trus- 
tee. Sec.  2306:  Trust  estates  may  be 
created  for  the  benefit  of  any  female, 
or  minor,  or  person  non  compos  mentis. " 
[Also,  on  compliance  with  certain 
requisitions,  for  the  benefit  of  persons 
mentally  weak,  intemperate,  profli- 
gate, etc.:  Acts  of  1876,  p.  26;  Code 
1882,  sec.  2306.]  See  Gordon  v. 
Green,  10  Ga.  534-,  Russell  v.  Kear- 
nev,  27  Ga.  96;  Ingram  v.  Fraley,  29 
Ga.  553;  Logan  v.  Goodall,  42  Ga.  95; 
Sutton  V.  Aiken,  62  Ga.  733;  Coiighlin 
V.  Seago,  53  Ga.  250;  Adams  v.  Guer- 
ard,  29  Ga.  651;  76  Am.  Dec.  624; 
Bowman  v.  Long,  26  Ga,  142;  Boyd  v. 
England,  56  Ga.  598. 


§  1004  EQUITY   JURISPRUDENCE.  1484 

deals  with  express  trusts  of  land,  are  the  following: 
1.  All  uses,  and  all  express  passive  trusts,  and  all  express 
active  trusts  except  certain  enumerated  kinds,  are  abol- 
ished. 2.  Certain  kinds  of  express  active  trusts  are 
allowed,  wherein  the  trustee  has  the  whole  estate  and 
management/  and  the  beneficiary  has  no  estate,  equi- 
table or  legal,  but  only  the  right  to  enforce  the  perform- 
ance of  the  trust  according  to  its  terms  against  the 
trustee.  These  permitted  species  are  all  made  subject  to 
the  rules  concerning  perpetuities,  or  the  periods  during 
which  the  absolute  power  of  alienation  may  be  suspended. 
3.  Trusts  of  personal  property  are  not  embraced  within 
this  scheme,  and  are  not  substantially  modified  or  lim- 
ited, except  that  they  are  subject  to  the  rules  concerning 
perpetuities.^  4.  When  the  trust  is  declared  in  the  in- 
strument by  which  the  estate  is  conveyed  to  the  trustee, 
any  transfer  or  other  act  of  his  in  contravention  of  the 
trust  is  absolutely  void;  when  the  trust  is  not  declared 
in  that  conveyance,  it  becomes  inoperative  as  against  a 
bona  fide  purchaser  for  valuable  consideration  and  with- 
out notice  pt  the  trust.  5.  In  those  species  which  are 
for  the  permanent  benefit  of  the  beneficiary,  —  that  is, 
those  which  are  not  trusts  to  sell  or  dispose  of  the  prop- 
erty,—  the  beneficiary  either  is  or  may  be  made  unable 
to  assign  or  transfer  his  interest.  6.  The  general  powers, 
duties,  and  liabilities  of  the  trustees  as  established  by 
the  doctrines  of  equity  jurisprudence  are  not  other- 
wise altered.  The  portions  of  this  system  which  relate 
to  trusts  arising  by  operation  of  law  —  resulting  and  con- 
structive—  will  be  described  in  a  subsequent  section. 

§  1004.  Judicial  Interpretation — Validity  of  Trusts. — 
The  following  are  among  the  most  important  results  of 
the  judicial  interpretation  given  to  these  statutory  pro- 
visions: Since  all  passive  trusts  of  land  are  abolished,  a 
conveyance  or  devise  of  real  property  to  A,  merely  in 

»  [Culbertson  v.  Witbeck  Co.,  127  ^  [See  Gilman  v.  McArdle,  99  N.  Y. 
U.  S.  335  (Mich.).l       '  451,  52  Am.  Rep.  41.] 


1485 


EXPRESS    PRIVATE    TRUSTS. 


§  1004 


trust  for  or  to  the  use  of  B,  would  not  be  void,  but  would 
vest  the  entire  estate,  legal  and  equitable,  in  B,  as  though 
the  transfer  had  been  made  directly  to  him;  and  the 
same  effect  would  be  produced  if  the  grantor  should  at- 
tempt to  create  a  trust  upon  a  trust,  by  any  form  of  limi- 
tation, to  A  to  the  use  of  B,  in  trust  for  C.^  The  first  class 
of  express  trusts,  according  to  the  form  of  the  New  York 
statute,  is  strictly  confined  to  sales  for  the  benefit  of  cred- 
itors; by  the  form  of  the  California  statute,  the  class 
clearly  includes  every  kind  of  active  trust  which  em- 
powers the  trustee  to  sell  or  convey  the  trust  land.'  The 
second  class  permits  a  trust  to  mortgage  or  lease  lands, 
and  with  the  money  raised  by  the  mortgage,  or  the  rents 
from  the  leasing,  to  pay  any  kind  of  testamentary  gift,  or 
to  pay  off  any  encumbrance  which  may  be  on  the  land, 
but  not  for  the  purpose  of  paying  general  creditors.' 
The  third  class  authorizes  a  most  useful  kind  of  trust  in 


^  This  has  been  expressly  settled  in 
New  York,  and  there  can  be  no  doubt 
that  the  same  result  •would  take  place 
in  the  other  states.  Even  if  the  stat- 
ute of  uses  of  Henry  VIII.  is  not  re- 
garded as  re-enacted,  the  provisions  of 
the  modern  statutes  abolishing  passive 
uses  and  trusts  are  based  upon  the 
same  policy  as  the  original  legislation. 
And  since  these  state  statutes  are  more 
mandatory  in  their  language,  there 
seems  to  be  no  room  left  for  the  inter- 
pretation which  permitted  a  passive 
trust  to  be  created  by  means  of  a 
use  limited  upon  a  use:  Knight  v. 
Weatherwax,  7  Paige,  182;  Braker  v. 
Deveraux,  8  Paige,  513,  518;  Johnson 
V.  Fleet,  14  Wend.  176,  180,  per  Nel- 
son, J.;  Rathbun  v.  Rathbun,  6  Barb. 
98;  Knickerbocker  Ins.  Co.  v.  Hill,  3 
Hun,  577;  Rawson  v.  Lampnian,  5 
N.  Y.  456;  Wright  v.  Douglass,  7 
N.  Y.  564;  Astor  v.  L'Amoreux,  4 
Sand.  524;  and  see  Hill  v.  Den,  54 
Cal.  6;  Wormouth  v.  Johnson,  58  Cal. 
621;  Patton  v.  Chamberlain,  44  Mich. 
5;  Toms  v.  Williams,  41  Mich.  552. 
[See  also  Syracuse  Savings  Bank  v. 
Holden,  105N.  Y.  415;  Crok  v.  Rinda- 
koff,  105  N.  Y.  475;  Sullivan  v.  Bruh- 
ling,  66  Wis.  472;  Farmers'  Nat.  Bank 
V.  Morau,  30  Minn.   165;  Townsheud 


V.  Frommer,  125  N.  Y.  446  (a  trust  to 
convey  on  the  happening  of  a  specified 
event  is  active,  and  will  be  validated 
as  a  power).] 

'  In  New  York  a  trust  to  sell  for 
any  other  purpose  than  payment  of 
creditors  is  void  as  a  trust,  but  valid 
and  effectual  as  a  power  in  trust:  Sel- 
den  V.  Vermilyea,  1  Barb.  58.  In 
California,  the  following  are  illustra- 
tions: Sale  for  benefit  of  creditors: 
Grant  v.  Burr,  54  Cal.  298;  Bateinan 
V.  Burr,  57  Cal.  4S0;  Gschwend  v. 
Estes,  51  Cal.  134;  Sharp  v.  Good- 
win, 51  Cal.  219;  Tyler  v.  Granger,  48 
Cal.  259;  Thompson  v.  McKay,  41  Cal. 
221,  230;  Learned  v.  Wei  ton,  40  Cal. 
349;  Handley  v.  Pfister,  39  Cal.  283; 
2  Am.  Rep.  449.  For  benefit  of  lega- 
tees: Estate  of  Delaney,  49  Cal.  76, 
86;  Auguisola  v.  Arna/,  51  Cal.  435, 
438.  [See  also  Cooke  v.  Piatt,  98 
N.  Y.  35  (it  is  essential  to  the  validity 
of  trusts  of  this  class  that  the  power 
conferred  shall  be  absolute  and  imper- 
ative).] In  my  opinion,  this  form  would 
include  a  trust  simfily  to  convey  the 
land  to  some  designated  person  or 
class,  for  the  validity  of  the  trust  can- 
not depend  upon  the  amount  of  th« 
proceeds. 

"  Lang  V.  Ropke,  5  Sand.  303. 


§  1005  EQUITY    JURISPRUDENCE.  1486 

marriage  and  family  settlements,  and  in  testamentary 
provisions  for  widows  and  children.  If  the  provisions  of 
the  trust  unduly  suspend  the  power  of  alienation,  it  is 
void.  It  should  be  observed  that  attempted  trusts  not 
valid  as  conforming  to  this  class  may  be  effectual  as 
powers  in  trust.'  By  one  form  of  the  fourth  class  a  trust 
is  authorized  to  accumulate  income  for  the  benefit  of 
minors  in  being,  and  not  longer  than  during  their  minor- 
ity; every  other  form  of  accumulation  is  prohibited.  By 
the  other  form  the  accumulation  is  permitted  for  the 
benefit  of  married  women  as  well  as  minors.^ 

§  1005.  Interest,  Rights,  and  Liabilities  of  the  Benefi- 
ciary.—  Although  the  beneficiary  in  all  these  classes  of 
express  trusts  takes  no  estate,  this  does  not  prevent  him 
from  taking  or  holding  the  estate,  or  being  vested  with 
the  ultimate  estate,  after  the  trust  is  ended.*  He  also 
has  a  right,  —  a  thing  in  action;  and  how  far  this  is  as- 
signable, or  may  be  reached  by  his  creditors,  depends 
upon  the  nature  and  particular  provisions  of  the  trust.* 

1  The  number  of  New  York  decia-  72  N.  Y.  408;  Moore  v.  Hegeman,  72 

ions  concerning  this  species  is  great,  N.  Y.  376;  Heermans  v.  Burt,  78  N. 

discussing  and  settling  many  questions  Y.  259;  Donovan  v.  Van  de  Mark,  78 

of  detail.     The  following  are  the  most  N.  Y.  244;  Ireland  v.  Ireland,  84  N.  Y. 

important:  Lorillard's  Case,  14  Wend.  321;  Delaney  v.  Van  Aulen,  84  N.  Y. 

265;  Hawley  v.  James,   16  Wend.  61;  16;  Toms  v.  Williams,  41  Mich.  552; 

Kane  v.  Gott,  24  Wend.  641;  35  Am.  Meth.  Church  etc.  v.  Clark,  41  Mich. 

Dec.  641;  Hone's  Ex'rsv.  Van  Schaick,  730;    Lyle   v.    Burke,  40   Mich.    499; 

20  Wend.   564;  Moore  v.   Moore,   47  Smith  v.  Ford,  48  Wis.  115;  White  v. 

Barb.    257;    Burke   v.    Valentine,    52  Fitzgerald,   19  Wis.  4S0;  Goodrich  v. 

Barb.  412;  Killam  v.  Allen,  52  Barb.  City  of  Milwaukee,  24  Wis.  422;  over- 

605;  Leggett  v.  Perkins,  2  N.  Y.  297;  ruling  Marvin  v.  Titsworth,   10  Wis. 

Amory  v.  Lord,  9  N.  Y.  403;  Savage  320;    Cutter  v.    Hardy,  48  Cal.   568; 

V.  Burnham,   17  N.  Y.  561;  Beekman  Estate  of  Delaney,  49  Cal.  76;  [Wood- 

V.  Bonsor,  23  N.  Y.  298;  80  Am.  Dec.  ward  v.  James,  115  N.  Y.  356;  Cooke 

269;  Downing  v.   Marshall,  23  N.  Y.  v.  Piatt,  98  N.  Y.  35.] 

366;  80  Am.  Dec.  290;  Gilman  v.  Red-  *  For   construction,  see   Hawley  v. 

dington,  24  N.  Y.  9;  Everitt  V.  Everitt,  James,   16  Wend.  61;  Vail  v.  Vail,  4 

29  N.  Y.  39;  Post  v.  Hover,  33  N.  Y.  Paige,  317,  328;  Morgan  v.  Masterton, 

593;  Harrison  v.   Harrison,  36  N.  Y.  4  Sand.  442;  Harris  v.  Clark,  7  N.  Y, 

543;  Schettler  v.  Smith,  41  N.  Y.  328;  242;  Kilpatrick  v.  Johnson,  15  N.  Y. 

Manice  v.  Manice,  43  N.  Y.  303;  Ver-  322;  Dodge  v.  Pond,  23  N.  Y.  69;  Gil- 

noa  V.  Vernon,  53  N.  Y.  351;  Kiah  v.  man  v.  Reddington,  24  N.  Y.  9;  Toms 

Grenier,  56  N.  Y.  220;  Heermans  v.  v.  Williams,  41   Mich.  552;  [Pray  v. 

Robertson,  64  N.  Y.  332;  Provost  v.  Hegeman,  92  N.  Y.   508;  Barbour  v. 

Provost,  70  N.  Y.   141;  Stevenson  v.  De  Forest,  95  N.  Y.  13.] 

Lesley,  70  N.  Y.  512;  Verdin  v.  Slo-  »  Stevenson  v.  Lesley,  70  N.  Y.  512. 

cum,   71   N.  Y.   345;  Garvey  v.   Mc-  *  In  all  trusts  of  the  first  and  second 

Devitt,  72  N.  Y.  556;  Low  v.  Harmony,  classes,  where  a  fixed  sum  is   to   be 


1487 


EXPRESS    PRIVATE    TRUSTS. 


§  1005 


The  entire  estate  is  vested  in  the  trustee,  but  his  power 
to  make  a  valid  sale  and  conveyance  will  depend  upon 
the  nature  of  the  trust  and  the  form  of  the  instrument 
by  which  it  is  declared.^ 


paid  to  the  beneficiary,  as  to  the  cred- 
itor, a  legatee,  etc.,  he  may  clearly 
assign  his  right,  so  that  the  assignee 
would  become  entitled  to  the  pay- 
ment. The  interest  of  the  beneficiary 
in  these  kinds  is  also  plainly  subject 
to  be  reached  by  his  creditors.  In 
trusts  of  the  third  and  fourth  classes, 
even  without  any  statutory  prohibi- 
tion, it  seems  inconsistent  with  the 
whole  scheme  that  the  rights  of  the 
beneficiary  should  be  assignable.  In 
several  of  tlie  states  following  the 
New  York  type,  his  power  to  assign 
is  expressly  taken  away;  in  California 
he  may  be  restrained  from  assigniag 
by  the  terms  of  the  trust:  Civ.  Code, 
sec.  867. 

In  trusts  of  the  third  class,  to  re- 
ceive rents  and  profits  for  the  benefi- 
ciary, if  there  is  no  valid  provision  for 
their  accumulation,  the  surplus  of  the 
income  over  what  is  reasonably  neces- 
sary, under  all  the  circumstances,  for 
his  support,  education,  etc.,  may  be 
reached  by  the  creditors  of  the  benefi- 
ciary, by  means  of  a  proper  equitable 
action.  The  trust  may  authorize  the 
application  of  the  income  for  the  sup- 
port of  the  beneficiary's  family  as  well 
as  of  himself;  in  such  a  case  only  the 
surplus  over  what  was  needed  for  both 
could  be  reached.  It  is  also  settled 
by  the  decisions  that  a  provision  to 
the  effect  that  the  rights  of  the  ben- 
eficiary should  cease,  and  the  trust 
should  shift  on  behalf  of  another  per- 
son—  e.  g.,  the  beneficiary's  wife  — 
in  case  a  judgment  was  recovered 
against  him,  or  in  case  his  interest 
became  liable  to  the  claims  of  credi- 
tors, is  valid  and  operative:  See  Noyes 
V.  Blakeman,  3  Sand.  531;  6  N.  Y. 
667;  Bramhall  v.  Ferris,  14  N.  Y.  41; 
67  Am.  Dec.  11.3;  Graff  v.  Bonnett.  31 
N.  Y.  9;  88  Am.  Dec.  236;  Campbell 
V.  Foster,  35  N.  Y.  361;  Williams  v. 
Thorn,  70  N.  Y.  270;  81  N.  Y.  381; 


Cruger  v.  Jones,  18  Barb.  467;  Genet 
V.  Beekmau,  45  Barb.  382;  Kennedy  v. 
Nunan,  52  Cal.  326.  In  trusts  of  the 
fourth  class,  to  accumulate  for  the  ben- 
efit of  minors,  the  interest  of  the  ben- 
eficiaries is  clearly  beyond  the  reach  of 
their  creditors  during  the  existence  of 
the  trust. 

'  In  trusts  of  the  first  class,  being 
expressly  created  for  the  purpose  of  a 
sale,  the  trustee  may,  of  course,  sell 
and  convey  a  good  title:  See  Learned 
V.  VVelton,  40  Cal.  349;  Thompson  v. 
McKay,  41  Cal.  221.  230;  Sprague  v. 
Edwards,  48  Cal.  239;  Saunders  v. 
Schmselzle,  49  Cal.  59.  In  trusts  of 
the  other  kinds,  the  trustee  had  no 
authority  to  sell  or  convey.  Still,  if 
the  trust  is  not  declared  in  the  same 
instrument  by  which  the  land  is  con- 
veyed to  the  trustee,  a  purchaser  from 
him  without  notice  of  the  trust,  and 
for  a  valuable  consideration,  takes  a 
good  title  freed  from  the  trust;  a  pur- 
chaser with  notice,  or  without  a  val- 
uable consideration,  takes  the  land 
subject  to  the  trust,  and  becomes  him- 
self a  trustee:  Holden  v.  New  York 
and  Erie  Bank,  72  N.  Y.  286;  New  v. 
NicoU,  73  N.  Y.  127;  29  Am.  Rep.  Ill; 
Griffin  V.  Blanchar,  17  Cal.  70;  Thomp- 
son V.  Toland,  48  Cal.  99;  Sharp  v. 
Goodwin,  51  Cal.  219;  Scott  v.  Um- 
barger,  41  Cal.  410;  Price  v.  Reeves, 
38  Cal.  457;  Lathrop  v.  Bampton,  31 
Cal.  17;  89  Am.  Dec.  141.  When  the 
trust  is  declared  in  the  same  instru- 
ment by  which  the  land  is  conveyed 
to  the  trustee,  every  sale  or  other  act 
by  him  in  contravention  of  the  trust 
is  absolutely  void;  a  purchaser  or 
grantee  would  obtain  no  title  what- 
ever: Powers  V.  Bergen,  6  N.  Y.  358; 
Belmont  v.  O'Brien,  12  N.  Y.  394; 
Smith  V.  Bowen,  35  N.  Y.  83;  Briggs 
V.  Palmer,  20  Barb.  392;  Cruder  v. 
Jones,  18  Barb.  467;  Leitch  v.  Wells. 
48  Barb.  637. 


1006  EQUITY   JURISPRUDENCE.  1488 

SECTION  III. 

HOW  EXPRESS  TRUSTS  ARE  CREATED. 


§  1006.     Trusts  of  real  property;  statute  of  frauds;  writing  necessary. 

§  1007.     Written  declaration  by  tlie  grantor;  ditto,  by  the  trustee;  ex- 
amples. 

§  1008.     Trusts  of  personal  property  may  be  created  verbally;  what 
trusts  are  not  within  the  statute. 

§  1009.     Words  and  dispositions  suflBcient  to  create  a  trust;  examples. 
§§  1010-1017.     Express  trusts  inferred  by  construction,  sometimes  improperly 
called  "implied  trusts." 

§  1011.     1.  From  the  powers  given  to  the  trustee. 

§  1012.     2.  Provisions  for  maintenance;  examples. 

§  1013.     3.  To  carry  out  purposes  of  the  will. 

§  1014.     4.    From  "precatory"  words;  Knight  v.  Knight;  examples. 

§  1015.     Modern  tendency  to  restrict  this  doctrine;  in  the  United  States. 

§  1016.     What  intention  necessary  to  create  the  trust;  the  general  cri. 
terion;  examples. 

§  1017.     Objections  to  the  doctrine. 

§  1006.  Trusts  of  Real  Property  —  Statute  of  Frauds.  — 
Before  the  statute  of  frauds,  trusts  of  real  as  well  as  per- 
sonal property  could  be  created  or  declared  —  technically 
averred  —  verbally.^  The  original  statute  of  frauds  pro- 
vides that  "  all  declarations  or  creations  of  trusts,  or  con- 
fidences in  any  lands,  tenements,  or  hereditaments,  shall 
be  manifested  and  proved  by  some  writing  signed  by  the 
party  who  is  by  law  enabled  to  declare  the  trust,  or  by 
his  last  will  in  writing,  or  else  they  shall  be  utterly  void"; 
also,  that  "all  grants  and  assignments  of  any  trust  or 
confidence  shall  likewise  be  in  writing,  signed  by  the 
party  granting  or  assigning  the  same,  or  by  such  last  will 
or  devise  [as  mentioned  in  §  5],  or  else  shall  likewise  be 

'  It  seems,  however,  that  this  power  ton  v.   Cann,   3  Atk.    141,    149,    151 

of  declaring  a  trust  of  land  verbally  Osterman   v.   Baldwin.   6   Wall.    116 

did  not  exist  when  the  land  was  con-  Murphy  v.   Hubert,   7    Pa.    St.    420 

veyed  by  a  deed  absolute  on  its  face;  Shelton  v.  Shelton,  5  Jones  Eq.  292 

only  applying  to  conveyances  by  feoff-  Anding  v.  Davis,  38  Miss.  574;  77  Am. 

ment  without  a  deed:  See  Fordyce  v.  Dec.   658;    but   see   Dean  v.  Dean,  6 

Willis,  3  Brown  Ch.  577,  587;  Adliug-  Conn.  285. 


1489  HOW    EXPRESS    TRUSTS    ARE    CREATED.  §   1007 

utterly  voidj'  This  last  clause  refers  to  assignments  by 
the  cestui  que  trust.  Analogous  statutes  have  been  en- 
acted in  the  American  states.^  It  is  the  settled  doctrine, 
in  interpreting  this  legislation,  that  a  trust  of  land  need 
not  be  created  nor  declared  by  a  writing;  it  need  only  be 
manifested  and  proved  by  some  writing  duly  signed  or 
subscribed  by  the  proper  party;  and,  as  a  consequence, 
this  written  evidence  may  be  a  separate  instrument,  either 
simultaneous  with  or  subsequent  to  the  deed  of  convey- 
ance, and  may  be  very  informal.^ 

§  1007.  Written  Declaration  by  the  Grantor,  or  by  the 
Trustee.  —  The  written  evidence  of  the  trust  which  will 
satisfy  the  statute  may  come  from  the  grantor,  — the  one 
who  intends  that  a  trust  shall  be  created  for  a  certain 
beneficiary,  — or  from  the  trustee,  —  the  grantee  to  whom 
the  land  is  conveyed  for  the  purposes  of  the  trust,  but 
not  from  the  cestui  que  trust.  The  grantor  may  declare 
the  trust  in  the  will  or  the  deed  by  which  the  land  is  con- 
veyed or  devised,  or  in  an  instrument  separate  and  dis- 
tinct from  the  conveyance;  or  he  may  declare  himself  a 
trustee,  and  that  he  holds  the  land  in  trust,  without  con- 
veying the  legal  title.'     When  the  trust  is  not  created  in 

1  29  Car.  II.,  c.  3,  sees.  7-9.  The  oa  Trusts,  sec.  78,  note;  also  Williams 
§  5  referred  to  in  the  clause  above  v.  Hodges,  95  N.  C  32;  Pierson  v.  Pier- 
quoted,  prescribed  the  mode  of  exe-  son,  5  Del.  Ch.  11;  Harvey  v.  Gardner, 
cuting  a  will  of  land.  The  American  41  Ohio  St.  642;  Clark  v.  Haaey,  02 
statutes  dififer  cousideraljly  from  the  Tex.  511;  50  Am.  Rep.  536.] 
English,  and  among  themselves,  in  ^  Forster  v.  Hale,  3  Ves.  698;  Deu- 
their  language.  Still,  unless  the  terms  ton  v.  Davies,  18  Ves.  499,  503;  Ani- 
of  a  particular  statute  are  radicalbj  a  brose  v.  Ambrose,  1  P.  Wms.  322; 
departure  from  the  original  type,  and  Davies  v.  Ottj',  33  Beav.  540;  Ganlner 
are  mandatory  in  form,  requiring  the  v.  Rowe,  2  Sim.  &  St.  346;  5  Russ. 
trust  to  be  created  by  the  conveyance  258;  Smith  v.  ]MatthewH,  3  De  Gex,  F, 
itself,  the  interpretation  adopted  by  &  J.  139;  Movan  v.  Hays,  1  Johns, 
the  English  courts  prevails  through  Ch.  339,  342;  Pinney  v.  Fellows,  15 
the  American  states.  The  various  Vt.  525;  Sime  v.  Howard,  4  Nev.  473, 
statutes  are  regarded  as  substantially  483;  Flagg  v.  Mann,  2  Sum.  486:  Cor- 
the  same:  Perry  on  Trusts,  sec.  81.  nelius  v.  Smith,  55  Mo.  528;  [Wiser 
[The  statutes  of  frauds  in  a  number  of  v.  Allen,  92  Pa.  St.  317;  Gordon  v. 
the  states  have  omitted  the  paragraph  McColloh,  66  Md.  245.] 
relating  to  the  creation  or  declaration  *  Patton  v.  Beecher,  62  Ala.  579  (aa 
of  trusts.  Mr.  Perry  enumerates  Con-  express  trust  cannot  be  created  by  pa- 
necticut,  Delaware,  Virginia,  North  rol  on  a  deed  al)solute  on  its  face); 
Carolina,  Texas,  Tennessee,  Kentucky,  Wallace  v.  Wainwright,  87  Pa.  St.  263; 
Ohio,  and  Indiana.  To  these  should  Hearst  v.  Puji.l,  44  Cal.  2.30,  235;  Miles 
be  added  West  Virorinia:  See  Perry  v.  Thome,  38  Cal.  335;  99  Am.  Deo. 
2  Eq.  Jur.  — 94 


§  1007 


EQUITY    JURISPRUDENCE. 


1490 


and  by  the  instrument  of  conveyance,  it  may  be  suffi- 
ciently declared  and  evidenced  by  the  trustee  to  whom 
the  land  is  conveyed,  or  who  becomes  holder  of  the  legal 
title;  and  this  may  be  done  by  a  writing  executed  simul- 
taneously with  or  subsequent  to  the  conveyance,  and  such 
writing  may  be  of  a  most  informal  nature.^     The  trustee's 


384;  Taylor  v.  Sayles,  57  "N.  H.  465; 
Barnes  v.  Taylor,  27  N.  J.    Eq.   259; 
Tanner  v.  Skinner,    11   Bush,    120  (a 
party    declaring    himself    a    trustee); 
Urann   v.    Coates,   109   Mass.    581    (a 
memorandum   signed   by  a  decedent, 
not   addressed   to   any  person,  found 
among  his  papers,  a  sufficient  declara- 
tion of  trust  with  respect  to  certain 
land,    constituting    him     a    trustee); 
Lynch  v.  Clements,  24  N.  J.  Eq.  431 
(while  a  grantor  may  declare  a  trust 
in  a  separate  instrument  accompany- 
ing the  deed,  a  testator  who  devises 
land  cannot  declare  a  trust  in  a  valid 
manner  by  means  of  a  separate  writ- 
ing which  is  not  duly  executed  with 
the  formalities  required  for  the  execu- 
tion of  a  will,  even  though  the  writing 
is  referred  to  in  the  will);  Homer  v. 
Homer,  107  Mass.  82  (a  mere  memo- 
randum in  a  ledger  is  not  sufficient); 
Bragg  V.  Paulk,  42  Me.  502;  Bates  v. 
Hurd,  65  Me.    ISO;  McClellan  v.  Mc- 
Clellan,  65  Me.  500;  Packard  v.  Put- 
nam,  57  N.  H.  43;  Faxon  v.  Folvey, 
110  Mass.  392;Movanv.  Hays,  1  Johns. 
Ch.  339;  Gomez  v.  Tradesmen's  Bank, 
4  Sand.  102,  106;  Harrison  v.  McMen- 
nomy,  2  Edw.  Ch.  251 ;  Wright  v.  Doug- 
lass, 7  N.  Y.  564;  Cook  v.  Barr,  44  N. 
Y.  156;  Duffy  v.  Masterson,  44  N.  Y. 
557;  Berrien  v.  Berrien,  4  N.  J.    Eq. 
37;  Ivory  v.  Burns,  56  Pa.   St.   300; 
Raybold  v.  Ray  bold,  20  Pa.  St.  308; 
Maccubbin  v.  Cromwell,  7  Gill  &  J. 
164;  Johnson  v.  Ronald,  4  Muuf.  77; 
Skipwith's    Ex'r    v.    Cunningham,    8 
Leigh,  271;  31  Am.  Dec.  642  {the  cestui 
que  ti-ust  need  not  join  in  executing 
the  writing);  Reid  v.  Reid,  12  Rich. 
Eq.  213;  Gibson  v.  Foote,  40  Miss.  788; 
Kmgsbury  v.  Burnside,  58  HI.  310;  11 
Am.  Rep.  67;  Sime  v.  Howard,  4  Nev. 
473,  482.     The  grantor  may  declare  the 
trust  by  an  instrument  separate  from 
the  conveyance  to  the  trustee:  Wood  v. 
Cox,  2  Mylne  &  C.  684  (a separate  testa- 
mentary paper);  Smith  v.  Attersoll,  1 
Russ.    '266  (a   paper    accompanying   a 
will  although  not  duly  executed  as  a 


will;  see,  per  contra.  Lynch  v.  Clements, 
stifra);  Inchiquin  v.  French,  1  Cox, 
1;  but  the  separate  instrument  must 
be  contemporaneous  with  the  convey- 
ance, or  a  part  of  the  same  single  trans- 
action; where  the  title  has  been  vested 
in  a  grantee,  his  rights  cannot  be  de- 
feated by  a  subsequent  and  wholly  in- 
dependent act  of  the  grantor:  Adling- 
ton  V.  Cann,  3  Atk.  141,  145;  Crabb  v. 
Crabb,  1  Mylne  &  K.  511;  Kilpin  v. 
Kilpin,  1  Mylne  &  K.  520,  532;  De 
Laurencel  v.  De  Boom,  48  Cal.  581; 
Chapman  v.  Wilbur,  3  Or.  326;  Ben- 
nett V.  Fulmer,  49  Pa.  St.  155;  Brown 
V.  Brown,  12  Md.  87. 

1  Letters,  recitals,  memoranda,  etc., 
have  been  held  sufficient  evidence  of  a 
trust:  Smith  v.  Matthews,  3  De  Gex,  F. 
&  J.  139;  Gardner  v.  Rowe,  2  Sim.  &  St. 
346;  5  Russ.  258;  Dale  v.  Hamilton,  2 
Phill.  Ch.  266;  Forster  v.  Hale,  3  Ves. 
696;  Union  Mut.  Ins.  Co.  v.  Campbell, 
95  111.  267;  35  Am.  Rep.  166  (notice 
in  writing  given  by  the  grantee  stat- 
ing that  the  property  in  fact  belonged 
to  certain  named  beneficiaries,  a  suf- 
ficient declaration  of  trust);  Rogers 
Locomotive  etc.  Works  v.  Kelly,  19 
Hun,  399  (receipt  by  a  bank  that 
money  deposited  was  in  trust  for  spe- 
cified purposes);  Bates  v.  Hurd,  65 
Me.  180  (a  distinct  written  statement 
specifying  the  terms  ot  the  trust,  and 
the  parties  to  it,  subscribed  by  the 
trustee,  whether  addressed  to  or  de- 
livered to  the  cestui  que  trust  or  not,  or 
whether  intended  to  be  evidence  of  the 
trust  or  not  when  made,  is  a  sufficient 
declaration);  McClellan  v.  McClellan, 
65  Me.  500  (it  is  sufficient  that  a'trust 
is  declared  by  a  writing  subscribed  by 
the  trustee  subsequent  to  the  convey- 
ance); De  Laurencel  v.  De  Boom,  48 
Cal.  581  (testator  devised  land  to  A 
on  the  face  of  the  will  absolutely;  on 
the  same  day  the  will  was  executed, 
testator  wrote  a  letter  to  A,  stating 
that  the  devise  was  on  trust  for  cer- 
toin  purposes  which  were  sufficiently 
specified;  afterwards,  and  during  tea- 


1491 


HOW    EXPRESS    TRUSTS    ARE    CREATED.  §  1008 


acceptance  of  the  trust  may  be  express  by  his  executing 
the  conveyance  or  otlier  instrument,  or  by  assenting  to 
the  will;  or  it  may  be  inferred  from  hjs  dealing  with  the 
property;  and  prima  facie  he  is  presumed  to  accept.*  An 
acceptance  by  the  trustee  is  necessary,  in  order  to  bind 
him,  but  not  in  order  to  validate  the  trust.  A  refusal  to 
accept  or  disclaimer  frees  the  trustee  named  from  any  duty 
to  act  under  the  trust,  but  the  rights  of  the  beneficiary  do 
not  depend  upon  his  acceptance.  A  court  of  equity  never 
suffers  an  express  trust  to  fail  from  want  of  a  trustee.' 

§  1008.  Trusts  of  Personal  Property  may  be  Created 
Verbally.  — The  provisions  of  the  statute  of  frauds  apply 
to  chattels  real,'  but  not  to  money  secured  by  mortgages 


ta'tor'a  lifetime,  A,  in  writing,  ac- 
knowledged the  letter,  accepted  the 
trusts,  and  promised  to  carry  them 
out.  Held,  that  the  express  trust 
was  declared,  and  A  took  the  land  as  a 
trustee);  Tanner  v.  Skinner,  11  Bush, 
120  (explicit  statement  by  a  party  de- 
claring himself  a  trustee);  Moore  v. 
Pickett,  62  111.  15S  (letter  written  by 
the  trustee;  and  the  lands  mentioned 
in  the  letter  as  affected  by  the  trust 
may  be  identified  by  evidence  of  the 
surrounding  circumstances);  Kings- 
bury V.  Burnside,  58  111.  310;  11  Am. 
Rep.  67  (by  letter  of  trustee);  John- 
son V.  Deloney,  35  Tex.  42  (the  same); 
Phelps  V.  Seely,  22  Gratt.  573  (the 
same);  Baldwin  v.  Humphrey,  44 
N.  Y.  609  (grantees  declaring  them- 
selves trustees  by  a  written  agree- 
ment); Packard  v.  Putnam,  57  N.  H. 
43;  Ivory  v.  Burns,  56  Pa.  St.  300; 
fLoring  v.  Palmer,  118  U.  S.  321  (trust 
<;ontained  in  a  series  of  letters  and 
agreements);  Cain  v.  Cox,  23  W.  Va. 
.694  (title  bond);  Newkirk  v.  Place,  47 
N.  J.Eq.  477  (letters);  McCandless  v. 
Warner,  26  W.  Va.  754;  Gay  lord  v. 
City  of  La  Fayette,  115  lud.  423.] 
Even  where  there  has  l>een  no  other 
■writing,  the  admissions  by  a  party  de- 
fendant in  an  answer  in  chancery  may 
be  a  sufficient  declaration  of  trust: 
Patton  V.  Cliamberlain,  44  Mich.  5; 
Broadrup  v.  Woodman,  27  Ohio  St. 
5.33;  McLaurie  v.  Partlow,  53  111.  340; 
Cozine  v.  Graham,  2  Paige,  177;  Mac- 
^jubbiu  v.  Cromwell.  7  Gill  &  J.  157, 
164;  [McVay  v.  McVay,  43  N.  J.  Eq. 


47;  Garnsey  v.  Gothard,  90  Cal.  603.] 
As  to  the  defendant's  denial  of  the  al- 
leged parol  agreement,  or  his  express 
pleading  of  the  statute,  in  his  answer, 
see  Ontario  Bank  v.  Root,  3  Paige, 
478;  Dean  v.  Dean,  9  N.  J.  Eq.  425; 
Wolf  v.  Corby,  30  Md.  35(5,  360;  Bil- 
lingsleav.  Ward,  33  Md.  48,  51;  Allen 
V.  Cliambers,  4  Ired.  Eq.  125. 

1  Montford  v.  Cadogan,  17  Ves.  485, 
489;  19  Ves.  635,  6.38;  Urch  v.  Walker, 
3  Mylne  &  C.  702;  Kirwan  v.  Daniel, 
5  Hare,  493;  Eyrick  v.  Hetrick,  13 
Pa.  St.  488,  493;  Flint  v.  Clinton  Co., 
12  N.  H.  430,  432;  Lyle  v.  Burke,  40 
Mich.  499;  Hearst  v,  Pujol,  44  Cal. 
230,  235.     [See  also  §  1060,  note.] 

*  Whether  the  want  arises  from  the 
fact  that  no  trustee  was  named,  or 
from  the  trustee's  refusal  to  act,  or 
from  other  cause,  the  court  will  ap- 
point a  trustee,  or  will  treat  the  per- 
son in  whom  the  legal  title  is  vested  as 
a  trustee:  King  v.  Donnelly,  5  Paige, 
46;  Cushney  v.  Henry,  4  Paige,  345; 
Shepherd  v.  McEvers,  4  Johns.  Ch. 
136;  8  Am.  Dec.  561;  Crocheroa  v. 
Jaques,  3  Edw.  Ch.  207;  De  Barante 
V.  Gott,  6  Barb.  492;  Griffith's  Adm'r 
V.  Griffith,  5  B.  Mon.  113;  Furman  v. 
Fisher,  4  Cold.  626;  94  Am.  Dec.  210; 
Peter  v.  Beverly,  10  Pet.  532;  Druid 
Park  etc.  Co.  v.  Oettinger,  53  Md.  46; 
Adams  v.  Adams,  21  Wall.  185  (the 
trustee's  refusal  to  accept  does  not  im- 
pair the  beneficiary's  rights);  [Minot 
V.  Tilton,  64  N.  H.  371  (same).] 

3  F.)rster  v.  Hale,  3  Ves.  696;  Riddle 
V.  Emerson,  1  Veru.  108. 


1009 


EQUITY    JURISPRUDENCE. 


1492 


and  other  charges  upon  land.'  Nor  does  the  statute  ex- 
tend to  trusts  of  pure  personalty;  and  such  trusts  may 
therefore  be  created,  declared,  or  admitted  verbally,  and 
proved  by  parol  evidence,  although  the  consensus  of 
authorities  demands  clear  and  unequivocal  evidence.^ 
Trusts  which  arise  by  operation  of  law  —  resulting  and 
constructive  trusts  —  are,  in  express  terms,  excepted  from 
the  statute. 

§  1009.  Words  or  Dispositions  SuBBcient  to  Create  a 
Trust.  — What  words  or  dispositions,  either  in  the  written 
or  the  verbal  declaration,  do  or  do  not  operate  to  create 
a  trust?     It  is  assumed  in  the  present  discussion  that  the 

^  Benbow  v.  Townsend,  1  Mylne  & 
K.  506;  Bellasis  v.  Compton,  2  Vera. 
294;  [Tapia  v.  Demartini,  77  Cal.  383; 
11  Am.  St.  Rep.  288.] 

*  McFadden  v.  Jenkyns,  1  Phill.  Ch. 
153,  157;  Hawkins  v.  Gardiner,  2 
Smale  &  G.  441,  451;  Clapp  v.  Emery, 
98  111.  523  (a  son  collected  and  in- 
vested in  his  own  name  money  of  his 
mother.  Held,  his  parol  statement 
showed  a  trust,  and  not  a  mere  loan); 
Hon  V.  Hon,  70  Ind.  135  (trust  in 
personal  property  created  verbally); 
ReiEf  V.  Horst,  52  Md.  255  (a  son-in- 
law  receiving  money  from  his  father- 
in-law  verbally  agreed  to  hold  it,  and 
also  another  sum  previously  received, 
in  trust  for  his  own  children.  Held,  a 
trust  was  impressed  on  loth  sums); 
Davis  V.  Coburn,  128  Mass.  377  (a 
trust  in  personal  property  may  be 
shown  by  parol  evidence);  Chace  v. 
Chapin,  130  Mass.  128  (the  same); 
Gadsden  v.  Whaley,  14  S.  C.  210  (a 
person  may  create  a  trust  in  personal 
property  by  verbally  declaring  him- 
self a  trustee  for  the  donee;  no  par- 
ticular form  of  words  is  necessary, 
and  the  trust  may  be  proved  by  cir- 
cumstances as  well  as  by  direct  evi- 
dence of  the  declarations);  Ray  v. 
Simmons,  11  R.  I.  266;  23  Am.  Rep. 
447;  (an  owner  of  personalty  may  ver- 
bally declare  that  he  holds  it  in  trust 
for  another;  e.  g.,  A,  depositing  money 
in  a  bank  in  his  own  name,  may  orally 
declare  that  he  holds  it  as  trustee  for 
B);  Silvey  v.  Hodgdon,  52  Cal.  363  (A 
took  out  a  policy  of  insurance  on  his 
own  life  in  name  of  his  daughter,  B,  and 
on  the  face  of  it  iu  her  favor;  a  verbal 


agreement  was  made  that  she  should 
hold  it  in  trust  for  all  A's  children. 
Held,  that  a  valid  trust  was  created, — 
a  very  instructive  case);  Eaton  v.  Cook, 
25  N.  J.  Eq.  55  (an  oral  direction  by 
a  creditor  to  his  debtor  to  hold  the 
money  due  in  trust  for  A  creates  a 
valid  trust  in  favor  of  the  donee,  A); 
Hooper  V.  Holmes,  11  N.  J.  Eq.  122;. 
Kimball  v.  Morton,  5  N.  J.  Eq.  26,  31; 
43  Am.  Dec.  621;  Barkley  v.  Lane'* 
Ex'r,  6  Bush,  587;  Higgenbottom  v. 
Peyton,  3  Rich.  Eq.  39S;  Maffitt'a 
Adm'r  v.  Rynd,  69  Pa.  St.  380  (al- 
though upon  a  conveyance  of  land  a 
verbal  declaration  of  trust  in  favor  of 
the  grantor  or  other  person  is  void 
under  the  statute,  yet  such  a  verbal 
declaration  by  the  grantee  after  a  con- 
version of  the  land  into  money  cre- 
ates a  valid  trust  with  respect  to  the 
proceeds).  See  Lister  v.  Hodgson,  L. 
R.  4  Eq.  30.  [To  the  same  effect, 
Hess's  Appeal,  112  Pa.  St.  168;  Calder 
V.  Moran,  49  Mich.  14;  Edinger  v. 
Heiser,  62  Mich.  598;  Mohn  v. 
Mohn,  112  Ind.  285;  Thomas  v.  Merry, 
113  Ind.  88;  but  see  Wolford  v.  Farn- 
ham,  44  Minn.  159  (a  parol  agreement 
by  grantee  to  hold  land  for  grantor 
until  sold,  and  when  sold,  pay  him  the 
proceeds,  void).  See  also,  on  the  gen- 
eral subject,  Barry  v.  Lambert,  98- 
N.  Y.  305;  Cobb  v.  Knight,  74  Me. 
253;  Chace  v.  Chapin,  130  Mass.  12S 
(subsequent  declarations  of  transferrer 
assented  to  and  acted  upon  by  the 
transferee,  admissible  to  establi.-jl\ 
trust);  Chase  v.  Perley,  148  Mass.  289; 
Dauser  v.  Warwick,  33  N.  J.  Eq.  133; 
Roach  v.  Caraffa,  S5  Cal.  437.] 


1493      HOW  EXPRESS  TRUSTS  ARE  CREATED.     §  1009 

property  is  directly  conveyed  to  or  is  held  by  the  person 
alleged  to  be  a  trustee.  In  the  first  place,  as  has  already 
been  shown,  a  mere  voluntary  promise  to  give  property 
in  trust  does  not  create  a  trust,  nor  any  right  which  a 
court  of  equity  will  enforce.*  In  the  second  place,  no  pre- 
cise form  of  words  is  necessary  to  create  a  trust,  but  the 
intention  must  be  clear.  The  fact  that  a  trust  of  lands 
is  created  must  not  only  be  manifested  and  proved  by  a 
writing  properly  executed,  but  it  must  also  be  manifested 
and  proved  by  such  a  writing  what  the  trust  is.  The 
declaration  of  trust,  whether  written  or  oral,  must  be  rea- 
sonably certain  in  its  material  terms;  and  this  requisite 
of  certainty  includes  the  subject-matter  or  property  em- 
braced within  the  trust,  the  beneficiaries  or  persons  in 
whose  behalf  it  is  created,  the  nature  and  quantity  of 
interests  which  they  are  to  have,  and  the  manner  in  which 
the  trust  is  to  be  performed.  If  the  language  is  so  vague, 
general,  or  equivocal  that  any  of  these  necessary  elements 
of  the  trust  is  left  in  real  uncertainty,  then  the  trust  must 
fail."     No  particular  technical  words  need  be  used;  even 

»  Young  V.  Young,  80  N.  Y.  422;  36  Baker,  18  Beav.  372;  Stubbs  v.  Sargon, 

Am.    Rep.   634;  Estate  of   Webb,   49  2  Keen,  255;  Cruvvys  v.  Colmau,  9  Ves. 

Cal.  541;  and  see  ante,  §§  997,  998,  un-  319,  .323,  per  Sir  William  Grant;  Steere 

der   head   of    voluntary   trusts.       On  v.  Steere,  5  Johns.  Ch.  1;  9  Am.  Dec. 

the  same  principle,  a  mere  unfinished,  256;    Porter  v.   Bank  of   Rutland,   19 

inchoate  purpose  expressed   does  not  Vt.  410;  Carpenter  v.  Cushman,   105 

create  a  trust:  Bayley   v.  Boulcott,  4  Mass.  417,  419;   Inhabs.  of   Freeport 

Russ.    345;    Donohoe  v.    Conrahy,    2  v.    Bartol,  3   Greenl.    340;   Brown   v. 

Jones  &  L.  688,  694;  Bellinger's  Ap-  Combs,  29  N.  J.  L.  36;  Harris's  Ex'ra 

peal,  71  Pa.  St.  425;  nor  the  mere  ex-  v.  Barnett,  3  Gratt.  339;  Rutledge  v. 

pression  that  the   property  was  "in-  Smith,   1  McCord  Eq.  119;  Norman  v. 

tended"    for  a  certain  person:    Hays  Burnett,  25  Miss.  183;  Mercer  v.  Stark, 

V.  Quay,  68  Pa.  St.  263.  1  Smedes  &  M.  Ch.  479;  Barkley  v. 

^  It  does  not  follow  that  the  gran-  Lane's  Ex'r,  6  Bush,  587;  Slocum  v. 
tee,  devisee,  or  legatee  takes  the  prop-  Marshall,  2  Wash.  C.  C.  397;  Russell 
erty  absolutely  free  from  the  trust  in  v.  Switzer,  63  Ga.  711  (certainty  neces- 
such  case;  if  the  trust  attempted  to  be  sary);  Hill  v.  Den,  54  Cal.  6  (a  con- 
created  fails  for  reason  of  uncertainty,  veyance  by  A  to  himself  and  his 
and  the  instrument  shows  an  intention  brother  jointly  as  trustees  for  A's 
that  the  immediate  donee  was  not  to  children);  Smith  v.  Ford,  48  Wis.  115 
take  and  hold  the  beneficial  interest,  (trust  created  by  express  words  on  be- 
then  a  trust  results  to  the  donor:  See  half  of  grantor's  wife  and  children); 
post,  §  1032;  Knight  v.  Boughton,  11  Chili  First  Presb.  Soc.  v.  Bowen,  21 
Clark  &  F.  513;  Smith  v.  Matthews,  3  Hun,  389  (no  valid  trust  without  a  cer- 
De  Gex,  F.  &  J.  1.39;  Erisgs  v.  Penny,  tain  beneficiary);  Wallace  v.  Wain- 
3  Macn.  &  G.  546;  Williams  v.  Wil-  wriglit,  S7  Pa.  St.  263  (a  trust  exists 
liams,  1  Sim.,  N.  S.,  358;  Reeves  v.  where  the  legal  estate  is  in  oue  persoa 


1009 


EQUITY    JURISFRUDENCK. 


1494 


the  words  "trust"  or  "trustee"  are  not  essential;  any- 
other  words  which  unequivocally  show  an  intention  that 


and  the  equitable  in  another) ;  Cockrell 
V.  Armstrong,  31  Ark.  580  (express 
words  not  necessary;  the  intention  to 
be  gathered  from  the  whole  instru- 
ment); Smith  V.  Bowen,  35  N.  Y.  83 
(the  words  "all  my  estate,  both  real 
and  personal,  I  give  to  my  wife,  to  be 
used  and  disposed  of  at  her  discretion 
for  the  benefit  of  herself  and  my  daugh- 
ters, M.,  L.  and  A.,"  held  to  create  a 
trust  in  favor  of  the  daughters  with 
respect  to  three  fourths  of  the  prop- 
erty); Zuver  V.  Lyons,  40  Iowa,  510 
(a  trust  to  A  for  life,  and  after  his 
death  the  title  in  fee  to  vest  in  his 
heirs,  creates  a  trust  estate  in  A  dur- 
ing his  life,  and  remainder  in  fee  to 
his  heirs,  contrary  to  the  rule  in  Shel- 
ley's case);  McElroy  v.  McElroy,  113 
Mass.  509  (where  a  deed  to  A  expressly 
creates  a  trust  in  favor  of  B,  the  haben- 
dum clause  and  the  covenants  do  not 
necessarily  limit  the  interest  of  the 
cestui  que  trust,  nor  give  any  beneficial 
interest  to  the  grantee,  A).  [See  also, 
in  general,  Obermiller  v.  Wylie,  36 
Fed.  Rep.  641;  Hamer  v.  Sidway,  124 
N.  Y.  550;  21  Am.  St.  Rep.  693; 
Blouin  V.  Phaneuf,  81  Me.  176;  Mc- 
Camant  v.  Nuckolls,  85  Va.  331  (dis- 
cretionary  power  merely);  Hemphill 
V.  Hemphill,  99  N.  C.  442;  Anderson 
V.  Crist,  113  Ind.  65;  Quinn  v.  Shields, 
62  Iowa,  129;  49  Am.  Rep.  141;  Ten- 
ney  v.  Simpson,  37  Kan.  579;  Rich- 
ardson V.  Seever's  Adm'r,  84  Va.  259, 
270  (gift  to  donor's  son-in-law  "for 
benefit  of  "  latter's  wife  and  children, 
no  trust  created;  words  merely  show 
motive  for  the  gift);  but  see  Creaswell's 
Adm'r  v,  Jones,  68  Ala.  420  (convey- 
ance to  son-in-law  "as  an  advance- 
ment" to  the  daughter,  "in  part  of 
her  distributive  share,"  creates  a  trust 
for  her);  Holt  v.  Wilson,  75  Ala.  53 
(antenuptial  agreement  that  wife's 
property  shall  "inure  and  belong  to" 
the  husband  is  a  declaration  of  trust).] 
Under  the  peculiar  law  of  Pennsyl- 
vania, an  express  trust  cannot  be  effect- 
ively created  in  behalf  of  a  woman 
unless  she  is  married,  or  unless  it  is 
created  in  contemplation  of  her  mar- 
riage: Snyder's  Appeal,  92  Pa.  St. 
504;  Pickering  v.  Coates,  10  Phila. 
65;  Ash  v.  Bowen,  10  Phila.  96.  No 
trust  will  be  created  where  the  prop- 


erty to  bo  the  subject-matter  is  left 
uncertain:  Bardswell  v.  Bardswell,  9 
Sim.  319;  Winch  v.  Brutton,  14  Sim, 
379;  Fox  V.  Fox,  27  Beav.  301;  Lech 
mere  v.  Lavie,  2  Mylue  &  K.  197 
Cowman  v.  Harrison,  10  Hare,  234 
Palmer  v.  Simmonds,  2  Drew.  221 
nor  where  the  objects  are  left  uncer 
tain:  Green  v.  Marsden,  1  Drew.  646 
White  V.  Briggs,  2  Phill.  Ch.  583, 
"Trust "  and  "trustee  "  not  essential, 
but  their  omission  might  be  a  strong 
evidence  of  the  intention:  King  v. 
Denison,  1  Ves.  &  B.  260,  273;  Crock- 
ett V.  Crockett,  1  Hare,  451;  Raikes  v. 
Ward,  1  Hare,  445;  Jubber  v.  Jubber, 
9  Sim.  503;  Inderwick  v.  Inderwick, 
13  Sim.  652;  Bibby  v.  Thompson,  32 
Beav.  646;  Porter  v.  Bank  of  Rutland, 
19  Vt.  410;  Aynesworth  v.  Haldeman, 
2  Duvall,  565.  571;  Tobias  v.  Ketchum, 
32  N.  Y.  319,  327,  328;  Smith  v. 
Bowen,  35  N.  Y.  83;  Sheets's  Estate, 
62  Pa.  St.  257,  566;  [Woodward  v. 
James,  115  N.  Y.  356;]  and  "trust" 
or  "trustee"  do  not  always  show  a. 
trust:  Brown  v.  Combs,  29  N.  J.  L. 
36;  Attorney-General  v.  Merrimack 
M.  Co.,  14  Gray,  586,  612;  Selden's 
Appeal,  31  Conn.  548;  Freedley's  Ap- 
peal, 60  Pa.  St.  344;  Richardson  v. 
Inglesby,  13  Rich.  Eq.  59;  Eldridge 
V.  The  See  Yup  Co.,  17  Cal.  44;  [Mat- 
ter of  Hawley,  104  N.  Y.  250.]  Sir 
William  Grant  said  in  Cruwys  v.  Col- 
man,  9  Ves.  319,  323,  that  three  things 
are  indispensable  to  constitute  a  valid 
trust:  1.  SuflScient  words  to  raise  it; 
2.  A  definite  subject;  and  3.  A  cer- 
tain or  ascertained  object.  It  is  the 
well-settled  rule  that  although  the 
purpose  to  create  a  trust  is  evident, 
still,  where  the  terms  of  its  creation: 
are  so  vague  and  indefinite  that  a 
court  of  equity  cannot  clearly  ascer- 
tain either  the  objects  or  the  persons 
who  are  to  take,  the  trust  will  be  held 
to  fail,  and  the  property  will  fall  into 
the  general  fund  of  the  author:  Power 
V.  Cassidy,  79  N.  Y.  602,  609;  35  Am. 
Rep.  550,  per  Miller,  J.;  Fowler  v. 
Garlike,  1  Russ.  &  M.  232;  Stubbs  v. 
Sargon,  2  Keen,  255;  3  Mylne  &  C. 
507;  Wood  v.  Cox.  2  Mylne  &  C.  684; 
Wheeler  v.  Smith,  9  How.  55,  79; 
[Dyer's  Appeal,  107  Pa.  St.  446.] 
This    requisite    applies   with    special 


1495 


HOW    EXPRESS    TRUSTS    ARE    CREATED. 


§  1009 


the  legal  estate  was  vested  in  one  person,  but  to  be  held 
in  some  manner  or  for  some  purpose  on  behalf  of  an- 
other, if  certain  as  to  all  other  requisites,  are  sufficient. 
On  the  other  hand,  if  the  words  "  trust  "  or  "  trustee  "  are 
employed,  they  do  not  necessarily  show  an  intention  to 
create  or  declare  a  trust.  It  sometimes  happens  that  an 
express  trust  arises,  not  from  any  definite  words,  but  from 
the  entire  dispositions  contained  in  the  will,  deed,  or  other 
instrument,  or  from  a  construction  of  all  its  terms.  Some 
examples  of  such  trusts,  both  in  real  and  in  personal  prop- 
erty, are  given  in  the  foot-note  as  illustrations.* 


force  to  private  trusts;  pnblic  or 
charitable  trusts  are  governed  by  a 
much  less  stringent  rule.  [The  bene- 
ficiaries need  not  be  named;  it  is  suffi- 
cient if  they  can  be  ascertained,  and 
parol  evidence  is,  of  course,  admissible 
in  case  of  a  latent  ambiguity:  Gilmer 
V.  Stone,  120  U.  S.  586;  First  National 
Bank  v.  Schween,  127  111.  573;  11  Am. 
St.  Rep.  174;  Sleepor  v.  Iselin,  62 
Iowa,  583;  Boardman  v.  Willard,  73 
Iowa,  22.] 

•  Examples  of  trusts  of  real  prop- 
erty: Janes  v.  Throckmorton,  57  Cal. 
368  (an  encumbered  estate  being  con- 
veyed to  A,  in  consideration  thereof 
he  gave  a  written  agreement  whereby 
he  covenanted  that  he  would  pay  off 
the  indebtedness  out  of  the  estate, 
and  if  any  money  or  land  remained 
after  payment  of  all  the  indebtedness, 
he  would  convey  one  fifth  part  thereof 
to  B.  Held,  that  a  trust  was  created 
in  favor  of  B;  and  A  having  freed  the 
estate  from  the  encumbrances,  and 
obtained  a  clear  title  in  himself,  that 
he  held  the  land  subject  to  a  trust  in 
B's  favor  with  respect  to  one  fifth 
thereof);  Wormouth  v.  Johnson,  58 
Cal.  621;  Taft  v.  Taft,  130  Mass.  461 
(testator  devised  land  to  his  daughter, 
with  full  power  to  dispose  of  the 
whole  or  any  part  or  any  of  the  pro- 
ceeds, to  devote  the  income,  etc.,  to 
the  maintenance  and  support  of  her- 
self and  her  children,  and  if  any  por- 
tion of  the  estate  was  undisposed  of 
during  her  life  or  by  her  last  will,  the 
same  was  to  be  held  for  her  children 
until  they  became  of  age  and  then 
paid  to  them.  Held,  that  no  trust 
was  created  in  favor  of  the  children, 


but  they  took  contingent  remainders); 
Toms  V.  Williams,  41  Mich.  552; 
Ferry  v.  Liable.  31  N.  J.  Eq.  566  (a 
testator's  direction  to  his  executors  to 
continue  his  business  creates  a  trust 
estate);  Donovan  v.  Van  de  Mark,  78 
N.  Y.  244;  Verdinv.  Slocum,  71  N.  Y. 
345;  Low  v.  Harmony,  72  N.  Y.  408; 
Vernon  v.  Vernon,  53  N.  Y.  351 
(trusts  under  New  York  statute); 
Smith  V.  Bowen,  35  N.  Y.  83;  Whit- 
comb  V.  Cardell,  45  Vt.  24.  Exam- 
ples of  trusts  of  personal  property: 
Trust  created,  or  not,  of  money  de- 
posited in  a  bank:  Stone  v.  Bishop,  4 
Cliff.  593;  Weber  v.  Weber,  58  How. 
Pr.  255;  Rogers  etc.  Works  v.  Kelly, 
19  Hun,  399;  Ray  v.  Simmons,  11  R.  I. 
266;  23  Am.  Rep.  447;  Martin  v.  Funk, 
75  N.  Y.  134;  31  Am.  Rep.  448;  Boy- 
kin  V.  Pace's  Ex'r,  64  Ala.  68,  (a  re- 
ceipt, "  Received  of  S.  P.  eight  hun- 
dred dollars,  in  trust  for  S.  P.,  minor, 
to  be  kept  and  used  for  his  benefit,  to 
the  best  of  my  ability,"  etc.,  creates 
a  valid  trust  which  cannot  be  varied 
by  parol  evidence);  Clapp  v.  Emery, 
98  III.  523  (trust  created  by  receiving 
and  investing  money  of  another  with 
verbal  declarations);  Reiff  v.  Horst> 
52  Md.  255  (trust  by  receiving  money 
with  verbal  directions);  Lylev.  Burke, 
40  Mich.  499  (a  written  declaration  of 
trust);  Kershaw  v.  Snowden,  30  Ohio 
St.  181  (money  placed  in  the  hands  of 
a  person  to  be  repaid  on  his  death, 
held  to  create  simply  the  relation  of 
debtor  and  creditor,  and  not  a  trust); 
Gadsden  v.  Whaley,  14  S.  C.  210  (a 
person  verbally  declares  himself  a 
trustee);  Ferry  v.  Liable,  31  N.  J. 
Eq.  566;  Morrison  v.  Kiustra,  55  Miss. 


§  1010  EQUITY   JURISPRUDENCE.  1496 

§  1010.  Express  Trusts  Inferred  by  Construction.  — 
There  is  another  important  class  of  express  trusts,  which 
are  not  directly  and  expressly  declared  by  the  terms  of 
the  instrument,  but  which  are  inferred  by  a  construction 
of  all  the  terms  and  dispositions.  They  are  all  cases 
where  the  court  infers  that  it  was  the  intention  of  the 
party  to  create  an  express  trust  for  some  purpose,  although 
he  has  not  expressed  that  intention  in  unequivocal  and 
direct  terms,  and  the  court  is  forced  to  gather  it  from  his 
general  expressions,  or  from  the  objects  and  purposes  of 
his  gift.  When  such  a  trust  is  found  by  the  court  to  have 
been  intended  by  the  party,  it  is  in  every  respect  an  ex- 
press active  trust, — has  no  resemblance  whatever  to  a  result- 
ing or  a  constructive  trust.  It  is,  in  fact,  an  express  trust 
which  the  donor  did  not  unmistakably  declare,  but  which 
the  court  has  helped  out  by  interpretation  and  inference. 
To  call  this  class  "implied  "  trust,  as  is  often  done,  is  not 
only  erroneous,  but  is  productive  of  confusion  and  mis- 
take.*    These  trusts  ordinarily  arise  from  a  construction 

71;  Jones  V.  Kent,   80  N.  Y.    585  (A  mere   deposit  of  money  in  a  savings 

sold   to   B   certain   stocks   for  a  sum  bank   by  one  person   in   the  name  of 

paid   down,  "and   one  half   of  what-  another);  Marcy  v.  Amazeen,  61  N.  H. 

ever  price  the  same  should  be  sold  for,  131;  60  Am.  Rep.  320  (same);  Robin- 

vvhen  sold,  over  and  above  that  sum."  son  v.  Ring,  72  Me.  140;  39  Am.  Rep, 

Held,  no  trust  created  of   the  stocks  308;  Boyd  v.  Munro,  32  S.  0.  249  (no 

ill   B's   hands);  Young  v.  Young,    SO  trust);   Continental   Bank  v.  Weems, 

N.  Y.  422;  36   Am.  Rep.  634;  People  69  Tex.  489;  5  Am.  St.  Rep.  85;  Ed- 

V.  Merchants'  and    Mechanics'  Bank,  son  v.  Angell,  58  Mich.  336  (no  trust); 

78  N.  Y.  269;  34  Am.  Rep.  532;  Sil-  Chadwick  v.  Chadwick,  59  Mich.  87; 

vey  V.  Hodgdon,  52  Cal.   363  (verbal  McLeod  v.  Evans,    66    Wis.    401;   57 

trust   in   a   policy   of   life  insurance);  Am.    Rep,  287;  Bowers  v.  Evans,  71 

Craige  v.  Craige,  9  Pliila.  545;  Eaton  Wis.  133;  Ellicott  v.  Barnes,  31   Kan. 

V.  Cook,  25   N.  J.  Eq.  55  (a  direction  170   (money   delivered    to   cashier   of 

by  a  creditor  to  his  debtor  to  hold  the  bank  to  pay  a  note  is  a  trust  fund); 

money  in   trust  for  a  thu-d   person);  compare  National  Bank  v.  Ellicott,  31 

Kitchen  v.  Bedford,   13  Wall.  413   (a  Kan.  173.] 

receipt  of  a  "sum"  in  railroad  bonds,         '  See   Lane  v.  Lane,  8   Allen,  350. 

with  a  promise  to  expend  "said  sum"  These  trusts  are  in  no  sense  implied, 

in  the  purchase  of  certain  lands,  held  if   that  word  is  used,  as  it  only  can 

to  constitute  a  trust  of  the  securities);  be  properly,  in  opposition  to  express. 

'{Miller   v.    Clark,    40  Fed.    Rep.   15;  They  are  a  species  of  express  trusts, 

Hamer  v.  Sidway,  124  N.  Y.  538,  550;  and  not  a  class  distinct  from  express 

21  Am.  St.  Rep.  693;  Willis  v.  Smyth,  trust.     They  differ  from  all  other  ex- 

91    N.  Y.  297;    Mabie   v.    Bailey,    95  press  trusts  only  in  degree,  and  not  in 

N.  Y.  206;  People  v.    City   Bank   of  kind.     In   every  instance   of   express 

Rochester,    96   N.  Y.    35;   Beaver   v.  trust,  the  court  must  see  an  intention 

Beaver,    117    N.  Y.   421;  15    Am.    St.  to  conveyor  to  hold  the  property  in 

Rep.  531  (trust   not   inferred  from  a  trust  for  some  purpose,  and  this  in- 


1497 


HOW   EXPRESS   TRUSTS   ARE    CREATED.  §  1011 


of  the  language  of  wills;  but  there  is  no  reason,  on  prin- 
ciple, why  they  may  not  also  arise  from  conveyances  and 
agreements  inter  vivos} 

§  1011.  1.  From  Powers  Given  to  the  Trustees.  —  Al- 
though no  trust  is  declared  in  express  terms,  nor  even 
mentioned,  still  the  intention  of  the  donor  to  create  the 
trust,  and  the  existence  of  the  trust  itself,  may  be  neces- 
sarily inferred  from  the  powers  and  authority  given  to 
the  grantee,  and  in  case  of  wills,  even  where  no  estate  is 
directly  devised  to  the  executors,  but  the  whole  estate  is 
apparently  given  to  the  beneficiaries,  the  trust  may  be 
necessarily  inferred  from  the  powers  and  authority  con- 
ferred upon  the  executors,  and  thus  from  a  construction 
of  the  entire  will  the  intention  may  be  shown  that  the 
executors  are  to  take  the  legal  title  as  trustees  of  an  ex- 
press active  trust.^     The  peculiarity  of  this  case  is,  that  the 

ceeds,"  etc.,  and  full  power  and  au- 
thority to  rent,  lease,  repair,  and  in- 
sure any  portion  of  the  said  estate, 
during  any  period  of  time  the  same 
may  remain  unsold  and  undivided." 
Here  appears  to  be  a  direct  gift  of  in- 
come to  the  widow  during  life,  and  a 
direct  gift  of  the  whole  principal  to 
the  children,  to  be  divided  after  the 
widow's  death.  There  is  no  direct 
gift  to  the  executors  at  all;  and  the 
words  "  trust,"  or  "  trustee,"  or  other 
similar  terms,  are  not  used.  The  court 
said  (p.  327):  "The  first  question,  then, 
is,  Are  the  executors  under  this  will 
made  trustees  of  an  express  trust? 
The  word  'trust'  or  'trustee'  is  not 
used  in  the  will,  but  that  is  only  a 
circumstance  to  be  noted  in  consider- 
ing the  question.  '  It  is  by  no  means 
necessary  that  the  donee  should  be 
expressly  directed  to  hold  the  prop- 
erty to  certain  uses,  or  in  trust,  or  as 

a  trustee It  is  one  of  the  fixed 

rules  of  equitable  construction  that 
there  is  no  magic  in  particular  words; 
and  any  expressions  that  show  un- 
equivocally the  intention  of  the  parties 
to  create  a  trust  will  have  that  etfect. 
It  was  said  by  Lord  Eldon  that  the 
word  "  trust  "  not  being  made  use  of  is 
a  circumstance  to  be  alluded  to,  but 
notliing  more;  and  if  the  whole  frame 
of  the  will  creates  a  triut,  the  law  is  thti 


tention  must  be  shown  by  the  lan- 
guage used;  in  one  instance  the  lan- 
guage is  direct  and  technical,  in 
another  it  is  not  so  technical,  but  the 
meaning  is  equally  plain;  in  the  pres- 
ent instance  there  is  no  such  direct 
language  used  to  show  that  intention, 
and  the  intention  is  gathered  from 
the  whole  instrument  or  from  the 
nature  of  the  dispositions.  The  term 
"implied  "  should  be  confined  exclu- 
sively to  those  trusts  which  arise  by 
operation  of  law,  and  are  opposed  to 
"express  "  trusts. 

1  See  Liddard  v.  Liddard,  28  Beav. 
266. 

'  The  case  of  Tobias  v.  Ketchum,  32 
N.  Y.  319,  327-331,  contains  so  full  a 
discussion  of  this  important  doctrine 
that  I  shall  quote  from  it  at  some 
length.  The  testator  gave  to  his 
widow  all  the  furniture  and  one  third 
of  the  income  of  the  land  during  her 
life,  and  to  his  chiMreti  all  the  rest 
and  residue  of  his  property,  real  and 
personal,  to  be  equally  divided  among 
them  within  six  months  after  the 
widow's  death.  He  tlien  appointed 
executors,  and  gave  them  power  to 
sell  real  estate,  if  necessary  to  make  a 
fair  division,  and  finally  said  that  he 
clothed  them  "with  full  power  and 
authority  to  carry  out  all  the  provis- 
ions of  this  will,"  "to  divide  the  pro- 


§1011 


EQUITY   JURISPRUDENCE. 


1498 


trust  arises,  and  the  legal  estate  is  vested  in  the  trustees, 
although  the  will  contains  no  disposition  by  which  the 
legal  estate  is  in  terms  devised  to  them.  The  doctrine  is 
settled  that,  in  dispositions  of  such  a  nature,  although 
there  is  no  devise  in  terms  to  them,  the  authority  con- 
ferred by  the  will  upon  the  executors  to  lease,  rent,  repair, 
insure,  pay  taxes,  assessments,  and  interest,  and  other- 
wise manage  the  trust  property,  and  to  pay  over  the  net 
income  to  the  devisees  or  legatees,  necessarily  carries  the 
legal  title  to  the  executors,  and  creates  an  express  active 
trust  in  them.  It  is  a  familiar  doctrine  that  where  land 
is  conveyed  or  devised  to  trustees,  and  they  have  active 
duties  to  perform,  they  take  the  legal  estate;  the  converse 
is  also  generally  true,  that  where  active  duties  are  pre- 


saine,  though  the  word  "trust"  is  not 
used':  Hill  on  Trustees,  orig.  ed.,  65, 
and  cases  cited.  We  are,  in  this  case, 
to  determine  the  question  by  the  au- 
thority conferred  and  the  duties  im- 
posed." The  court  then  went  into  a 
full  examination  of  the  powers  and 
duties  given  to  the  executors.  If  they 
had  only  authority  to  sell  the  land, 
and  to  make  an  equal  division  among 
the  children,  they  might  be  satisfied 
by  regarding  it  merely  as  a  power  in 
trust,  while  the  legal  estate  remained 
vested  in  the  devisees.  But  the  author- 
ity to  sell  aud  to  divide  among  the 
children,  together  with  the  authority 
to  lease,  rent,  insure,  pay  taxes,  inter- 
est, and  the  like,  showed  conclusively 
that  the  legal  estate  was  intended  to 
vest  in  the  executors.  These  powers 
lasted  during  the  life  of  the  widow; 
they  could  not  be  exercised  unless  the 
executors  were  clothed  with  the  legal 
estate;  they  necessarily  required  that 
the  executors  should  have  full  posses- 
sion of  the  corpus  of  the  property,  with 
full  power  to  manage  it  and  to  receive 
all  the  gross  income,  to  pay  all  charges, 
and  to  pay  only  the  net  income  to  the 
widow  and  children.  In  other  words, 
the  executors  were  trustees;  the  legal 
estate  vested  in  them  made  them  trus- 
tees. In  support  of  these  conclusions 
the  court  cited  and  commented  upon 
Lewin  on  Trusts,  248;  Barker  v. 
Greenwood,  4  Mees.  &  W.  421;  White 
V.    Parker,  1    Bing.   N,    C.   573;   Bir- 


mingham V.  Kirwan,  2  Schoales  &  L. 
444;  Leggett  v.  Perkins,  2  N.  Y.  297; 
Brewster  v.  Striker,  2  N.  Y.  19.  In 
conclusion,  the  court  said:  "These 
authorities  are  conceived  to  be  abun- 
dant to  establish  the  proposition  that 
the  authority  to  lease,  rent,  repair, 
insure,  pay  taxes,  assessments,  and 
interest,  aud  pay  net  income  to  dev- 
isees, carried  the  legal  title  to  the 
executors  in  this  case,  and  created  a 
trust  in  them,  valid  under  the  statute. " 
In  Brewster  v.  Striker,  2  N.  Y.  19, 
the  testator  devised  his  real  estate  to 
his  grandchildren,  and  then  provided 
that  the  lands  should  not  be  sold,  but 
the  executors  should  lease  or  rent 
them,  and  pay  the  rents  and  profits  to 
the  grandchildren;  the  executors  were 
held  to  be  trustees  and  to  take  the 
legal  estate.  See  also  Garvey  v.  Mc- 
Devitt,  72  N.  Y.  556,  562;  Smith  v. 
Scholtz,  68  N.  Y.  41;  Knox  v.  Jones, 
47  N.  Y.  389.  396;  Vernon  v.  Vernon, 
63  N.  Y.  351,  359;  Van  Nostrand  v. 
Moore,  52  N.  Y.  12,  18;  Wagstafif  v. 
Lowerre,  23  Barb.  209,  221;  Ferry  v. 
Liable,  31  N.  J.  Eq.  566  (a  direction 
to  the  executors  to  carry  on  the  tes- 
tator's business  creates  a  trust  estate 
in  them).  [See  Johnson  v.  Lawrence, 
95  N.  Y.  154.  See  also,  in  general. 
Ward  v.  Ward,  105  N.  Y.  73;  Toronto 
General  Trust  Co.  v.  Chicago  etc. 
K  R.  Co.,  123  N.  Y.  37;  Matter  of 
Denton,  102  N.  Y.  200.] 


1499  HOW    EXPRESS    TRUSTS    ARE    CREATED.  §  1012 

scribed  for  executors,  which  could  not  be  performed  un- 
less the  legal  estate  is  vested  in  them,  they  are  in  fact 
made  trustees,  and  necessarily  take  the  legal  estate  for 
the  purposes  of  the  trust. ^ 

§1012.  2.  Provisions  for  Maintenance. — A  second  spe- 
cies of  trust  by  inference  sometimes  arises  when  property 
is  given  to  a  parent,  or  person  in  loco  parentis,  with 
no  trust  declared  in  terms,  but  with  such  directions  for 
the  maintenance  of  his  family  or  children  as  enable  the 
court  to  infer  an  intention  on  the  part  of  the  donor  that 
the  property  should  be  held  in  trust  for  the  purposes  of 
the  maintenance.  No  definite  rule  can  be  laid  down; 
each  case  must  stand  upon  its  own  circumstances.  If  the 
language  is  suflScient  for  the  intention  to  be  clearly  in- 
ferred, the  trust  will  be  enforced;  otherwise  the  donee 
will  take  an  absolute  estate,  and  the  provisions  concern- 
ing maintenance  will  be  regarded  as  mere  motives  for  the 
gift  and  recommendations  addressed  to  his  discretion.^ 

'  In  general:  Wright  v.  Pearson,  1  Bowen,  35  N.  Y.  83  ("all  my  estate  I 

Eden,    119,    125;   Mott  v.   Buxton,   7  give  to  my  wife,  to  be  used  and  dis- 

Ves.  201.     To  receive  and   pay  over  posed  of  at  her  discretion  for  the  bene- 

rents:   Reynell  v.   Reyuell,   10  Beav.  tit  of  herself  and  my  daughters,  A,  B, 

21;  Collier  v.  McBean,  34  Beav.  426;  and  C,"  created  a  trust  for  the  daugh- 

8ilvester  v.  Wilson,  2  Term  Rep.  444.  ters    as    to    three   fourths);    Lyon  v. 

*  Woods  V.    Woods,  1   Mylne  &  C.  Lyon,  65  N.  Y.  339  (a  testator  devised 

401;   Raikes  v.    Ward,   1    Hare,    445;  all  his  real  estate  to  his  sons,  provided 

Carr  v.  Living,  28  Beav.  644;  Bird  v.  that  the  house  should  be  his  daughter's 

Maybury,    33    Beav.    351;    Byne    v.  "home,  free  of  expense,  as  to  paying 

Blackburn,  26  Beav.  41;  Longmore  v.  any  reut  or  privilege  in  said  house. 

Elcum,  2  Younge  &  C.  Ch.  363,  369;  Held,  the    daughter  was   entitled   to 

Berry   v.    Briant,    2    Drew.    &    S.    1;  full  support  from  the  sons);  Biddle'a 

Whiting  V.  Whiting,  4  Gray,  236,  240;  Appeal,  80  Pa.  St.  258    (devise    to  a 

Andrews  v.  Bank  of  Cape  Ann,  3  Al-  trustee,  in  trust  for  testator's  widow, 

len,  313;  Smith  v.  Wildman,  39  Conn,  to  pay  the  income  to  her,  and  that  iu- 

387;  Paisley's  Appeal,  70  Pa.  St.  153,  come    to   be   applied    by   her   to   the 

158;  Whelan  V.  Reilly,  3  W.  Va.  597;  maintenance  of  his  children,  without 

Bryan  v.  Howland,  98  111.  625  (land  her  being  called  upon  to  give  any  ac- 

conveyed  to  a  trustee,  in  trust  for  A,  count  of  her  manner  of   applying  it; 

and  to  perndt  A  to  "use,  occupy,  pos-  held  to  create  no   trust  for  the  chil- 

sess,  enjoy,  rent,  etc.,  in  any  manner  dren);    Estate  of    Goodrich,    38  Wis. 

for    the    support,     maintenance,    and  492     (testator     devised     his     "  liome 

benefit  of   himself   and   his   children,"  farm,"   etc.,    to   his  son,  and    added, 

held  not  to  create  a  trust  in  favor  of  "my  wife  to  have  a  home  and  good 

the  children);  Taft  v.  Taft,  130  Mass.  support  as    long  as  she    lives  on   tlie 

461  (devise  to  a  daughter,  with  power  home  premises,  board  and  clothing," 

to  sell,  and   to   devote   the   proceeds  etc.      Held,  the   maintenance   of   the 

and  income  to  the  support  and  main-  widow  was  charged  upon  the  "home 

tenance  of   herself   and   her   children,  farm");  Young  v.  Young,  68   N.    C. 

no  trust  for  the  children);   Smith  v.  309  (testator  gave  all  his  property  to 


§  1013 


EQUITY   JURISPRUDENCE. 


1500 


§  1013.  3.  To  Carry  out  the  Purposes  of  the  Will.  — 
Trusts,  or  at  least  powers  in  trust,  are  sometimes  inferred 
from  the  terms  of  a  will,  when  an  intention  to  create  the 
same  is  necessary,  in  order  to  carry  out  the  directions  and 
purposes  of  the  testator.  For  example,  when  a  trustee  is 
ordered  to  pay  certain  moneys,  but  no  property  is  given 
him  with  which  to  make  the  payments,  or  when  execu- 
tors are  ordered  to  sell  the  real  estate,  or  the  real  estate 
is  charged  with  the  payment  of  the  testator's  debts,  —  in 
these  and  similar  cases  a  trust,  or  a  power  in  trust,  may 


his  widow,  "to  be  managed  by  her, 
and  that  she  may  be  enabled  the  bet- 
ter to  control  and  manage  our  chil- 
dren, to  be  disposed  of  by  her  to  them 
in  that  manner  she  may  think  best." 
Held,  a  trust  created  for  the  children); 
and  see  Parsons  v.  Best,  1  Thomp.  & 
0.  211.  [See  also  Blouin  v.  Phaneuf, 
81  Me.  176;  Bell  v.  Watkins,  82  Ala. 
512;  60  Am.  Rep.  756;  Pilcher  v.  Mc- 
Henry,  14  Lea,  77;  Seibel  v.  P^app,  85 
Va.  28  (no  trust  for  the  children  in 
the  last  case);  Spiers  v.  Roberts,  73 
Mich.  666  (absence  of  an  obligation  to 
account  decisive  against  the  trust 
character  of  the  provision);  Zimraer  v. 
Sennott,  134  111.  505  (a  devise  to  tes- 
tator's widow,  "upon  condition  that" 
she  shall  raise,  support,  and  educate  his 
children,  creates  no  trust).]  It  would 
be  diificult  to  reconcile  some  of  these 
American  decisions  with  the  current  of 
English  authorities.  The  following  is 
a  riiiumA  of  recent  English  cases:  — 

Where  a  bequest  is  made  so  that 
the  legatee  may  use  or  dispose  of  the 
income  for  the  benefit  of  himself  and 
the  maintenance  or  education  of  his 
children,  a  trust  is,  in  general,  created 
for  the  children  in  common  with  the  in- 
terest of  the  parent:  Woods  v.  Woods, 
I  Mylne  &  C.  401 ;  Berry  v.  Briant,  2 
Drew.  &  S.  1;  Castle  v.  Castle,  1  De 
Gex  &  J.  .352;  Byne  v.  Blackburn,  26 
Beav.  41;  Carr  v.  Living,  28  Beav. 
644;  Bird  v.  Maylmry,  33  Beav.  351; 
Hora  V.  Hora,  33  Beav.  88;  Wilson  v. 
Maddison,  2  Younge  &  C.  Ch.  372; 
Longmore  v.  Elcum,  2  Younge  &  C. 
Ch.  363,  370;  Staniland  v.  Staniland, 
34  Beav.  536.  Sometimes  the  language 
shows  that  it  was  not  the  testator's  in- 
tention for  the  parent  to  take  any  inter- 
est for  himself;  e.  g.,  a  gift  to  A  to  dis- 


pose of  among  his  children:  Blakeney 
v.  Blakeney,  6  Sim.  52;  or  a  gift  to  A 
to  enable  him  to  maintain  his  children 
until  they  become  of  age:  Wetherell 
V.  Wilson,  I  Keen,  80.  A  gift  to  A, 
to  be  disposed  of  for  the  benefit  of  him- 
splfandlds  children,  has  been  construed 
so  that  the  parent  took  a  life  estate 
with  a  -power  of  disposition  in  favor  of 
his  children,  which  would  be  a  power 
in  trust:  Armstrong  v.  Armstrong, 
L.  R.  7  Eq.  518;  Crockett  v.  Crockett, 
2  Phill.  Ch.  553;  Costabadie  v.  Costa- 
badie,  6  Hare,  410;  Gully  v.  Cregoe, 
24  Beav.  185;  Jeffery  v.  De  Vitre,  24 
Beav.  276;  Shovelton  v.  Shovelton,  32 
Beav.  142;  but  see  Lambe  v.  Eames, 
L.  R.  6  Ch.  597.  As  to  a  bequest  to  A, 
with  a  direction  that  B  should  reside 
with  and  be  maintained  by  A,  see  Wil- 
son V.  Bell,  L.  R.  4  Ch.  581.  On  the 
other  hand,  the  language  may  show  no 
intention  to  create  a  trust,  and  may 
simply  state  the  motive  for  the  gift. 
Thus  the  bequest  was  held  to  be  abso- 
lute in  the  following  cases:  A  bequest 
to  A,  to  enable  him  the  better  to  pro- 
vide for  his  children:  Brown  v.  Cassa- 
major,  4  Ves.  498;  a  bequest  to  A,  to 
enable  him  to  assist  his  children:  Ben- 
son v.  Whittam,  5  Sim.  22;  a  legacy 
to  A,  to  maintain  and  bring  up  B:  Bid- 
dies V.  Biddies,  16  Sim.  I;  Jones  v. 
Greatwood,  16  Beav.  527;  but  see 
Wheeler  v.  Smith,  I  Giflf.  300.  It 
must  be  conceded  that  the  cases  upon 
the  subject  of  maintenance  are  very 
confused,  and  even  contradictory. 
[See  also  Henry  v.  Strong,  39  Ch.  Div. 
443  (beneficiaries  under  a  discretionary 
trust  for  maintenance  have  no  assign- 
able interest  except  such  as  tiie 
trustees,  in  their  discretion,  may  allow 
them).] 


1501 


HOW    EXPRESS    TRUSTS    ARE    CREATED.  §   1014 


be  inferred,  iu  order  that  tlie  trustee  or  executor  may- 
carry  the  directions  into  effect.' 

§  1014.  4.  Precatory  Words.  —  The  most  common  and 
important  species  of  trusts  by  inference  are  those  which 
arise  where  a  testator  has  given  property  to  a  devisee  or 
legatee,  and  has  accompanied  his  gift  with  'precatory  words 
or  phrases,  implying  his  desire  or  wish  that  the  property 
should  be  used  for  the  benefit  of  some  designated  person 
or  persons,  or  should  be  applied  to  some  designated  pur- 
pose.''    "Words  expressing  direction,  recommendation,  en- 


»  Pitt  V.  Pelham,  2  Freem.  134;  1 
Ch.  Rep.  28.3;  Tenant  v.  Brown,  1 
Cas.  Ch.  180;  Blatch  v.  Wilder,  1  Atk. 
420;  Cook  v.  Fountain,  3  Swanst.  5S5; 
Hoxie  V.  Hoxie,  7  Paige,  187;  Walker 
V.  Whiting,  23  Pick.  3l3;  Fay  v.  Taft, 
12  Cush.  448;  Watson  v.  Mayrant,  1 
Rich.  Eq.  449;  Withers  v.  Yeadon,  1 
Rich.  Eq.  324;  Baker  v.  Red,  4  Dana, 
158.  [These  instances  should  be  dis- 
tinguished from  the  case  of  a  power  of 
sale  not  discretionary,  implying  no 
special  confidence  in  the  executor: 
such  power  belongs  to  the  oflBce  of  ex- 
ecutor, and  may  be  exercised  by  an 
administrator  with  the  will  annexed: 
See  Mott  v.  Ackerman,  92  N.  Y.  539.] 

» In  Knight  v.  Knight,  3  Beav.  148, 
172-174,  11  Clark  &  F.  513,  Lord 
Langdale  explained  this  doctrine  in 
the  following  manner:  "As  a  general 
rule,  it  has  been  laid  down  that  when 
property  is  given  absolutely  to  any 
person,  and  the  same  person  is,  by  the 
gi\rer  who  has  power  to  command, 
recommended,  or  entreated,  or  wished 
to  dispose  of  that  property  in  favor  of 
another,  the  recommendation,  or  en- 
treaty, or  wish  shall  be  held  to  create 
a  trust:  1.  If  the  words  are  so  used 
that,  upon  the  whole,  they  ought  to 
be  construed  as  imperative;  2.  If  the 
subject  of  the  recommendation  or  wish 
be  certain;  and  3.  If  the  objects  or 
persons  intended  to  have  the  benefit 
of  the  recommendation  or  wish  be  also 
certain.  In  simple  cases  there  is  no 
difficulty  in  the  application  of  the  rule 
thus  stated.  If  a  testator  gives  one 
thousand  pounds  to  A  B,  desiring, 
wishing,  recommending,  or  hoping 
that  A  B  will,  at  his  death,  give  the 
same  sum,  or  any  certain  part  of  it,  to 
O  D,  it  is  cousidered  that  0  D  is  aa 


object  of  the  testator's  bounty,  and  A 
B  is  a  trustee  for  him.  No  question 
arises  upon  the  intention  of  the  tes- 
tator, upon  the  sum  or  subject  intended 
to  be  given,  or  upon  the  person  or  ob- 
ject of  the  wish.  So  if  a  testator 
gives  the  residue  of  his  estate,  after 
certain  purposes  are  answered,  to  A 
B,  recommending  A  B,  after  his 
death,  to  give  it  to  his  own  relations, 
or  such  of  his  own  relations  as  he 
shall  think  most  deserving,  or  as  he 
shall  choose,  it  has  been  considered 
that  the  residue  of  the  property  — 
though  a  subject  to  be  ascertained  — 
and  that  the  relations  to  be  selected  — 
though  persons  or  objects  to  be  ascer- 
tained —  are  nevertheless  so  clearly  and 
certainly  ascertainable  —  so  capable  of 
being  made  certain  —  that  the  rule 
is  applicable  to  such  cases.  On  tlie 
other  hand,  if  the  giver  accompa- 
nies his  expression  of  wish  or  re- 
quest by  other  words,  from  which  it 
is  to  be  collected  that  he  did  not  in- 
tend the  wish  to  be  imperative;  or  if 
it  appears  from  the  context  that  the 
first  taker  was  intended  to  have  a  dis- 
cretionary power  to  withdraw  any 
part  of  the  subject  from  the  object  of 
the  wish  or  request;  or  if  the  objects 
are  not  such  as  may  be  ascertained 
with  sufficient  certainty,  — then  it  has 
been  held  that  no  trust  has  been  cre- 
ated. Thus  the  words  "free  and  un- 
fettered," accompanying  the  strongest 
expressions  of  request,  were  held  to 
prevent  the  words  of  request  from  be- 
ing imperative.  Any  words  by  which 
it  is  expressed,  or  from  which  it  may 
be  implied,  that  the  first  taker  may 
apply  any  part  of  the  subject  to  his 
own  use,  are  held  to  prevent  the  sub- 
ject of  the  gift  from  being  considered 


1014 


EQUITY    JURISPRUDENCE. 


1502 


treaty,  confidence,  hope,  expectation,  desire,  wish,  request, 
and  the  like,  are  included  under  the  denomination  "prec- 


certain;  and  a  vague  description  of  the 
object —  that  is,  a  description  by  which 
the  giver  neither  clearly  defines  the 
object  himself,  nor  names  a  distinct 
class  out  of  which  the  first  taker  is  to 
select,  or  which  leaves  it  doubtful 
what  interest  the  object  or  class  of 
objects  is  to  take  —  will  prevent  the 
objects  from  being  certain  within  the 
meaning  of  the  rule;  and  in  such 
cases  we  are  told  that  the  question 
'never  turns  upon  the  grammatical 
import  of  the  words,  —  they  may  be 
imperative,  but  not  necessarily  so;  the 
subject-matter,  the  situation  of  the 
parties,  and  the  probable  intent  must 
be  considered:  Meggison  v,  Moore,  2 
Ves.  632,  633,  And  'wherever  the 
subject  to  be  administered  as  trust 
property,  and  the  objects  for  whose 
benefit  it  is  to  be  administered,  are  to 
be  found  in  a  will  not  expressly  creat- 
ing a  trust,  the  indefinite  nature  and 
quantum  of  the  subject,  and  the  in- 
definite nature  of  the  objects,  are  al- 
ways used  by  the  court  as  evidence 
that  the  mind  of  the  testator  was  not 
to  create  a  trust;  and  the  difficulty 
that  would  be  imposed  upon  the  court 
to  say  what  should  be  so  applied,  or 
to  what  objects,  has  been  the  founda- 
tion of  the  argument  that  no  trust 
was  intended':  Morice  v.  Bishop  of 
Durham,  10  Ves.  535,  536;  or,  as  Lord 
Eldon  expresses  it  in  another  case, 
'  Where  a  trust  is  to  be  raised  charac- 
terized by  certainty,  the  very  diffi- 
culty of  doing  it  is  an  argument  which 
goes,  to  a  certain  extent,  towards  in- 
ducing the  court  to  say  it  is  not 
sufficiently  clear  what  the  testator  in- 
tended ':  Wright  v.  Atkyns,  Turn.  & 
R.  157,  159."  In  this  case  a  testator 
devised  his  estates  to  his  heir  at  law, 
—  a  brother, — and  added:  "I  trust 
to  the  liberality  of  my  successors  to 
reward  any  others  of  my  old  servants, 
and  to  their  justice  in  continuing  the 
estates  in  the  male  succession,  accord- 
ing to  the  will  of  the  founder  of  the 
family,  my  above-named  grandfather." 
Held,  that  no  trust  was  created;  the 
divisee  took  the  estate  absolutely  un- 
fettered by  any  trust  in  favor  of  the 
male  line.  One  of  the  most  recent 
decisions  in  which  the  subject  was 
carefully  considered  is  Foose  v.  Whit- 


more,  82  N.  Y.  405;  37  Am.  Rep.  572. 
Testator  said:  "I  do  give  and  be- 
queath all  my  property  to  my  beloved 
wife,  only  requesting  her  at  the  close 
of  her  life  to  make  such  disposition 
of  the  same  among  my  children  and 
grandchildren  as  shall  seem  to  her 
good."  Danforth,  J.,  said  (p.  406): 
"  The  tendency  of  modern  decisions 
is  not  to  extend  the  rule  or  practice 
which  from  words  of  doubtful  mean- 
ing deduces  or  implies  a  trust:  Lamb 
v.  Eames,  L.  R.  10  Eq.  267;  In  re 
Hutchinson  and  Tenant,  L.  R.  8  Ch. 
Div.  540.  When  this  doctrine  was 
applied,  the  object  sought  for  was  the 
intention  of  tiie  testator,  and  for  this 
the  context  of  the  will  was  looked  at, 
first,  to  ascertain  his  wishes,  if  any 
were  expressed,  and  next,  to  see 
whether  he  intended  to  impose  an  ob- 
ligation on  his  legatee  to  carry  them 
into  effect,  or  having  expressed  his 
wishes,  he  intended  to  leave  it  to  the 
legatee  to  act  on  them  or  not,  in  his 
discretion.  Cases  illustrating  both 
divisions  of  this  inquiry  are  collected 
by  various  text-writers.  They  are, 
however,  subject  to  the  rule  stated 
by  Lord  Cranworth  in  Williams  v. 
Williams,  1  Sim.,  N.  S.,  358,  368, 
that  '  the  real  question  always  is, 
whether  the  wish  or  desire  or  rec- 
ommendation that  is  expressed  by  the 
testator  is  meant  to  govern  the  con- 
duct of  the  party  to  whom  it  is  ad- 
dressed, or  whether  it  is  merely  an  in- 
dication of  that  which  he  thinks  would 
be  a  reasonable  exercise  of  the  discre- 
tion of  the  party,  leaving  it,  however, 
to  the  party  to  exercise  his  own  dis- 
cretion. "  Mr.  Justice  Danforth  then 
cites  Bernard  v.  MinshuU,  Johns.  276, 
Howarth  v.  Dewell,  6  Jur.,  N.  S., 
1360,  and  In  re  Hutchinson  and  Ten- 
ant, supra,  and  reaches  the  conclusion 
that  the  words  used  were  not  sufficient 
to  show  an  intention  on  the  part  of  the 
testator  to  create  any  trust.  [The  case 
of  Col  ton  V.  Colton,  127  U.  S.  300, 
illustrates  the  rule  that  a  trust  sought 
to  be  inferred  from  precatory  words  is 
not  necessarily  defeated  by  reason  of 
uncertainty  as  to  the  form  and  extent 
of  the  provision  intended,  and  because 
it  involves  the  exercise  of  discretion- 
ary power  on  the  part  of  the  trustee. 


1503 


HOW   EXPRESS   TRUSTS    ARE    CREATED.  §  1014 


atory."  As  a  most  general  statement  of  the  rule,  if  such 
words  are  strong  enough  to  indicate  the  intention,  and  this 
intention  is  not  defeated  hy  other  provisions  of  the  will, 
the  court  infers  that  the  property  was  given  on  trust  for 
the  person  or  object  indicated,  and  will  enforce  such  trust, 
according  to  its  nature,  as  a  similar  trust  declared  in  ex- 
press terms  would  be  enforced.* 


Mr.  Justice  Matthews  says  (pp.  319, 
320):  "We  have  seea  that  whatever 
discretion  is  given  by  the  will  to  the 
testator's  widow  does  not  affect  the 
existence  of  the  trust.  That  discretion 
does  not  involve  the  right  to  choose 
whether  a  provision  shall  be  made  or 
not;  nor  is  there  anything  personal  or 
arbitrary  implied  in  it.  It  is  to  be  the 
exercise  of  judgment  directed  to  the 
care  and  protection  of  the  beneficiaries 
by  making  such  a  provision  as  will  best 
secure  that  end.  There  is  nothing  in 
this  left  so  vague  and  indefinite  that  it 
cannot,  by  the  usual  processes  of  the 
law,  be  reduced  to  certainty.  Courts 
of  common  law  constantly  determine 
the  reasonable  value  of  property  sold, 
where  there  is  no  agreement  as  to 
price,  and  the  judge  and  jury  are  fre- 
quently called  upon  to  adjudge  what 
are  necessaries  for  an  infant,  or  reason- 
able maintenance  for  a  deserted  wife. 
The  principles  of  equity  and  the  ma- 
chinery of  its  courts  are  still  better 
adapted  to  its  inquiries."] 

*  The  following  are  some  of  the  Eng- 
lish cases  showing  what  precatory 
words  have  or  have  not  been  held  to 
create  a  trust:  Words  luldch  have  been 
held  sufficient:  "In  full  confidence": 
Le  March  ant  v.  Le  Marchant,  L.  R. 
18  Eq.  414;  Curnick  v.  Tucker,  L.  R. 
17  Eq.  320;  "well  knowing":  Briggs 
V.  Penny,  3  Macn.  &  G.  546;  "directs": 
White  V.  Briggs,  2  Phiil.  Ch.  583; 
"confides,"  "trusts  and  confides": 
Palmer  v.  Simmonds,  2  Drew.  221, 
225;  Griffiths  v.  Evan,  5  Beav.  241; 
Macnab  v.  Whitbread,  17  Beav.  299; 
"hopes,"  "doubts  not,"  "recom- 
mends ":  Paul  v.  C'ompton,  8  Ves.  375, 
380;  Tibbits  v.  Tibbits,  19  Ves.  656; 
Malim  v.  Keighley,  2  Ves.  33.3,  335; 
Hart  V.  Tribe,  18  Beav.  215;  but  see 
Meggison  v.  Moore,  2  Ves.  630;  "en- 
treats": Prevost  V.  Clarke,  2  Aladd, 
458;  "desires,"  "wills  and  desires": 
Stead  V.  Mellor,  L.  R.  5  Ch.  Div.  225; 


Birch  V.  Wade,  3  Ves.  &  B.  198;  Bon- 
ser    v.    Kinnear,     2    Giff.    195;    "re- 
quests," "wishes  and  requests":  Foley 
V.  Parry,  2  Mylue  &  K.  138;  Bernard 
V.    Minshull,    Johns.    276;    "requires 
and   entreats ":    Taylor   v.   George,  2 
Ves.    &   B.    378;    "I   direct"  that   A 
"shall  reside  with  and  be  maintained 
by"B:  Wilson  v.  Bell,  L.   R.   4  Ch. 
581.     Settlement  made  after  marriage 
in  pursuance  of  a  declaration  of  wish 
sustained:  Teasdale  v.  Braithwaite,  L. 
R.  5  Ch.  Div.  6.30;  and  see  Irvine  v. 
Sullivan,  L.  R.  8  Eq.  673.     Words  hdd 
not  sufficient:  "My  wish":  Paruall  v. 
Parnall,  L.  R.  9  Ch.  Div.  96;  "to  do 
justice  "  to  testator's  "relations":  In 
re    Bond,    L.     R.    4    Ch.     Div.    238; 
"hoping,"  "fullest confidence":  Eatoa 
V.  Watts,  L.  R.  4  Eq.    151;  proceeds 
to  be  applied  in  maintaining  children: 
Mackett  v.  Mackett,  L.  R.  14  Eq.  49; 
"  may  dispose  of  ...  .  for  the  good 
of  their  fainiliesi  ":  Alexander  v.  Alex- 
ander, 6  De  Gex,   M.  &  G.  593;  and 
generally,  where  the  intention  appears 
from  express  terms  or  from  the  whole 
disposition  that  the  devisee  or  legatee 
is  to  take  absolutely,  the  addition  of 
precatory  words,  even  though  standing 
alone  they  might  create  a  trust,  will 
not  cut  down  the  absolute  gift;  their 
fulfillment  is  left  to  the  donee's  own 
discretion:    Meredith   v.    Heneage,    1 
Sim.  542;  Wood  v.  Cox,  2  Mylne  &  C. 
684;  a  gift   "absolutely,"  to   dispose 
of,   etc.,   testator  having  "full  confi- 
dence," etc.:  In   re   Hutchinson   and 
Tenant,  L.  R.  8  Ch.  Div.  540;  "to  be 
at  her  disposal,"  "for  the  benefit  of 
herself  and  family  ":  Lambe  v.  Eames, 
L.  R.  10  Eq.  267;  6  Ch.  597;  a  gift  to 
A,  "for  his  own  use,  benefit,  and  dis- 
posal absolutely,"  nevertheless   "con- 
juring,"  or    "desiring,"   or    "recom- 
mending "  him  to  make  some  particular 
disposition:  Winch  v.  Brutton,  14  Sim. 
379;  Johnston  v.  Rowlands,  2  De  Gex 
&  S.   356;   Webb  v.  Wools,   2  Sim.. 


§  1015 


EQUITY   JURISPRUDENCE. 


1504 


§  1015.     Modern  Tendency  to  Restrict  the  Doctrine.  — 

I  shall  not  attempt  any  analysis  and  classification  of  the 
cases  for  the  purpose  of  formulating  more  specific  rules. 
This  has  been  done,  as  far  as  practicable,  in  the  various 
treatises  upon  trusts.  The  decisions  are  numerous  and 
conflicting.  Judges  have  for  some  time  past  shown  a  de- 
cided leaning  against  the  doctrine  of  precatory  trusts, 
and  a  strong  tendency  to  restrict  its  operation  within 
reasonable  and  somewhat  narrow  bounds;  many  of  the 
earlier  decisions  would  certainly  not  be  followed  at  the 
present  day.  The  courts  of  this  country  have  generally 
adopted  the  doctrine  substantially  as  settled  in  England, 
although  perhaps  with  some  caution  and  reserve,  and 
they  all  exhibit  the  modern  tendency  to  limit  rather  than 
enlarge  its  scope;  while  in  a  few  of  the  states  the  doctrine 
has  been  accepted  with  great  reluctance,  and  only  to  a 
partial  extent  and  in  a  modified  form.^ 


N.  S.,  267;  Abraham  v.  Alman,  1  Russ. 
509;  Reeves  v.  Baker,  18  Beav.  372; 
["feeling  confident  that  she  will  act 
justly  by  our  children  in  dividing"  the 
property,  "when  no  longer  required 
by  her  ":  Mussoorie  Bank  v.  Raynor, 
7  App.  Cas.  (Priv.  Coun.)  321;  de- 
vise to  wife  absolutely,  "in  full  confi- 
dence that  she  will  do  what  is  right  as 
to  the  disposal  thereof  between  my 
children":  la  re  Adams  Vestry,  24 
Ch.  Div.  199;  27  Ch.  Div.  394;  "it  is 
my  desire  that  she  allow  ":  Gregory  v. 
Edmondson,  39  Ch.  Div.  253.] 

The  following  are  among  the  most 
important  English  cases  not  mentioneil 
in  the  foregoing  abstract:  Harding  v. 
Glyn,  1  Atk.  469;  Pierson  v.  Garnet, 
2  Brown  Ch.  38,  226;  Harland  v.  Trigg, 
I  Brown  Ch.  142;  Cunliffe  v.  Cunliffe, 
Amb.  686;  Bland  v.  Bland,  2  Cox, 
349;  Horwood  v.  West,  1  Sim.  &  St. 
387;  Cary  v.  Carv,  2  Schoales  &  L. 
173,  189;  Shaw  v.  Lawless,  1  Lloyd  & 
G.  558;  5  Clark  &  F.  129;  Wright  v. 
Atkyns,  Turn.  &  R.  143,  157;  17  Ves. 
255;  19  Ves.  299;  Cruwys  v.  Colman, 
9  Ves.  319,  322;  Morice  v.  Bishop  of 
Durham,  10  Ves.  521,  535;  Paul  v. 
Compton,  8  Ves.  375,  3S0;  Knott  v. 
Cottee,  2  Phill.  Ch.  192;  Hinxman  v. 
Poyuder,  5  Sim.  546;  Sale  v.  Moore, 


1  Sim.  534;  Eade  v.  Eade,  5  Madd. 
IIS;  Curtis  v.  Rippon,  5  Madd.  434; 
Wood  V.  Cox,  1  Keen,  317. 

^  Dresser  v.  Dresser,  46  Me.  48; 
Cole  V.  Littlefield,  35  Me.  439;  Erick- 
son  V.  Willard,  1  N.  H.  217;  Van 
Amee  v.  Jackson,  35  Vt.  173;  Warner 
V.  Bates,  98  Mass.  274,  277;  Spooner 
V,  Lovejoy,  108  Mass.  529,  533;  Chase 
v.  Chase,  2  Allen,  101;  Homer  v.  Shel- 
ton,  2  Met.  194,  206;  Whipple  v. 
Adams,  1  Met.  444;  Foose  v.  Whit- 
more,  82  N.  Y.  405;  37  Am.  Rep.  572; 
Smith  v.  Bowen,  35  N.  Y.  83;  Domi- 
nick  v.  Sayre,  3  Sand.  555;  Parsons  v. 
Best,  1  Thomp.  &  C.  211;  Arcularius 
v.  Geisenhainer,  3  Bradf.  64,  75;  Van 
Duyne  v.  VanDuyne,  14  N.  J.  Eq.  397 
Ward  V.  Peloubet,  10  N.  J.  Eq.  304 
Williams  v.  Worthington,  49  Md.  572 
33  Am.  Rep.  286;  Tolsou  v.  Tolson 
10  Gill  &  J.  159;  Harrisons  v.  Harri 
sou's  Adm'x,  2  Gratt.  1;  44  Am.  Dec, 
365;  Crump  v.  Redd's  Adm'r,  6  Gratt 
372;  Reid's  Adm'r  v.  Blackstoiie,  14 
Gratt.  363;  Rhett  v.  Mason's  Ex'r,  18 
Gratt.  541;  Cook  v.  Ellington,  6  J.>iie3 
Eq.  371;  Carson  v.  Carson,  1  Ired.  Eq. 
329;  Young  v.  Young,  68  N.  C.  309; 
Lesesne  v.  Witte,  5  S.  C.  450;  Hunter 
v.  Stembridge,  12  Ga.  192;  Ingram  v. 
Fraley,  29  Ga.  553;  Lines  v.  Darden, 


1505  HOW   EXPRESS   TRUSTS    ARE    CREATED.  §  1016 

§  1016.  What  Intention  Necessary — The  General  Cri- 
terion.—  Whether  or  not  a  trust  lias  been  created  in  any 
particular  ease  is  entirely  a  question  of  interpretation 
and  construction.  The  intention  must  be  sought  for  not 
only  in  the  precatory  words  themselves,  but  also  in  the 
terms  and  qualifications  of  the  gift,  the  powers  of  dispo- 
sition or  enjoyment  conferred  upon  the  first  taker,  the 
nature  of  the  property,  the  description  of  the  supposed 
beneficiaries,  and  all  the  other  context.  Precatory  words 
may  be  used  which,  standing  alone,  would,  under  the  de- 
cisions, create  a  trust;  but  they  may  be  qualified  and 
controlled  by  other  expressions  showing  that  the  gift  is 
absolute,  and  that  everything  is  left  to  the  discretion  of 
the  devisee  or  legatee.  Each  case  must  therefore  turn 
upon  its  own  circumstances,  and  not  a  little  upon  the 
sentiments  and  prepossessions  of  individual  judges. 
With  respect  to  the  essential  elements  which  must  exist 
in  every  precatory  trust,  it  is  impossible  to  add  anything 
to  the  clear  and  accurate  statement  of  Lord  Langdale,  in 
the  case  of  Knight  v.  Knight,  already  quoted.  Those 
essentials  are  the  imperative  nature  and  meaning  of  the 
precatory  words,  the  certainty  of  the  subject-matter  or 
property  embraced  in  the  trust,  and  the  certainty  of  the 
objects  or  intended  beneficiaries.  Upon  the  authority  of 
the  more  modern  decisions,  the  whole  doctrine  may  be 
summed  up  in  a  single  proposition:  In  order  that  a  trust 
may  arise  from  the  use  of  precatory  words,  the  court 
must  be  satisfied   from   the  words  themselves,  taken  in 

6  Fla.  51;  McRee's  Adm'ra  v.  Means,  tions:  See  Harper  v,  Phelps,  21  Conn. 
34  Ala.  349;  Ellis  v.  Ellis's  Adm'rs,  257;  Gilbert  v.  Chapin.  19  Conn.  342; 
15  Ala.  296;  50  Am.  Dec.  132;  Lucas  Bull  v.  Bull.  8  Conn.  47;  20  Am.  Dec 
V.  Lockhart,  10  Smedes  &  M.  466;  48  86;  Coates's  Appeal,  2Pa.  St.  129;  Pen- 
Am.  Dec.  766;  Cockrill  v.  Armstrong,  nock's  Estate,  20  Pa.  St.  268;  59  Am. 
31  Ark.  580;  Collins  v.  Carlisle,  7  B.  Dec.  718;  Walker  v.  Hall,  34  Pa.  St. 
Mon.  13;  Hunt  v.  Hunt,  11  Nev.  442;  483;  Kinter  v.  Jenks,  43  Pa.  St.  445; 
[Rowland  v.  Rowland,  29  S.  C.  54;  Jauretche  v.  Proctor,  48  Pa.  St.  466;. 
Howze  V.  Barber,  29  S.  C.  466;  Hox-  Second  Church  v.  Disbrow,  52  Pa.  St. 
eey  v.  Hoxsey,  37  N.  J.  Eq.  46;  Corby  219;  Burt  v.  Herron,  66  Pa.  St.  400p 
V.  Corby,  85  Mo.  371.]  In  Connecti-  Paisley's  Appeal,  70  Pa.  St.  153;  Bid- 
cut  and  Pennsylvania  the  doctrine  has  die's  Appeal,  80  Pa.  St.  258;  [Bowlby 
been  accepted  with  great  reserve  and  v.  Thunder,  105  Pa.  St.  173;  Hopkins 
caution,  and  under  considerable  limita-  v.  Glunt,  ill  Pa.  St.  290.] 
2  Eq.  Jub.— 96 


§  1016 


EQUITY   JURISPKUDENCE. 


1506 


connection  with  all  the  other  terms  of  the  disposition, 
that  the  testator's  intention  to  create  an  express  trust  was 
as  full,  complete,  settled,  and  sure  as  though  he  had  given 
the  property  to  hold  upon  a  trust  declared  in  express  terms 
in  the  ordinary  manner.  Unless  a  gift  to  A,  with  prec- 
atory words  in  favor  of  B,  is  in  fact  equivalent  in  its 
meaning,  intention,  and  effect  to  a  gift  to  A,  "  in  trust  for 
B,"  then  certainly  no  trust  should  be  inferred.  The  early 
decisions  proceeded  perhaps  upon  a  more  artificial  rule, 
and  saw  an  intention  in  the  use  of  words  of  wish,  desire, 
and  the  like,  where  no  such  intention  really  existed.  The 
modern  decisions  have  adopted  a  more  just  and  reason- 
able rule,  and  require  the  intention  to  exist  as  a  fact,  and 
to  be  expressed  in  unequivocal  language.  No  other  con- 
clusion can  be  reconciled  with  the  general  principles  of 
construction  which  are  based  upon  reason  and  universal 
experience.*     It  has  sometimes  been  stated  as  a  general 


'  The  following  cases  are  given  more 
as  examples  of  the  essential  requisites, 
and  as  illustrations  of  the  conclusion 
reached  in  the  text:  Imperative  7iatiire 
of  the  v)ords:  Stead  v.  Mellor,  L.  E,. 
5  Ch.  Div.  225.  The  opinion  of  Jes- 
sel,  M.  R.,  in  this  case  shows  very 
clearly  the  positions  occupied  hy  mod- 
ern authorities,  and  fully  sustains  the 
correctness  of  the  criterion  laid  down 
above  in  the  text.  The  will  gave  the 
residue  to  A  and  B,  "  my  desire  being 
that  they  shall  distribute  such  residue 
as  they  think  will  be  most  agreeable 
to  my  wishes."  Held,  that  A  and  B 
took  the  residue  absolutely.  Sir 
George  Jessel  said,  among  other  things, 
(p.  228):  "  Unless  I  find  in  the  will 
something  equivalent  to  a  declaration 
that  the  residuary  legatees  take  as  trus- 
tees, I  must  hold  that  they  take  a  ben- 
eficial interest":  Briggs  v.  Penny,  3 
Macn.  &  G.  546,  554,  556,  per  Lord 
Truro;  Williams  v.  Williams,  1  Sim., 
N.  S.,  358,  368;  Meredith  v.  Heneage, 
1  Sim.  542,  550,  653;  Bardswell  v. 
Bardswell,  9  Sim.  319;  Knott  v.  Cot- 
tee,  2  Phill.  Ch.  192;  Lechmere  v. 
Lavie,  2  Mylne  &  K.  197;  Hood  v. 
Oglander,  34  Beav.  513;  Scott  v.  Key, 
35  Beav.  291;  Shoveltou  v.  Shovelton, 
32  Beav.  143;  Liddard  v.  Liddard,  28 


Beav.  266;  Eaton  v.  Watts,  L.  R.  4 
Eq.  151;  Foosev.  Whitmore,  82  N.  Y. 
405;  37  Am.  Rep.  572;  Cockrill  v. 
Armstrong,  31  Ark.  580;  Hunt  v. 
Hunt.  11  Nev.  442;  Riddle's  Appeal, 
80  Pa.  St.  258;  Van  Amee  v.  Jackson, 
35  Vt.  173,  177.  [  IVords  held  not  suffi- 
cient:  "Enjoin":  Lawrence  v.  Cooke, 

104  N.  Y.  632,  See  also  Bacon  v. 
Ransom,  139  Mass.  117;  Rose  v.  Por- 
ter,  141  Mass.  309;  Sturgis  v.  Paine, 
146    Mass.    354;  Dowlby  v.  Thunder, 

105  Pa.  St.  173;  Hopkins  v.  Glunt, 
111  Pa.  St.  290;  Giles  v.  Anslow,  128 
111.  187;  In  re  Whitcomb,  86  Cal. 
265.  Words  held  sufficient:  "Recom- 
mend," "request":  Colton  v.  Colton, 
127  U.  S.  300.  "If  she  find  it  conve. 
nient,  ....  I  wish  it  to  be  done  " : 
Phillips  V.  Phillips,  112  N.  Y.  197;  8 
Am.  St.  Rep.  737;  "desire":  Riker  v. 
Leo,  115  N.  Y.  98;  "request":  Eddy 
V.  Hartshorne,  34  N.  J.  Eq.  420.  See 
also  Low  V.  Low,  77  Me.  171;  Maught 
V.  Getzendanner,  65  Md.  527;  57  Am. 
Rep.  352.]  Certainty  of  subject-matter 
or  property:  Buggins  v.  Yates,  9  Mod. 
122;  Curtis  v.  Rippon,  5  Madd.  434; 
Pope  V.  Pope,  10  Sim.  1;  Bardswell 
v.  Bardswell,  9  Sim.  319;  Winch  v. 
Brutton,  14  Sim.  379;  Cowman  v. 
Harrison,    10   Hare,    234;  Russell   v. 


1507 


HOW  EXPRESS  TRUSTS  ARE  CREATED.     §  1017 


rule  that  a  prima  facie  presumption  of  an  intention  to 
■create  a  trust  arises  from  the  use  of  precatory  words. 
Whatever  may  have  been  true  of  the  earlier  cases,  the 
modern  authorities  do  not,  in  my  opinion,  sustain  any 
such  rule;  it  is  contrary  to  their  whole  scope  and  tenor. 

§  1017.  Objections  to  the  Doctrine. — The  doctrine  of 
precatory  trusts  has  never  met  with  unanimous  approval. 
Able  judges  have  dissented  from  it  on   principle,  have 


Jackson,  10  Hare,  204,  213;  Lechmere 
V.  Lavie,  2  Mylne  &  K.  197;  Palmer 
V.  Simmonds,  2  Drew.  221;  Fox  v. 
Fox,  27  Beav.  301;  Constable  v.  Bull, 
.3  De  Gex  &  S.  411;  Williams  v. 
Worthington,  49  Md.  572;  33  Am. 
Rep.  286;  Tolson  v.  Tolson,  10  Gill  & 
J.  159;  Ingram  v.  Fraley,  29  Ga.  553; 
[MussoorieBank.  V.  Raynor,?  App.  Gas. 
(Priv.  Coun.)  321;  Colton  v.Colton,  127 
U.  S.  300,  319,  320;  Knox  v.  Knox, 
59  Wis.  172;  48  Am.  Rep.  487;  Noe 
V.  Kern,  93  Mo.  367;  3  Am.  St.  Rep. 
544.]  Certainty  of  object,  the  persons, 
and  the  way  in  tvhich  the  -property  is  to 
go:  Green  v.  Marsden,  1  Drew.  646; 
White  V.  Briggs,  2  Phill.  Ch.  583;  Sale 
V.  Moore,  1  Sim.  534;  Malim  v.  Keigh- 
ley,  2  Ves.  333,  335;  Briggs  v.  Penny, 
3  Macn.  &  G.  546.  With  respect  to 
the  doctrine  in  all  of  its  phases,  see 
Harding  v.  Glyn,  1  Atk.  469;  2  Lead. 
Cas.  Eq.,  4th  Am.  ed.,  183.3,  1834- 
1848,  1857-1866;  [Handley  v.  Wright- 
son,  60  Md.  198;  Knox  v.  Knox,  59 
Wis.  172;  48  Am.  Rep.  487;  Noe  v. 
Kern,  93  Mo.  367;  3  Am.  St.  Rep. 
544.  The  case  of  Colton  v.  Colton, 
127  U.  S.  300,  317,  well  illustrates 
the  manner  in  which  the  intention  of 
the  testator  may  be  inferred  from  the 
situation  of  the  testator  at  the  time 
he  framed  the  provisions  of  the  will, 
from  his  relation  to  the  beneficiaries, 
and  the  like.  J 

Notwithstanding  the  imposing  line 
of  authorities,  there  has  always  been 
a  strong  dissent  from  the  doctrine  from 
judges  of  the  highest  ability,  who 
have  described  it  as  artificial,  and  its 
effect  as  violating  the  intention  of 
parties.  The  following  are  a  few  ex- 
amples: In  Sale  v.  Moore,  1  Sim.  534, 
540,  Sir  Anthony  Hart,  V.  C,  said: 
"The  first  case  that  construed  words 
of  recommendation  into  a  command 
made  a  will  for  the  testator;  for  every 


one  knows  the  distinction  betweea 
them."  In  Wright  v.  Atkyns,  1  Ves. 
&  B.  31.%  315,  Lord  Eldon  said:  "This 
sort  of  trust  is  generally  a  surprise  on 
the  intention,  but  it  is  too  late  to  cor- 
rect that."  In  the  important  case  of 
Meredith  v.  Heneage,  1  Sim.  542,  551, 
before  the  house  of  lords,  Chief  Baron 
Richards  said,  speaking  of  prior  de- 
cisions: "I  entertain  a  strong  doubt 
whether,  in  many  or  perhaps  in  most 
of  the  cases,  the  construction  was  not 
adverse  to  the  real  intention  of  the 
testator.  It  seems  to  me  very  singu- 
lar that  a  person  who  really  meant  to 
impose  the  obligation  established  by 
the  cases  should  use  a  course  so  cir- 
cuitous, and  a  language  so  inappropri- 
ate and  obscure,  to  express  what  might 
have  been  conveyed  in  the  clearest  and 
most  usual  terms,  — terms  the  most 
familiar  to  the  testator  himself,  and  to 
the  professional  or  other  person  who 
might  prepare  his  will.  In  consider- 
ing these  cases,  it  has  always  occurred 
to  me  that  if  I  had  myself  made  such 
a  will  as  has  generally  been  considered 
imperative,  I  should  never  have  in- 
tended it  to  be  imperative;  but  on  the 
contrary,  a  mere  intimation  of  my 
wish  that  the  person  to  whom  I  had 
given  my  property  should,  if  he 
pleased,  prefer  those  whom  I  pro- 
posed to  him,  and  who,  next  to  him, 
were  at  the  time  the  principal  objects 
of  my  regard."  He  also  says  that  the 
question  in  such  cases  "is  purely  a 
matter  of  intention,  to  be  collected 
from  the  words  of  the  instrument,  as 
in  all  other  cases  of  wills."  The  fore- 
going language  of  this  learned  judge 
should,  as  it  seems  to  me,  be  present 
to  the  minds  of  all  courts,  when  pass- 
ing upon  cases  of  precatory  trusts,  as 
a  proper  and  reasonable  guide  in  ren- 
dering a  decision. 


§  1018  EQUITY   JURISPRUDENCE.  150S 

pronounced  it  artificial,  and  have  described  it  as  violat- 
ing instead  of  carrying  out  the  intent  of  parties;  and 
undoubtedly  most  of  the  earlier  decisions  were  open  ta 
this  criticism.  It  does  seem  strange  that  a  testator,  hav- 
ing a  full  and  settled  intention  to  create  a  trust,  should  adopt 
a  mode  which  at  best  seems  to  be  a  mere  suggestion  or 
possible  inference,  and  should  not  employ  the  familiar 
method  of  creating  a  trust  by  express  declaration.'  On 
the  other  hand,  to  abrogate  the  doctrine  altogether  would 
be  introducing  a  rule  wholly  arbitrary  and  technical,  since 
it  would  be  saying,  in  fact,  that  trusts  shall  not  be  created 
except  by  means  of  a  certain,  fixed,  and  technical  for- 
mula or  manner  of  expression.  Justice  will  be  done,  there- 
fore, if  the  doctrine  is  placed  upon  reasonable  grounds,  its 
operation  confined  within  narrow  limits,  and  regulated  by 
the  criterion  stated  in  the  preceding  paragraph. 


SECTION   IV. 
PUBLIC  OR  CHARITABLE  TRUSTS. 


§  1018.  General  description. 

§  1019.  A  public,  not  a  private,  benefaction  requisite. 

§  1020.  What  are  charitable  uses  and  purposes:  "  Statute  of  charitable 

uses. " 

§§  1021-1024.  Classes  of  charitable  uses. 

§  1021.  1.  Religious  purposes. 

§  1022.  2.  Benevolent  purposes. 

§  1023.  3.  Educational  purposes. 

§  1024.  4.  Other  public  purposes 

§  1025.  Creation  of  the  trust:  Certainty  or  uncertainty  of  the  object 

and  of  the  beneficiaries. 

§  1026.  Certainty  or  uncertainty  of  the  trustees. 

§  1027.  The  doctrine  of  qj-pres. 

§  1028.  Origin  and  extent  of  the  equitable  jurisdiction. 

§  1029.  Charitable  trusts  in  the  United  States. 

§1018.     General     Description.  —  In    express    private 
trusts  there  is  not  only  a  certain  trustee  who  holds  th© 

*  See  quotations  in  the  latter  portion  of  the  last  preceding  note. 


1509  PUBLIC    OR    CHARITABLB    TRUSTS.  §  1019 

legal  estate,  but  there  is  a  certain  specified  cestui  que  trust 
clearly  identified  or  made  capable  of  identification  by  the 
terms  of  the  instrument  creating  the  trust.  It  is  an  essen- 
tial feature  of  public  or  charitable  trusts  that  the  benefi- 
ciaries are  uncertain,  —  a  class  of  persons  described  in 
some  general  language,  often  fluctuating,  changing  in 
their  individual  numbers,  and  partaking  of  a  quasi  pub- 
lic character.  The  most  patent  examples  are  "the  poor" 
of  a  certain  district,  in  a  trust  of  a  benevolent  nature,  cr 
"the  children"  of  a  certain  town,  in  a  trust  for  educa- 
tional purposes.  In  such  a  case  it  is  evident  that  all  the 
beneficiaries  can  never  unite  to  enforce  the  trust;  for 
even  if  all  those  in  existence  at  any  given  time  could 
unite,  they  could  not  include  nor  bind  their  successors. 
It  is  a  settled  doctrine  in  England  and  in  many  of  the 
American  states  that  personal  property  and  real  property, 
-except  when  prohibited  by  statutes,  may  be  conveyed  or 
bequeathed  in  trust,  upon  charitable  uses  and  purposes, 
for  the  benefit  of  such  uncertain  classes  or  portions  of  the 
public,  and  that  if  the  purposes  are  charitable,  within  the 
meaning  given  to  that  term,  a  court  of  equity  will  enforce 
the  trust.  Furthermore,  it  is  one  of  the  most  important 
■and  distinctive  features  of  charitable  trusts  that  however 
long  the  period  may  be  during  which  they  are  to  last, 
even  though  it  be  absolutely  unlimited  in  its  duration, 
they  are  not  subject  to  nor  controlled  by  the  established 
doctrines,  nor  even  the  statutes  which  prohibit  perpetui- 
ties. Indeed,  it  may  be  said  that  the  full  conception  of 
a  charitable  trust  includes  the  notion  that  it  is  or  may  be 
perpetual.^ 

§  1019.  A  Public,  and  not  Private,  Benefaction  Requi- 
site. —  In  order  that  a  trust  may  be  charitable,  the  gift 
must  be  for  the  benefit  of  such  an  indefinite  class  of  per- 

'  The   subject   of   charitable   trusts  doctrines,  and  must  refer  the  reader 

in  particular  is  so  broad,  aud  involves  to  treatises  upon  trusts  for  a  detailed 

«o  many  special  rules  and  applications,  exposition;  a  proper  treatment  would 

that  I  shall  attempt  no  more  than  to  req^uire  a  volume  by  itself, 
give  an  outline  of  its  uiure  general 


1019 


EQUITY   JURISPRUDENCE. 


1510 


sons  that  the  charity  is  really  a  public,  and  not  a  mere 
private,  benefaction.  On  the  other  hand,  in  a  public  trust 
the  designation  of  the  charitable  use  and  of  the  benefi- 
ciaries must  be  sufficiently  certain  and  descriptive  to  in- 
dicate the  intention  of  the  donor;  the  language  m.ust  not 
be  so  general  and  vague  as  to  leave  both  the  beneficiaries 
and  the  purposes  and  objects  completely  to  the  judgment 
and  choice  of  the  trustee  or  of  the  court/ 


*  Morice  v.  Bishop  of  Durham,  9 
Ves.  399,  405;  10  Ves.  522,  541;  Mifc- 
ford  V.  Reynolds,  1  Phill.  Ch.  185; 
Att'y-Gen.  v.  Aspinall,  2  Mylne  & 
C.  613,  622,  623;  British  Museum  v. 
White,  2  Sim.  &  St.  594,  596;  Nash  v. 
Morley,  5  Beav.  177;  Kendall  v.  Gran- 
ger, 5  Beav.  300;  Townsend  v.  Carus, 
3  Hare,  257;  Nightingale  v.  Goulburn, 
5  Hare,  484;  Whicker  v.  Hume,  14 
Beav.  509;  1  De  Gex,  M.  &  G.  506;  7 
H.  L.  Gas.  124;  Miller  v.  Rowan,  5 
Clarke  &  F.  99;  Williams  v.  Kershaw, 

5  Clarke  &  F.  Ill,  note;  Cocks  v. 
Manners.  L.  R.  12  Eq.  574;  Beaumont 
V.  Oliveira,  L.  R.  6  Eq.  534;  4  Ch. 
309,  314  (scientific  purposes);  President 
of  the  United  States  v.  Drummond, 
cited  7  H.  L.  Cas.  155;  Dolan  v.  Mac- 
dermot,  L.  R.  5  Eq.  60;  3  Ch.  676 
(for  "such  charities  and  other  public 
purposes  as  lawfully  might  be  in  the 
parish  of  T. , " —  a  good  charitable  trust); 
James  v.  Allen,  3  Mer.  17;  Fowler  v. 
Garlike,  1  Russ.  &  M.  2.^2;  Vezey  v. 
Jamson,  1  Sim.  &  St.  69;  Ellis  v. 
Selby,  7  Sim.  3.52;  1  Mylne  &  C.  286; 
Loscombe  v.  Wintringham,  13  Beav. 
87,  89,  and  cases  in  note;  Baker  v. 
Sutton,  1  Keen,  224;  Wilkinson  v. 
Lindgreen,  L.  R.  5  Ch.  570  ("to  any 
other  religious  institution  or  purposes 
as  A  and  B  may  think  proper," —  a  valid 
charity);  Chamberlayne  v.  Brockett, 
L.  R.  8  Ch.  806;  Aston  v.  Wood,  L.  R. 

6  Eq.  419  (court  will  not  presume  a 
public  charitable  use  where  none  was 
declared,  although  the  bequest  was  to 
the  trustees  of  a  religious  society); 
Corporation  of  Gloucester  v.  Wood,  3 
Hare,  131,  136-148;  Lewis  v.  AUenby, 
L.  R.  10  Eq.  668;  Wilkinson  v.  Bar- 
ber, L.  R.  14  Eq.  96;  Gillam  v.  Tay- 
lor, L.  R.  16  Eq.  581;  Att'y-Gen.  v. 
Eastlake.  11  Hare,  205,  215;  Pocock 
V.  Att'y-Gen.,  L.  R.  3  Ch.  Div.  .S42;  In 
re  Janiian's  Estate,  L.  R.  8  Ch.  Div. 


584;  In  re  Williams,  L.  R.  5  Ch.  Div, 
735;  In  re  Birkett,  L.  R.  9  Ch.  Div.  576; 
In  re  Hedgman,  L.  R.  8  Ch.  Div.  156; 
Mills  V.  Farmer,  1  Mer.  55;  Moggridg© 
V.  Thackwell,  7  Ves.  36;  Coggeshall  v. 
Pel  ton,  7  Johns.  Ch.  292;  11  Am.  Dec. 
471;  Salstontall  V.  Sanders,  11  Allen, 
446;  Jackson  v.  Phillips,  14  Allen, 
639;  American  Academy  v.  Harvard 
College,  12  Gray,  582;  Vidalv.  Girard, 
2  How.  127;  Cresson's  Appeal,  30  Pa. 
St.  437;  Price  v.  Maxwell,  28  Pa.  St. 
23,  35;  Franklin  v.  Armfield,  2  Sneed, 
.S05;  Russell  v.  Allen,  5  Dill.  235; 
Box  ford  Sec.  Relig.  Soc.  v.  Harriman, 
125  Mass.  321;  Ould  v.  Washington 
Hospital,  95  U.  S.  303;  Goodell  v. 
Union  Ass'n  of  Burlington  Co.,  29 
N.  J.  Eq.  32;  De  Camp  v.  Dobbins,  2» 
N.  J.  Eq.  36;  Trustees  of  Cory  Univ. 
Soc.  v.  Beatty,  28  N.  J.  Eq.  570;  Ste- 
vens  v.  Shippen,  28  N.  J.  Eq.  487; 
Clement  v.  Hyde,  50  Vt.  716;  28  Am. 
Rep.  522;  Craig  v.  Secrist,  54  Ind. 
419;  Mason  v.  Meth.  Epis.  Ch.,  27  N.  J. 
Eq.  47;  Cruse  v.  Axtell,  50  Ind.  49; 
Old  South  Soc.  V.  Crocker,  119  Mass. 
1;  20  Am.  Rep.  299;  Zeisweiss  v. 
James,  63  Pa.  St.  465;  3  Am.  Rep. 
558  (a  devise  to  "the  Infidel  Society 
in  Philadelphia,  for  the  purpose  of 
building  a  hall  for  the  free  discussion 
of  religion,  politics,  etc.,"  is  not  a 
valid  charitable  use);  Meeting  St.  Bap. 
Soc.  V.  Hail,  8  R.  I.  234;  Needles  v. 
Martin,  33  Md.  609;  Thompson's  Ex'rs 
V.  Norris,  20  N.  J.  Eq.  489;  Norris  v; 
Thompson's  Ex'rs,  19  N.  J.  Eq.  307. 
Power  V.  Cassidy,  79  N.  Y.  602;  35 
Am.  Rep.  550. 

In  Jackson  v.  Phillips,  14  Allen, 
539,  556,  Gray,  J.,  said:  "A  charity  is 
a  gift  to  be  applied,  consistently  with 
existing  laws,  /or  the  benefit  of  an  in.' 
definite  number  of  persons,  either  by 
bringing  their  minds  or  hearts  under 
the  influence  of  education  or  religion; 


1511 


PUBLIC    OR    CUARITABLE    TRUSTS. 


§  1020 


§  1020.  What  are  Charitable  Uses  and  Purposes  — 
"Statute  of  Charitable  Uses."  —  It  is  the  question  of 
primary  importance,  upon  which  all  others  depend,  to 
determine  what  uses  and  purposes  are  charitable,  w^ithin 
the  meaning  of  the  doctrine,  so  that  gifts  for  such  pur- 
poses may  be  sustained  as  valid  charitable  trusts,  although 
they  may  tend  to  create  perpetuities.  It  has  already  been 
shown  that  the  purpose,  whatever  be  its  particular  object 
must  benefit  some  indefinite  class  or  portion  of  the  public; 
for  mere  private  charities  are  governed  by  the  rules  which 
apply  to  ordinar}'-  private  express  trusts.  The  general  ob- 
jects which  come  within  the  description  of  "charitable 
uses,"  and  which  may  therefore  constitute  a  valid  chari- 
table trust,  were  enumerated  in  the  statute  of  charitable 
uses,  passed  in  the  reign  of  Queen  Elizabeth,*  as  follows: 


by  relieving  their  bodies  from  disease, 
Buffering,  or  constraint;  by  assisting 
tliem  to  establish  themselves  in  life; 
or  by  erecting  or  maintaining  public 
works;  or  otherwise  lessening  the 
burdens  of  government."  Tliis  may 
not  be  an  exhaustive  description  of 
charitable  purposes,  but  it  accurately 
states  the  essential  element  that  the 
gift  must  be  for  an  indpjintte  clas.i,  so 
that  the  benefit  conferred  upon  them 
is  in  its  nature  public. 

Trusts  for  private  objects  do  not 
fall  within  the  denomination  of  char- 
itable trusts,  nor  under  the  jurisdiction 
over  them,  and  are  void  if  they  create 
perpetuities;  as  those  for  the  erection 
or  repair  of  private  tombs  or  monu- 
ments: In  re  Rickard,  31  Beav.  244; 
Fowler  V.  Fowler,  33  Beav.  (JlG;  Hoare 
V.  Osborne,  L.  R.  1  Eq.  5S5;  [Vaughan 
V.  Thomas,  33  Ch.  Div.  1S7;  Piper  v. 
Moulton,  72  Me.  155;  Bates  v.  Bates, 
134  Mass.  110;  45  Am.  Rep.  305;  Det- 
willer  V.  Hartman,  37  N.  J.  Eq.  .348; 
Johnson  v.  Holifield,  79  Ala.  423;  58 
Am.  Rep.  59G,  and  note;  Fite  v.  Beas- 
ley,  12  Lea,  328;]  or  to  found  a  private 
museum:  Thompson  v.  Shakespear,  1 
De  Gex,  F.  &  J.  399;  or  for  the  benefit 
of  a  private  company:  Attorney-Gen- 
eral V.  Haberdashers'  Co.,  1  Mylne  & 
K.  420;  or  for  a  private  charity:  Om- 
maney  v.  Butcher,  Turn.  &  R.  260;  a 
"friendly  society":  In  re  Clark's 
Trust,  L.  R.   1  Ch.  Div.  497;  Dawson 


V.  Small.  L.  R.  18  Eq.  114  (to  repair 
tomb);  Thomas  v.  Howell.  L.  R.  18 
Eq.  198  (a  bequest  to  each  of  ten  poor 
clergymen);  In  re  Williams,  L.  R.  .5 
Ch.  Div.  735  (to  repair  tombs);  Carna 
V.  Long,  2  De  Gex,  F.  &  J.  75  (to 
support  a  library  society  which  was 
established  for  the  benefit  of  its  own 
subscribers  only);  per  coutra.  Cruse  v. 
Axtell,  50  Ind.  49  (a  devise  to  a  lodge 
of  Freemasons,  held  to  be  for  a  good 
charitable  use;  a  decision  which  seems 
opposed  to  the  authorities);  [Bangor  v. 
Masonic  Lodge,  73  Me.  428;  40  Am. 
Rep.  369  (similar  gift,  void);]  Attorney- 
General  V.  Soule,  28  Mich.  153  (a  be- 
quest to  establish  an  ordinary  private 
school  is  not  for  a  public  charitable 
use);  Swift  v.  Beneficial  Soc,  73  Pa. 
St.  362  (bequest  to  a  "  friendly  so- 
ciety," the  benefits  of  which  are  con- 
fined to  ibs  own  members,  is  not  for 
a  charitable  use);  In  re  Clark's  Trust, 
L.  R.  1  Ch.  Div.  497  (same  as  last). 
[A  bequest  for  the  relief  of  the  most 
destitute  of  the  testator's  relatives 
held  valid:  Gafney  v.  Kenison,  64 
N.  H.  354;  but  a  provision  for  such 
of  the  testator's  children  and  their  de- 
scendants as  may  be  destitute,  not  a 
public  charity:  Kent  v.  Dunham,  142 
Mass.  216;  56  Am.  Rep.  667.] 

143  Eliz.,  c.  4.  The  "charitable 
trusts;"  now  under  consideratioa 
should  be  carefully  distinguished  from 
gifts  to  corporations  which  are  author- 


§  1021  EQUITY  jurisphudence.  1512 

"The  relief  of  aged,  impotent,  and  poor  people;  the  main- 
tenance of  maimed  and  sick  soldiers  and  mariners;  the 
support  of  schools  of  learning,  free  schools,  and  scholars 
of  universities;  repairs  of  bridges,  ports,  havens,  cause- 
ways, churches,  sea-banks,  and  highways;  education  and 
preferment  of  orphans;  the  relief,  stock,  and  maintenance 
of  houses  of  correction;  marriage  of  poor  maids;  aid  and 
help  of  young  tradesmen,  handicraftsmen,  and  persons 
decayed;  relief  or  redemption  of  prisoners  and  captives; 
aid  of  poor  inhabitants  concerning  payments  of  fifteenths, 
setting  out  of  soldiers,  and  other  taxes."  It  will  be  seen 
that  this  list  omits  some  most  important  and  familiar 
charitable  objects,  —  as,  for  example,  the  support  and 
propagation  of  religion.  The  English  and  American 
courts  have  never  regarded  this  enumeration  as  ex- 
haustive, but  as  designed  to  be  merely  illustrative.  Nu- 
merous objects  analogous  to  those  mentioned  in  the  statute 
are  held  to  be  charitable.  The  doctrine  is  settled  that 
all  particular  objects  embraced  within  the  general  spirit, 
intent,  and  scope  of  the  statute  are  to  be  considered  as 
charitable,  unless  they  violate  some  rule  of  public  policy 
or  the  provisions  of  some  positive  statute.' 

§  1021.  Classes  of  Charitable  Uses.  — 1.  Religious  Pur- 
poses. —  In  addition  to  the  objects  specifically  enumerated 
in  the  statute,  other  purposes  of  a  like  general  nature  are 
held  by  the  courts  to  be  charitable,  and  these  may  all  be 
arranged  in  the  following  classes:  Religious  purposes:  The 
support  and  propagation  of  religion  is  clearly  a  "  chari- 
table use."^     This  includes  gifts  for  the  erection,  main- 

ized     by     their    charters,     or    other  N.  Y.    58i,  587-621,  per  Porter,  J.; 

statutes,  to  receive  and  hold  property,  Wetmore  v.    Parker,  52   N.    Y.    450: 

and   apply   ib    to  objects   which    fall  Dorlge  v.  Williams,  46  Wis.  70;  Gould 

•within  the  general  designation  of  char-  v.  Taylor   Orphan   Asylum,    46  Wis. 

itable.     Such  gifts  are   permitted   ia  106. 

the  states  where  the  peculiar  doctrine  ^  Many   gifts   for  purposes  confess- 

of  "  charitable  trusts  "  ha3  been  abro-  edly  charitable  are   defeated   by  the 

gated,  and  they  are  regulated  by  the  statutes  of  mortmain  in  England,  and 

general  rules  of  law  applicable  to  all  in  the  states  where  these  or  analogous 

corporations,  or  by  the  provisions  of  statutes  have  been  adopted, 

the  individual  charter:    See  Levy  v.  *  In  England  an  exception  is  made 

Levy,    33    N.    Y.     97,    112-118,    per  of  "superstitious "uses,  contrary  to  the 

Wright,  J.;  Bascom  v.  Albertson,  34  public  policy,  such  as  masses  for  the 


1513 


PUBLIC    OR   CHARITABLE    TRUSTS. 


§  1021 


tenance,  and  repair  of  church  edifices,  the  maintenance 
of  worship,  the  support  of  clergymen,  the  promotion  and 


soul:  Attorney-Greneral  v.  Fiahmon- 
gers'  Co.,  5  Mylne  &  C.  11;  West  v. 
Shuttleworth,  2  Mylne  &  K.  684;  In 
re  Blundell,  30  Beav.  300;  Heath  v. 
Chapman,  2  Drew.  417;  Gary  v.  Ab- 
bot, 7  Ves.  490,  495.  In  the  United 
States  no  such  purposes  would  prob- 
il)ly  be  regarded  as  superstitious 
which  were  recognized  by  any  religious 
belief  and  ritual:  Gass  v.  Wilhite,  2 
Dana,  170;  26  Am.  Dec.  440;  Metho- 
dist  Church  v.  Remington,  1  Watts, 
218;  26  Am.  Dec.  61.  [See  dictum  of 
Rapallo,  J.,  in  Holland  v.  Alcock,  108 
N.  Y.  312;  2  Am.  St.  Rep.  420;  In  re 
Schouler,  134  Mass.  426;  Seda  v,  Hu- 
ble,  75  Iowa,  429;  9  Am.  St.  Rep.  495.] 
In  England,  no  charity  for  a  religious 
purpose  could  be  upheld  as  a  valid 
jmblie  charity,  unless  the  form  of  re- 
ligion was  one  at  least  professing  to 
acknowledge  the  divine  revelation  con- 
tained in  the  Bible,  and  to  be  founded 
thereon;  indeed,  the  whole  doctrine 
was  regarded  by  the  early  judges  as 
carrying  out  the  precepts  of  Christian- 
ity. While  the  American  courts  do 
not  discriminate  between  different 
phases  of  religious  belief  and  doctrine, 
still  the  essential  element  of  a  charity 
for  a  religious  purpose  must  be  in  reality 
religious.  The  supreme  court  of  Penn- 
sylvania therefore  decided,  in  complete 
agreement  with  principle  and  author- 
ity, that  a  devise  to  "the  Infidel  So- 
ciety in  Philadelphia,  for  the  purpose 
of  building  a  hall  for  the  free  discus- 
sion of  religion,  politics,  etc.,"  was 
not  a  valid  charitable  gift:  Zeisweiss 
V.  James,  63  Pa.  St.  465;  3  Am.  Rep. 
Rep.  558;  [see  also  Manners  v.  Phila. 
Library  Co.,  93  Pa.  St,  165;  39  Am. 
Rep.  741.]  In  England  it  is  not  neces- 
sary that  the  objects  should  conform 
to  the  doctrines  and  modes  of  the  es- 
tablished church.  Charitable  gifts  are 
valid  for  dissenters:  Attorney-General 
V.  Cock,  2  Ves.  Sr.  273;  Shrewsbury 
V.  Hornby,  5  Hare,  406;  Attorney- 
General  V.  Lawes,  8  Hare,  32;  Attor- 
ney-General V.  Bunce,  L.  R.  6  Eq. 
563.  Roman  Catholics:  Cary  v.  Al)bot, 
7  Ves.  490;  Attorney -General  v.  Todd, 
1  Keen,  803;  Walsh  v.  Gladstone,  1 
T\t\\L  Ch.  290;  Cocks  v.  Manners,  L.  R. 
J 2  Eq.  574.  Jews:  Michel's  Trust,  28 
Beav.  39.     To  promulgate  doctrines  of 


Joanna  Southcott:  Thornton  v.  Howe, 
8  Jur.,  N.  S.,  663.  But  not  to  pro- 
mote infidelity:  Zeisweiss  v.  James, 
63  Pa.  St.  465;  3  Am.  Rep.  553;  [Man- 
ners V.  Phila.  Library  Co.,  93  Pa.  St. 
165;  39  Am.  Rep.  741.] 

Among  the  particular  objects  which 
constitute  valid  religious  purposes  are 
the  following:  Building,  repairing,  or- 
namenting, etc.,  churclies:  Hoare  v. 
Osborne,  L.  R.  1  Eq.  585;  Booth  v. 
Carter,  L,  R.  3  Ex.  757;  Cresswell  v. 
Cresswell,  L.  R.  6  Eq.  69  (to  build  a 
parsonage);  providing  things  connected 
with  church  services:  Turner  v.  Og- 
den,  1  Cox,  316;  Adnam  v.  Cole,  6 
Beav.  353;  maintenance  of  divine  wor- 
ship: Att'v-Gen.  v.  Pearson,  3  Mer. 
353,  409;  Att'y-Gen.  v.  Bunce,  L.  R. 
6  Eq.  563;  Att'y-Gen.  v.  Webster,  L. 
R.  20  Eq.  483;  providing  or  support- 
ing clergymen  in  the  performance  of 
their  religious  functions:  Att'y-Gen.  v. 
Lawes,  8  Hare,  32;  Thornber  v.  Wil- 
son, 3  Drew.  245;  4  Drew.  350;  In  re 
Maguire,  L.  R.  9  Eq.  632;  In  re  Clergy 
Soc,  2  Kay  &  J.  615;  In  re  Kilvert's 
Trusts,  L.  R.  12  Eq.  183;  7  Ch.  170; 
but  a  bequest  to  each  of  ten  poor 
clergymen  is  not  a  "charitable  gift": 
Thomas  v.  Howell,  L.  R.  18  Eq.  198; 
and  see  Russell  v.  Kellett,  3  Smale  & 
G.  264;  promoting  religious  doctrines 
and  beliefs  by  the  distribution  of  Bibles 
or  tracts,  and  by  means  of  religious 
societies,  etc. :  Att'y-Gen.  v.  Stepney, 
10  Ves.  22;  Wilkinson  v.  Lindgren,  L. 
R.  5  Ch.  570;  a  gift  to  "  sisters  of  char- 
ity," but  not  to  a  convent:  Cocks  v. 
Manners,  L.  R.  12  Eq.  574;  [to  repair 
a  churchyard,  valid:  Vaughan  v. 
Thomas,  33  Ch.  Div.  187.] 

American  decisions  are  to  the 
same  effect:  Building  and  supporting 
churches,  maintaining  divine  worship: 
Jones  V.  Habersliam,  3  Woods,  44:); 
107  U.  S.  174,  182;  Laird  v.  Bass,  50 
Tex.  412;  De  Camp  v.  Dobbins,  29  N. 
J.  Eq.  36;  Old  South  Soc.  v.  Crocker, 
119  Mass.  1;  20  Am.  Rep.  299;  Meet- 
ing St.  Bap.  Soc.  V.  Hail,  8  R.  I.  234; 
promulgation  of  religious  doctrines  and 
beliefs  and  practices,  missionary  and 
other  similar  societies:  Goodell  ▼. 
Union  Ass'n  etc.,  29  N.  J.  Eq.  32 
(Young  Men's  Christian  Association); 
De  Camp  v.  Dobbins,  29  N.  J.  Eq.  36 


1022 


EQUITY    JURISPRUDENCE. 


1514 


propagation  of  religious  doctrines  and  beliefs  in  any  man- 
ner by  the  church  or  by  associations,  tlie  aid  of  mission- 
ary, Bible,  and  other  religious  societies,  and  all  other 
objects  and  purposes  which  are  really  religious.  The 
English  courts  made  an  exception  with  reference  to  su- 
perstitious uses,  but  in  the  United  States  no  such  distinc- 
tion is  made.  Our  courts  would  recognize  no  difference 
among  religious  beliefs  and  opinions;  but  in  this  country, 
as  well  as  in  England,  a  gift  could  not  be  sustained  as  a 
charity  for  religious  purposes  when  it  was  wholly  irre- 
ligious, and  its  only  object  was  to  destroy  all  religion. 

§  1022.  2.  Benevolent  Purposes.  —  Numerous  trusts 
for  purposes  of  benevolence  are  upheld  as  charitable, 
although  not  mentioned  in  the  statute,  since  they  are 
within   its   spirit   and   intent.^      Among   the   particular 


(missionary);  Trustees  of  Cory  Univ. 
ISoc.  V.  Beatty,  28  N.  J.  Eq.  570 ("pro- 
motion of  the  Universalist  denomina- 
tion"); butStarkweatlier  v.  Am.  Bible 
Soc,  72  111.  50,  22  Am.  Rep.  133,  holds 
that  the  American  Bible  Society  is  not 
a  charity,  within  the  statute  of  Eliza- 
beth; Fairbanks  v.  Lamson,  99  Mass. 
533;  Maine  Baptist  Miss.  Con.  v.  Port- 
land, 65  Me.  92  (domestic  missions, 
diffusion  of  Christian  knowledge);  [Mor- 
ville  V.  Fowle,  144  Mass.  109;  Kinney 
V.  Kinney,  86  Ky.  610;  Andrews  v. 
Andrews,  110  111.  223;]  for  the  benefit 
of  the  Sunday-school  library  of  a  spe- 
cified church:  Fairbanks  v.  Lamson, 
supra;  but  a  bequest  to  a  certain  Sun- 
day school,  the  income  to  be  applied 
in  procuring  Christmas  presents  for 
the  scholars,  was  held  invalid:  Goodell 
V.  Union  Ass'n  etc.,  29  N.  J.  Eq.  32; 
[for  the  education  of  two  young  men 
for  the  Christian  ministry,  valid:  Field 
V.  Drew  Theological  Seminary,  41  Fed. 
Rep.  371;  Simpson  v.  Welcome,  72 
Me.  496;  39  Am.  Rep.  349  (for  pur- 
chase and  distribution  of  religious 
books,  valid).] 

'  As  examples,  to  support  or  aid 
widows  or  orphans,  or  the  poor  of  a 
certain  place  or  district:  Powell  v. 
Att'y-Gen.,  3  Mer.  48;  Att'y-Gen.  v. 
Comber,  2  Sim.  &  St.  93;  Att'y-Gen. 
V.  Clarke,  Amb.  422;  Bishop  of  Here- 
ford V.  Adams,  7  Ves.  324;  Russell  v. 


Kellett,  3  Smale  &  G.  264;  Thompson 
V.  Corby,  27  Beav.  649:  Fisk  v,  Att'y- 
Gen.,  L.  R.  4  Eq.  521;  Dawson  v. 
Small,  L.  R.  18  Eq.  114;  In  re  Wil- 
liams,  L.  R.  5  Ch.  Div.  735;  In  ra 
Birkett,  L.  R.  9  Ch.  Div.  576;  [Web- 
ster v.  Southey,  36  Ch.  Div.  9.]  It 
also  seems  to  be  settled  that  a  gift  or 
bequest  in  trust  for  the  donor's  or  tes- 
tator's "poor  relations,"  or  "poor  de- 
scendants," or  "poor  kinsmen  and 
their  offspring  and  issue,"  as  an  in- 
definite clasis,  is  a  good  charitable 
trust  for  benevolent  purposes:  Gillam 
V.  Taylor,  L.  R.  16  Eq.  581,  584; 
Att'y-Gen.  v.  Price,  17  Ves.  371;  Isaac 
V.  Defriez,  Amb.  595;  17  Ves.  373, 
note;  White  v.  White,  7  Ves.  423; 
Bernal  v.  Bernal,  3  Mylne  &  C.  559; 
Att'y-Gen.  v.  Duke  of  Northumber- 
land, L.  R.  7  Ch.  Div.  745;  but  a  gift 
to  particular  individual  poor  relations 
would  be  an  ordinary  trust  or  legacy; 
Liley  v.  Hey,  1  Hare,  580;  for  erect- 
ing, endowing,  or  supporting  hospitals: 
Pelham  v.  Anderson,  2  Eden,  296; 
Magistrates  of  Dundee  v.  Morris,  3 
Macq.  134,  157;  Perringv.  Trail,  L.  R, 
18  Eq.  88;  University  of  London  v. 
Yarrow,  1  De  Gex  &  J.  72  (to  found 
a  hospital  "  for  studying  and  curing 
maladies  of  any  quadruped  or  bird  use- 
ful to  man");  for  deserving  unsuc- 
cessful literary  men:  Tlinmpson  v. 
Thompson,  1  ColL  C.  C.  3S1,  3'J5;  for 


1515 


PUBLIC    OR   CHARITABLE   TRUSTS. 


§  1022 


instances  embraced  within  this  clnss  are  trusts  for  the 
"  poor,"  the  "  deserving  poor,"  widows  and  orphans  of  a 
specified  to'wn,  district,  or  country;  for  hospitals,  asylums, 
and  similar  public  institutions;  for  any  class  of  persons 
requiring  aid,  as  "the  colored  persona"  of  a  certain  state; 
and  benevolent  objects  generally,  without  specifying  the 
form.  Even  trusts  established  for  the  donor's  own  "  poor 
relations,"  or  "poor  descendants,"  as  a  class,  are  held  to 
be  true  charities.  The  beneficiaries  to  be  relieved,  and  the 
mode  proposed  for  aiding  them,  must  be  public;  a  trust 
on  behalf  of  a  strictly  private  association,  the  benefits  ef 


the  encouragement  of  good  servants: 
Loscombe  v.  Wintringham,  13  Beav. 
87;  for  releasing  debtors:  Att'y-Gen. 
V.  Painters'  Co.,  2  Cox,  51;  for  the 
redemption  of  captives  or  prisoners: 
Att'y-Gen.  v.  Ironmongers'  Co.,  2 
Mylne  &  K.  576;  In  re  Prison  Chari- 
ties. L.  R.  16  Eq.  129;  but  see  Thrupp 
V.  Collett,  26  Beav.  125;  for  general 
benevolent  purposes  in  a  specified  dis- 
trict or  country  at  large,  without  men- 
tioning any  particular  form  or  object: 
Dolan  V.  Macdermot,  L.  R.  5  Eq.  60; 
3  Ch.  676;  Cresswell  v.  Cresswell,  L.  R. 
6  Eq.  69;  Lewis  v.  AUenby,  L.  R.  10 
Eq.  668;  Wilkinson  v.  Barber,  L.  R.  1-4 
Eq.  96;  Att'y-Gen.  v,  Webster,  L.  R. 
20  Eq.  483;  Pocock  v.  Att'y-Gen.,  3 
Ch.  Div.  342;  Mills  v.  Farmer,  1  Mer. 
65;  Moggridge  v.  Thackwell,  7  Ves. 
36;  but  in  In  re  Jarman's  Estate,  L.  R. 
8  Ch.  Div.  584,  a  bequest  to  general 
benevolent  purposes  was  held  invalid 
from  the  uncertainty  and  indefinite- 
ness  of  its  object. 

American  decisions:  Aid  or  support 
of  the  poor,  widows,  orphans,  etc.: 
Sohier  v.  Burr,  127  Mass.  221;  Good- 
ell  v.  Union  Ass'n  etc.,  29  N.  J.  Eq. 
32  ("in  aid  of  tlie  deserving  poor  of 
M.");  Mason  v.  Meth.  Epis.  Ch.,  27 
N.  J.  Eq.  47;  Fellows  v.  Miner,  119 
Mass.  541  (aged  and  infirm  poor); 
Gooch  v.  Ass'n  for  Relief  etc.,  109 
Mass.  558  (a  society  "  for  the  support 
of  poor  old  women  ");  for  building  or 
sustaining  a  hospital:  Quid  v.  Wash- 
ington Hospital,  95  U.  S.  303;  Mc- 
Donald V.  Mass,  Gen.  Hospital,  120 
Mass.  432;  21  Am.  Rep.  529;  devise  to 
a  lod^e  of  Freemasons:  Cruse  v.  Ax- 
tell,   50  Ind.   49;   [contra,    Bangor  v. 


Masonic  Lodge,  73  Me.  428;  40  Am. 
Rep.  369];  but  a  "beneficial  society," 
the  benefits  of  which  are  confined  to 
its  own  members,  is  not  a  public  char- 
ity: Swift  V.  Beneficial  Soc,  73  Pa.  St. 
362;  for  general  benevolent  purposes 
not  specified:  De  Camp  v.  Dobbins,  29 
N.  J.  Eq.  36;  Mayer  v.  Soc.  for  Visi- 
tation of  the  Sick,  2  Brewst.  385; 
Thomson's  Ex'rs  v.  Norris,  20  N.  J. 
Eq.  489  (a  bequest  to  "  benevolent, 
religious,  or  charitable  institutions," 
held  not  a  good  charitable  use;  "  be- 
nevolent "  includes  objects  not  charita- 
ble); [but  in  a  similar  case  it  was  held 
that  the  word  "  benevolent "  was  suffi- 
ciently defined  by  the  accompanying 
words:  Suter  v.  Hilliard,  132  Mass.  412; 
42  Am.  Rep.  444;  or  it  may  he  so  de- 
fined by  the  whole  purpose  of  the  will: 
Goodale  v.  Mooney,  60  N.  H.  528;  49 
Am.  Rep.  334;  Pell  v.  Mercer,  14  R.  I. 
412.  See  also,  in  general,  Hesketh  v. 
Murphy,  35  N.  J.  Eq.  23,  and  exten- 
sive collection  of  cases  in  reporter's 
note;  affirmed  36  N.  J.  Eq.  304  ("  to 
the  relief  of  the  most  deserving  poor 
of  P.");  Dascomb  v.  Marston,  SO  Me. 
223;  BuUard  v.  Chandler,  149  Mass. 
532  ("to  poor  and  unfortunate," 
valid);  Union  Meth.  Epis.  Ch.  v. 
Wilkinson,  36  N.  J.  Eq.  141  (poor 
members  of  certain  named  churches); 
Hunt  V.  Fowler,  121  111.  269  ("worthy 
poor"  of  a  certain  city,  valid);  Beards- 
ley  V.  Selectmen  of  Bridgeport,  53 
Conn.  489;  55  Am.  Rep,  152;  for  re- 
lief of  most  destitute  of  testator's 
poor  relations,  valid:  Gafney  v.  Ken- 
ison,  64  N.  H.  354;  see,  however, 
Kent  v.  Dunham,  142  Mass.  216;  66 
Am.  Rep.  667.J 


§  1023 


EQUITY   JURISPRUDENCE. 


1516 


which  are  confined  to  its  own  members,  is  not  a  "  chari- 
table trust." 

§  1023.  3.  Educational  Purposes.  —  Gifts,  devises,  and 
bequests  in  trust  for  educational  purposes  are  valid,  since 
they  are  all  clearly  within  the  spirit  of  the  statute.^  This 
class  embraces  all  trusts  for  the  founding,  endowing,  and 
supporting  schools  and  other  similar  institutions  which 
are  not  strictly  private;  for  the  establishment  of  profes- 
sorships, and  maintenance  of  teachers;  for  the  education 
of  designated  classes  of  persons,  as  the  poor  children  of 


*  Examples:  To  found,  endow,  or 
maintain  schools  and  other  institu- 
tions of  learning,  which  are  not  strictly 
private:  Magistrates  of  Dundee  v. 
Morris,  3  Macq.  134;  In  re  Latymer's 
Charity,  L.  R.  7  Eq.  353;  In  re  Hedg- 
man,  L.  R.  8  Ch.  Div.  156  ("for  sup- 
porting or  founding  free  or  ragged 
schools");  and  see  New  v.  Bonaker, 
L.  R.  4  Eq.  655;  for  the  foundation  or 
endowment  of  professorships,  scholar- 
ships, lectureships,  etc.,  and  mainte- 
nance of  teachers:  Rex  v.  Newman,  1 
Lev.  284;  Attorney-General  v.  Mar- 
garet Prof.,  1  Vern.  55;  Attorney-Gen- 
eral V.  Tancred,  1  Eden,  10;  for  the 
advancement  of  education,  learning, 
and  knowledge  generally:  Whicker  v. 
Hume,  7  H.  L.  Cas.  124;  1  De  Gex, 
M.  &  G.  506;  also  for  the  promotion  of 
science  and  any  strictly  scientific  pur- 
poses: President  of  the  United  States 
V.  Drummond,  cited  7  H.  L.  Cas.  155; 
as  a  gift  to  the  Royal  Society  and  to 
the  Geographical  Society:  Beaumont  v. 
Oliveira,  L.  R.  6  Eq.  534;  4  Ch.  309; 
and  for  a  botanical  garden:  Trustees 
of  the  British  Museum  v.  White,  2  Sim. 
&  St.  594;  Townley  v.  Bedvvell,  6  Ves. 
194.  American  cases:  Founding  or 
supporting  schools,  etc.  (in  several  of 
those  cases  the  gift  is  to  a  town  or 
other  municipal  body,  as  the  trustee): 
Russell  v.  Allen,  5  Dill.  235;  Boxford 
etc.  Soc.  V.  Harriman,  125  Mass.  321; 
Stevens  v.  Shippen,  28  N.  J.  Eq.  487; 
Meeting  St.  Bap.  Soc.  v.  Hail,  8  R.  I. 
234;  [Piper  v.  Moulton,  72  Me.  155; 
Taylor  v.  Trustees,  34  N.  J.  Eq.  101;] 
but  the  school  must  be  public,  or  for 
the  benefit  of  some  portion  of  the  pub- 
lic; a  gift  of  ten  thousand  dollars  to 
trustees  "for  the  establishment  of  a 
school  at  M.,  for  the  education  of  chil- 


dren," was  held  not  a  valid  charity, 
since  the  school  might  be  merely 
private:  Attorney-General  v.  Soule,  28 
Mich.  153;  the  same  is  true  of  agiftfor 
a  merely  private  library  association: 
Carne  v.  Long,  2  De  Gex,  F.  &  J.  75; 
gifts  for  the  promotion  of  education 
generally,  or  for  the  education  of 
any  designated  class  of  persons  in  a 
town,  or  district,  or  state:  Attorney- 
General  V.  Parker,  126  Mass.  216; 
Dodge  V.  Williams,  46  Wis.  70  ("for 
the  education  and  tuition  of  worthy 
indigent  females  ");  De  Camp  v.  Dob- 
bins, 29  N.  J.  Eq.  36  ("educational 
enterprises ");  Clement  v.  Hyde,  50 
Vt.  716;  28  Am.  Rep.  522  (bequest  "  to 
the  treasurer  of  the  co~unty  of  0.  and 
his  successors  in  office,  the  income  to 
be  expended  in  the  education  of  schol- 
ars of  the  poor  in  the  county  of  0."); 
Craig  V.  Secrist,  54  Ind.  419  (devise  to 
a  county  for  the  education  of  a  certain 
class  of  children);  Mason  v.  Meth.  Epis. 
Ch.,  27  N.  J.  Eq.  47  (bequest  to  two 
towns,  the  income  for  educating  poor 
children);  P: -chard  v.  Scott,  39  Conn. 
63  (to  defray  expenses  of  educating 
poor  children  in  a  certain  district); 
[Jones  V.  Habersham,  107  U.  S.  174, 
189;  Russell  v.  Allen,  107  U.  S.  172; 
Missouri  Hist.  Soc.  v.  Acad,  of  Science, 
94  Mo.  459;  Webster  v.  Morris,  66 
Wis.  366;  57  Am.  Rep.  278;  (school 
"for  the  education  of  young  persona 
in  the  domestic  and  useful  arts");  to 
found  a  public  library:  Dascomb  v. 
Marston,  80  Me.  223;  Brown  v.  Pan- 
coast,  34  N.  J.  Eq.  324;  for  dissemi- 
nation  of  the  works  of  a  given  author: 
George  v.  Braddock,  45  N.  J.  Eq.  757; 
14  Am.  St.  Rep.  754  (the  writings  of 
Mr.  Henry  George).] 


1517  PUBLIC   OR   CHARITABLB   TRUSTS.      §§  1024,  1025 

a  town;  for  the  promotion  of  science  and  scientific  studies; 
and  generally  for  the  advancement  of  knowledge,  learning, 
and  education. 

§  1024.  4.  Other  Public  Purposes.  —  Other  public  pur- 
poses, not  in  the  ordinary  sense  benevolent,  may  be  valid 
charities,  since  they  are  either  expressly  mentioned  by 
the  statute,  or  are  within  its  plain  intent.  All  of  these 
purposes  tend  to  benefit  the  public,  either  of  the  entire 
country  or  of  some  particular  district,  or  to  lighten  the 
public  burdens  for  defraying  the  necessary  expenses  of 
local  administration  which  rest  upon  the  inhabitants  of 
a  designated  region.* 

§  1025.  Creation  of  the  Trust  —  Certainty  or  Uncer- 
tainty of  the  Object  and  of  the  Beneficiaries.  —  One  of  the 
distinguishing  elements  of  a  "  charitable  "  as  compared 
with  an  ordinary  trust  consists  in  the  generality,  in- 
definiteness,  and  even  uncertainty  which  is  permitted  in 
describing  the  objects  and  purposes  or  the  beneficiaries. 
From  the  very  definition  of  a  "charitable  trust*'  the 
beneficiaries  are  always  an  uncertain  body  or  class;  but 
the  doctrine  goes  further  than  this.  If  the  donor  suffi- 
ciently shows  his  intention  to  create  a  charity,  and  indi- 
cates its  general  nature  and  purpose,  and  describes  in 
general  terms  the  class  of  beneficiaries,  the  trust  will  be 
sustained  and  enforced,  although  there  may  be  indefinite- 
ness  in  the  declaration  and  description,  and  although 
much  may  be  left  to  the  discretion  of  the  trustees.'     This 

'Examples:   For  the  improvement  etc.:  Att'y-Gen.  v.  Eastlake,  11  Hare, 

or  good  of  a  town:  Jones  v.  Williams,  205,  215,  216;  Att'y-Gen.  v.  Brown,  1 

Amb.  651;  Howse  v.  Chapman,  4  Ves.  Swanst.  265,  301,  302;  fire  companies 

542;    Att'y-Gen.  v.    Lonsdale,  1  Sim.  in  Pennsylvania:  Humane   Fire  Co. 'a 

105;    Mitford  v.    Reynolds,    1    Phill.  Appeal,  88  Pa.  St.  389;  Bethlehem  v. 

Ch.    185;    Att'y-Gen.    v.   Bushby,    24  Perseverance  Fire  Co.,  81  Pa.  St.  445. 

Beav.  299;  for  the  benefit  of  the  coun-  '  The   decisions  ajypear  to  be  very 

try  generally:   Nightingale   v.   Goul-  conflicting,  and  it  is  certainly  difficult 

bourn,  2  Phill.  Ch.  594;  to  aid  in  pay-  to  harmonize  them  all.     The  following 

ment  of  the  pulilic  debt:  Newland  v.  are   examples   of    trusts   which  were 

Att'y-Gen.,  3  Mer.  684;    for  a  parish  held  invalid  on  account  of  too  great 

or    the    parishioners:    Att'y-Gen.    v.  uncertainty:  A  gift  for  "  charitable  or 

Webster,  L.  R.  20  Eq.  483;  public  ben-  public  purposes    :  Vezey  v.  Jamson,  1 

efit  of  a  town,  improving  streets,  light-  Sim.  &  St.  69;  see  Fowler  v.  Fowler,  33 

ing,  paving,  protecting  from  the  sea,  Beav.  616;  for  such  "objects of  liberal- 


§1025 


EQUITY   JURISPRUDENCE. 


1518 


uncertainty,  however,  must  not  be  carried  too  far.  The 
intention  of  the  donor  to  create  some  kind  of  charity,  re- 
ligious, benevolent,  educational,  or  otherwise,  must  never 
be  left  uncertain.  It  must  sufficiently  appear  that  he 
designed  to  establish  a  charity,  and  the  purpose  must  be 
indicated  with  sufficient  clearness,  to  enable  the  court,  by 
means  of  its  settled  doctrines,  to  carry  the  design  into 
effect.  Such  is  the  well-established  English  doctrine, 
and  the  court  strives  to  carry  out  a  charity  if  at  all  prac- 
ticable. In  this  country,  the  doctrine  has  been  adopted 
only  to  a  partial  extent.  In  a  few  of  the  states  where  the 
system  of  charitable  trusts  prevails,  the  English  theory 
seems  to  have  been  accepted  with  little  or  no  modifica- 
tion. In  most  of  the  states  more  certainty  in  defining 
the  purposes  of  the  charity  and  terms  of  the  trust,  or  in 
designating  the  classes  of  persons  who  are  intended  to  be 
the  beneficiaries,  is  required,  in  order  to  sustain  the  gift, 
than  is  necessary  under  the  methods  of  the  English 
courts.' 


ity  and  benevolence  "  as  a  trustee  shall 
approve  of:  Morice  v.  Bishop  of  Dur- 
ham, 9  Ves.  399;  Williams  v.  Kershaw, 
5  Clark  &  F.  Ill;  Ellis  v.  Selby,  1 
Mylne  &  C.  286;  per  contra,  Waldo  v. 
Caley,  16  Ves.  206;  Horde  v.  Earl  of 
Sufifolk,  2  Mylne  &  K.  59;  Johnston  v. 
Swann,  cited  Arab.  585,  note;  but  see 
comments  on  these  cases  in  Ellis  v. 
Selby,  1  Mylne  &  C.  286,  292,  293;  also 
a  bequest  to  a  public  body  for  a  pur- 
pone,  none  being  stated,  is  void:  Corpo- 
ration of  Gloucester  v.  Osborn,  1  H. 
L.  Cas.  272;  suh  nam.  Corporation  of 
Gloucester  v.  Wood,  3  Hare,  131,  136- 
148;  a  bequest  "to  the  trustees  of 
Mt.  Zion  chapel,"  etc.,  no  purpose  be- 
ing stated;  held  that  the  court  could 
not  assume  a  charitable  purpose  to  be 
intended,  and  the  bequest  was  void: 
Aston  V.  Wood,  L.  R.  6  Eq.  419;  a 
bequest  which  the  executors  "should 
apply  to  any  charitable  or  benevolent 
purpose  they  might  agree  upon  at  any 
time,"  held  too  indefinite,  and  inoper- 
ative: In  re  Jarman's  Estate,  L.  R.  8 
Ch.  Div.  584. 

Examples  of   trusts  held  valid,  al- 
though uncertain   in  their  objects  or 


purposes:  Where  the  intention  to 
create  a  charitable  trust  is  evident, 
the  court  will,  as  a  rule,  sustain  and 
enforce  it,  although  its  terms  are  very 
indefinite  and  uncertain:  Magistrates 
of  Dundee  v.  Morris,  3  Macq.  134, 
157;  a  bequest  for  "such  charities  and 
other  public  purposes  as  lawfully  may 
be  in  the  parish  of  T.":  Dolan  v.  Mac- 
dermot,  L.  R.  5  Eq.  60;  3  Ch.  676;  for 
charitable  purposes  generally,  no  par- 
ticular kind  being  mentioned:  Att'y- 
Gen.  v.  Herrick,  Amb.  712;  Chamber- 
layne  v.  Brockett,  L.  R.  8  Ch.  206;  for 
such  charitable  purposes  as  the  trustee 
or  some  other  designated  person  may 
determine,  or  where  the  selection  and 
application  are  left  to  the  discretion  of 
the  trustees:  Lewis  v.  Allenby,  L.  R. 
10  Eq.  668;  Wdkinson  v.  Barber, 
L.  R.  14  Eq.  96;  Wilkinson  v.  Lind- 
gren,  L.  R.  5  Ch.  570;  Pocock  v. 
Att'y-Gen.,  L.  R.  3  Ch.  Div.  342. 
For  further  examples  of  uncertain  ob- 
jects and  purposes,  see  post,  §  1027, 
and  cases  cited  as  illustrations  of  the 
rule  of  cy-pres. 

'  It  is  impossible  to  formulate  any 
more    specific   American    rule,   since 


1519 


PUBLIC    OR    CHARITABLE    TRUSTS. 


1026 


§  1026.     Certainty  or  Uncertainty  of  the   Trustee.  — 
Charitable  trusts  also  differ  from  private  trusts  in  another 


there  is  a  radical  difference  in  the 
theories  and  fundanieutal  views  pre- 
vailing in  various  states.  I  shall 
make  no  attempt  to  analyze  and  class- 
ify the  decisions  upon  this  most  im- 
portant question,  but  shall  simply 
give  some  examples,  referring  the 
reader  to  treatises  upon  trusts  for  a  de- 
tailed discussion.  Examples  of  trusts 
held  invalid:  Bequest  to  executors  and 
their  successors,  "to  be  by  them  dis- 
tributed to  such  persons,  societies,  or 
institutions  as  they  may  consider  most 
deserving,"  held  too  indefinite,  and 
invalid  as  a  oharital)le  trust:  Nichols 
V.  Allen,  130  Mass.  211;  39  Am.  Rep. 
445;  compare  Power  v.  Cassidy,  79 
N.  Y.  602;  35  Am.  Rep.  550;  bequest 
to  A,  "to  distribute  tlie  same  in  such 
manner  as,  in  his  discretion,  shall 
appear  best  calculated  to  carry  out 
wishes  which  I  have  expressed  to 
him,"  held  invalid,  and  the  trust  can- 
not be  established  by  proof  of  testator's 
oral  directions:  OUilfe  v.  Wells,  130 
Mass.  221;  bequest  to  a  Sunday  school, 
the  income  to  be  "  applied  in  maiiing 
Christmas  presents  to  the  scholars," 
void;  no  competent  trustee  and  no 
certain  beneficiaries:  Goodell  v.  Union 
Ass'n  etc.,  29  N.  J.  Eq.  32;  devise  and 
bequest  "to  the  Roman  Catholic  or- 
phans" of  a  certain  diocese,  the  bishop, 
as  executor,  authorized  to  use  the  prop- 
erty for  the  benefit  of  said  orphans, 
held  invalid;  uncertainty  as  to  trustee 
and  beneficiaries:  Heiss  v.  Murphy, 
40  Wis.  276;  bequest  to  trustees,  to 
be  expended,  at  their  discretion,  "  for 
the  establishment  of  a  school  at  M."; 
indefinite  and  invalid:  Att'y-Gen.  v, 
Soule,  28  Mich.  153;  bequest  to  "  be- 
nevolent, religious,  or  charitable  pur- 
poses," invalid:  Thomson's  Ex'rs  v. 
Norris,  20  N.  J.  Eq.  489;  a  bequest  to 
A.,  bishop  of  W.,  and  his  successors, 
in  trust  for  the  sisters  of  St.  Joseph, 
an  unincorporated  society:  Kain  v. 
GHbboney,  101  U.  S.  362;  3  Hughes, 
397;  a  devise  or  bequest  to  trustees  for 
the  benefit  of  "the  colored  persons" 
of  a  city  or  state:  Needles  v.  Martin, 
33  Md.  609;  [see  also  Fairfield  v.  Law- 
son,  50  Conn.  501;  47  Am.  Rep.  669; 
a  gift  "for  such  charitable  purposes 
as  A  may  deem  proper  ":  Bristol  v. 
Bristol,  53  Conn.   242;  Mills  v.  New- 


berry, 112  111.  123;  54  Am.  Rep.  213; 

for  benefit  of  testator's  next  of  kin 
"who  may  be  needy,"  void  as  to  the 
clause  "  who  may  be  needy ":  Fon- 
taine's Adm'r  v.  Thompson's  Adm'r, 
80  Va.  229;  56  Am.  Rep.  588;  and  see 
Kent  V.  Dunham,  142  Mass.  216;  56 
Am.  Rep.  667;  but  a  similar  bequest 
was  upiield  in  Webster  v.  Morris,  66 
Wis.  366;  57  Am.  Rep.  278;  and  see 
Gafney  v.  Kenison,  64  N.  H.  354.] 

Examples  of  trusts  held  sufficiently 
certain  and  valid:  Bequest  toexecutora, 
"to  be  divided  by  them  among  such 
Roman  Catholic  charities,  institutions, 
schools,  or  churches  in  the  city  of  New 
York,"  as  a  majority  of  the  executors 
should  decide,  there  being  many  such 
institutions  in  New  York  authorized 
by  law  to  take  gifts  by  will:  Power  v. 
Cassidy,  79  N.  Y.  602;  35  Am.  Rep. 
550;  devise  or  bequest  to  a  town,  or 
towns,  or  a  county,  for  purpose  of 
building  or  maintaining  a  school,  or 
educating  poor  children,  or  aiding  the 
poor,  etc. :  Boxford  etc.  Soc.  v.  Harri- 
man,  125  Mass.  321  (a  school);  Clement 
V.  Hyde,  50  Vt.  716;  28  Am.  Rep. 
522  (educating  poor  children);  Craig 
V.  Secrist,  54  Ind.  419  (same);  Mason 
V.  Methodist  Episcopal  Church,  27 
N.  J.  Eq.  47  (same,  and  aiding  poor 
widows);  Fellows  v.  Miner,  119  Mass. 
541  (aged  aud  infirm  poor);  devise 
and  bequest  in  trui5t  "  for  the  ymrpose 
of  founding  an  institution  for  the  edu- 
cation of  youths  in  St.  Louis  Co.": 
Russell  V.  Allen,  5  Dill.  235;  a  gift  to 
trustees  to  pay  income  to  an  almoner 
to  be  appointed  by  the  probate  court, 
and  he  to  distribute  the  same  among 
the  poor  widows  of  a  certain  district, 
held  valid,  and  not  defeated  by  a  de- 
lay of  several  years:  Sohier  v.  Burr, 
127  Mass.  221;  a  conveyance  to  trus- 
tees for  an  unincorporated  church; 
Laird  v.  Bass,  50  Tex.  412;  a  devise 
of  lands  to  trustees  "for  the  erection 
of  a  hospital  for  foundlings,  and  for 
any  corporation  which  Congress  may 
create":  Ould  v.  Washington  Hos- 
pital,  95  U.  S.  303;  a  bequest,  the 
income  "to  help  form  a  Young  Men's 
Christian  Association  ";  also  a  bequest 
to  A,  "thatthe  interest  may  be  applied, 
at  his  discretion,  in  aid  of  the  deserving 
poor  of  AL":  Goodell  v.  Union  Ass'a 


§  1026 


EQUITY    JURISPRUDENCE. 


1520 


very  important  feature.  It  is  settled,  as  a  part  of  the 
complete  system  prevailing  in  England,  that  not  only  may 
the  beneficiaries  be  uncertain,  but  that,  even  where  the 
gift  is  made  to  no  certain  trustee,  so  that  the  trust,  if 
private,  would  wholly  fail,  a  court  of  equity  will  carry 
the  trust  into  effect,  either  by  appointing  a  trustee  or  by 
acting  itself  in  the  place  of  a  trustee,  —  that  is,  by  estab- 
lishing a  scheme  for  accomplishing  the  design  of  the 


etc.,  29  N.  J.  Eq.  32;  a  bequest  to  a 
certain  church,  "  in  trust,  to  use  the 
same  to  promote  the  religious  interests 
of  said  church,  and  to  aid  the  mis- 
sionary, educational,  and  benevolent 
enterprises  to  which  said  church  is  in 
the  habit  of  contributing  ":  De  Camp 
V.  Dobbins,  29  N.  J.  Eq.  36;  bequest 
to  a  church,  to  be  paid  as  soon  as  it  is 
incorporated,  "to  employ  in  the  pro- 
motion of  the  Universalist  denomina- 
tion": Trustees  etc.  v.  Beatty,  28 
N.  J.  Eq.  57,0;  a  devise  for  the  estab- 
lishing a  school  for  the  benefit  of  youth 
residing  in  New  Jersey,  or  furnishing 
education  to  such  children  of  the  city 
of  H.  as  the  authorities  shall  permit 
to  attend:  Stevens  v.  Shippen,  28 
N.  J.  Eq.  487;  a  conveyance  of  land, 
in  trust,  for  the  purpose  of  erecting 
thereon  a  school-house  and  a  meeting- 
house for  divine  worship:  Meeting  St. 
Bap.  Soc.  V.  Hail,  8  R.  I.  234;  a  be- 
quest,  the  income  to  be  applied  for 
"the  benefit  of  the  sabbath-school 
library  of  the  First  Baptist  Church  in 
S.,  or  the  Baptist  Home  Missionary 
Society,  whichever  may  be  deemed 
most  suitable:  Fairbanks  v.  Lamson, 
99  Mass.  533;  see  also  Baptist  Ass'n 
V.  Hart's  Ex'rs,  4  Wheat.  1;  Inglis  v. 
Sailor's  Snug  Harbor,  3  Pet.  99;  Vidal 
V.  Girard's  Ex'rs,  2  How.  127;  Brown 
V.  Concord,  33  N.  H.  285;  Burr's  Ex'rs 
V.  Smith,  7  Vt.  241;  29  Am.  Dec.  154; 
Baker  v.  Smith,  13  Met.  34,  41 ;  Jack- 
son V.  Phillips,  14  Allen,  539,  557; 
White  V.  Fisk,  22  Conn.  31;  Shotwell's 
Ex'rs  V.  xMott,  2  Sand.  Ch.  46;  Wil- 
liams V.  Williams,  8  N.  Y.  525;  Beek- 
man  v.  Bonsor,  23  N.  Y.  298;  80  Am. 
Dec.  269;  Bascom  v.  Albertson,  34 
N.  Y.  584;  Whitman  v.  Lex,  17  Serg. 
&  R.  88;  17  Am.  Dec.  644:  Brendle  v. 
German  Ref.  Cong.,  33  Pa.  St.  415, 
418;  Philadelphia  v.  Girard's  Heirs, 
45  Pa.  St.  9;  84  Am.  Dec.  470;  Miller 


V.  Porter,  53  Pa.  St,  292;  Gallego'a 
Ex'rs  V.  Att'y-Gen.,  3  Leigh,  450;  24 
Am.  Dec.  650;  Venable  v.  Coffman,  2 
W.  Va.  310;  McAuley  v.  Wilson,  1 
Dev.  Eq.  276;  18  Am.  Dec.  587;  Att'y- 
Gen.  V.  Jolly,  2  Strob.  Eq.379;  Carter 
v.  Balfour,  18  Ala.  814;  Dickson  v, 
Montgomery,  1  Swan,  348;  Att'y-Ges». 
V.  Wallace,  7  B.  Mon.  611;  Urmey*3 
Ex'r  V.  Wooden,  1  Ohio  St.  160;  59 
Am.  Dec.  615;  Oilman  v.  Hamilton, 
16  111.  225.  [The  power  to  dispense 
the  fund  carries  with  it,  by  implica- 
tion, the  power  to  select  the  benefici- 
aries: Hesketh  v.  Murphy,  36  N.  J. 
Eq.  304.  See,  in  general,  Russell  v. 
Allen,  107  U.  S.  167;  Field  v.  Drew 
Theol.  Sem.,  41  Fed.  Rep.  371;  Suter 
V.  Hilliard,  132  Mass.  412;  42  Am. 
Rep.  144;  Minot  v.  Baker,  147  Masa. 
348;  9  Am.  St.  Rep.  713;  White  v. 
Ditson,  140  Mass.  351;  54  Am.  Rep. 
273;  Bullard  v.  Chandler,  149  Mass, 
532;  Boardsley  v.  Selectmen  of  Bridge- 
port, 53  Conn.  489;  55  Am.  Rep.  152 
("to  be  used  at  discretion,  ....  for 
the  special  benefit  of  the  worthy,  de- 
serving, poor,  white,  American,  Prot- 
estant, democratic  widows  and  or- 
phans residing  in  B.":  each  adjective 
capable  of  sustaining  a  charitable  be- 
quest); Union  Meth.  Epis.  Church  v. 
Wilkinson,  36  N.  J.  Eq.  141;  Eutaw 
Place  Church  v.  Shiveley,  67  Md.  493; 
1  Am.  St,  Rep.  412;  Beckwith  v. 
St.  Philip's  Parish,  69  Ga.  564;  Hunt 
V.  Fowler.  121  111.  269;  Goodale  v. 
Mooney,  60  N.  H.  528;  49  Am.  Rep. 
334  (to  be  distributed  by  execution 
"for  benevolent  objects,"  valid);  Web- 
ster V.  Morris,  66  Wis.  366;  57  Am,  Rep. 
278  (a  bequest,  "  to  be  given  to  any 
of  my  heirs  who  are  in  need,  or  not  in 
very  comfortable  circumstances,  as  to 
my  executors  seems  fit  and  proper,"  i* 
sufficiently  definite).] 


1521        PUBLIC  OR  CHARITABLE  TRUSTS.       §  1026 

donor,  as  though  the  legal  title  had  vested  in  a  certain 
trustee.  This  result  may  happen  in  various  modes.  In 
one  class  of  instances  the  same  rule  is  merely  applied 
which  would  be  invoked  under  like  circumstances  to 
regulate  the  administration  of  a  private  trust.  Where  a 
testator  has  expressly  purported  to  give  the  property  to 
a  trustee,  but  for  any  cause  the  appointment  fails,  the 
charitable  trust  will  still  be  enforced.^  The  doctrine, 
however,  goes  much  farther  than  this  simple  rule,  which 
does  not  permit  a  trust  otherwise  valid  to  fail  for  want  of 
a  designated  trustee.  It  also  applies  where  the  property 
is  given  to  a  person  or  body  incapable  of  taking  and  hold- 
ing in  perpetuity;  or  to  a  body  uncertain,  indefinite,  and 
fluctuating  in  its  members,  such  as  an  unincorporated 
society;  or  to  a  body  not  in  legal  being,  as  to  a  corpora- 
tion not  in  existence;  and  even  where  there  is  no  person 
or  body  indicated  as  the  recipients  of  the  legal  title,  but 
the  property  is  merely  directed  to  be  applied  to  some 
designated  charitable  purpose,  the  performance  of  which 
direction  might  and  often  would  necessarily  create  a  per- 
petuity.^    This  is  one  of  the  most  important  points  of 

*  As  where  a  testator  gives  property,  v.  Ochiltree,  8  Blackf.  15,  22;  Sohier 

to  be  applied  in  charity  to  such  person  v.  Burr,    127    Mass.  221;  [Russell  v. 

as   he   shall   hereafter  in  his  will  ap-  Allen,  107  U.  S.   167;  In  re  Schouler, 

point  his  executor,  and  he  neglects  to  1.34  Mass.  426;  Brown  v.  Pancoast,  34 

appoint  any  one,  or,  having  appointed  N.  J.  Eq.  324.'1 

one,  the  person  dies  in  the  testator's  '  The  following  are  some  of  the  many 
lifetime,  and  none  other  is  named;  or  cases  in  which  this  doctrine  is  either 
the  testator  gives  his  property  to  such  applied  or  discussed:  To  a  body  not  in 
person  as  his  executor  shall  name,  and  existence:  Att'y-Gen.  v.  Bunce,  L.  R. 
no  executor  at  all  is  appointed,  or,  if  6  Eq.  563;  In  re  Maguire,  L.  R.  9  Eq. 
appointed,  he  dies  in  the  testator's  632;  to  unincorporated  fluctuating  as- 
lifetime;  or  if  the  property  is  given  sociations:  Cocks  v.  Manners,  L.  R.  12 
to  certain  trustees,  and  they  all  die  in  Eq.  574;  and  see  Gower  v.  Mainwar- 
the  testator's  lifetime,  or  the  trustee  ing,  2  Ves.  Sr.  87,  89,  per  Lord  Hard- 
named  refuses  to  act, —  in  all  such  cases  wicke;  Att'y-Gen.  v.  Oglander,  3- 
the  court  carries  out  the  intended  Brown  Ch.  166;  Att'y-Gen.  v.  Green, 
charity  as  stated  in  the  text:  Mills  v.  2  Brown  Ch.  490;  White  v.  White,  1 
Farmer,  1  Mer.  55,  96;  Moggridge  v.  Brown  Ch.  12;  Att'y-Gen.  v.  Boultbee, 
Thackwell,  3  Brown  Ch.  517;  1  Ves.  2  Ves.  380;  Att'y-Gen.  v.  Bowyer,  3 
.464;  7  Ves.  36,  69:  Att'y-Gen.  v.  Ves.  714;  Att'y-Gen.  v.  Comber,  2 
Jackson,  11  Ves.  365.  367;  White  v.  Sim.  &  St.  93;  Att'y-Gen.  v.  Down- 
W^hite,  1  Brown  Ch.  12;  Att'y-Gen.  v.  ing,  Amb.  550,  571. 
Hickman,  2  Eq.  Cas.  Abr.  193;  Brown  There  is  a  fundamental  divergence 
V.  Kelsey,  2  (^ush.  243;  Winslow  v.  between  two  classes  of  American  de- 
Cummings.  3  Cush.  358,  365;  McCord  cisiona  upon  this  aueation.  la  dom* 
2  Ea  Jna.  — 96 


§1026 


EQUITY   JURISPRUDENCE. 


1522 


distinction  between  charitable  and  private  trusts;  for  it 
is  certain  that  at  law,  and  independently  of  the  peculiar 
doctrine  of  equity  on  this  subject,  gifts  to  charitable  uses, 
without  a  certain  and  competent  trustee  to  take  and  hold 
the  legal  title,  —  as  to  an  unincorporated  and  fluctuating 
society,  —  would  be  wholly  void.*  The  doctrine,  however, 
is  rejected  by  the  courts  of  several  American  states,  which 
admit  the  existence  and  validity  of  charitable  trusts  only 
in  cases  where  the  property  is  given  to  a  certain  and 
competent  trustee. 

proper  trustee,  but  the  charity  would 
not  fail  on  that  account,  for  the  court 
would  appoint  a  trustee:  Mason  v. 
Meth.  Epis.  Ch.,  27  N.  J.  Eq.  47. 
Gift  to  a  bishop  and  his  successors,  in 
trust,  for  an  object  which  would  be  or 
might  be  a  perpetuity,  held  void:  Kaia 
V.  Gibboney,  101  U.  S.  362;  3  Hughes, 
397;  Heiss  v.  Murphey,  40  Wis.  276. 
See  also  Preachers'  Aid  Soc.  v.  Rich, 
45  Me.  552;  Tappan  v.  Deblois,  45  Me. 
122;  Swasey  v.  Am.  Bible  Soc,  57  Me. 
523;  Tucker  v.  Seamen's  Aid  Soc,  7 
Met.  188,  195;  Bliss  v.  Am.  Bible  Soc, 
2  Allen,  334;  Meeting  St.  Bap.  Soc  v. 
Hail,  8  R.  I.  234;  Birchard  v.  Scott, 
39  Conn.  63;  Goodell  v.  Union  Ass'n 
etc,  29  N.  J.  Eq.  32;  Stevens  v.  Ship, 
pen,  28  N.  J.  Eq.  487;  Philadelphia 
V.  Fox,  64  Pa.  St.  169;  Zeisweiss  v. 
James,  63  Pa.  St.  465;  3  Am.  Rep. 
558;  State  v.  Warren,  28  Md.  338; 
Needles  v.  Martin,  33  Md.  609;  Mil- 
ler V.  Atkinson,  63  N.  C.  537;  Mc- 
Intyre  v.  Zanesville,  17  Ohio  St.  352; 
Board  of  Ed.  v.  Edson,  18  Ohio  St. 
221;  98  Am.  Dec  114;  Ex  parte  Lind- 
ley,  32  Ind.  367;  Att'v-Gen.  v.  Soule, 
28  Mich.  153;  Methodist  Oh.  v.  Clark, 
41  Mich.  730;  Heuser  v.  Harris,  42 
111.  425;  Academy  of  Visitation  v. 
Clemens,  50  Mo.  167;  Estate  of 
Hinckley,  58  Cal.  457;  [Hunt  v. 
Fowler,  121  111.  269.] 

*  Att'y-Gen.  v.  Tancred,  Amb.  351; 
I  W.  Black.  90;  Widmore  v.  Woudroffe, 
Amb.  636,  640;  Anonymous,  2  Ch. 
Cas.  207;  Baptist  Ass'n  v.  Hart's 
Ex'rs,  4  Wheat  1;  McCord  v.  Ochil- 
tree, 8  Blackf.  15,  22;  Grimes's  Ex'rs 
V.  Harmon,  35  Ind.  198;  9  Am.  Rep. 
690;  Levy  v.  Levy,  33  N.  Y.  97,  102, 
cases  cited  by  Wright,  J. 


states  the  English  doctrine  as  stated 
in  the  text  is  adopted,  except  so  far 
as  it  is  enlarged  by  the  further  and 
distinct  doctrine  of  cy-pres;  in  others, 
charitable  trusts  are  sustained  and  en- 
forced only  when  the  legal  title  to  the 
property  is  given  by  the  donor  to  a 
certain  trustee  competent  to  take  and 
hold  in  perpetuity,  if  the  trust  creates 
one.  The  following  cases  are  given 
simply  as  examples:  Gifts  to  unmcor- 
porated  societies  held  valid:  Laird  v. 
Bass,  50  Tex.  412;  Cruse  v.  Ax  tell, 
50  Iiid.  49;  [Missouri  Hist.  Soc.  v. 
Academy  of  Science,  94  Mo.  459.] 
Gift  to  an  unincorporated  society,  or 
uncertain  and  fluctuating  body  held 
invalid:  Goodell  v.  Union  Ass'n  etc., 
29  N.  J.  Eq.  32  (to  a  Sunday  school); 
Heiss  V.  Murphey,  40  Wis.  276  ("  to 
the  Roman  Catholic  orphans "  of  a 
diocese);  [Dascomb  v.  Marston,  80 
Me.  223;  Byers  v.  McCartney,  62  Iowa, 
339.]  Gift  to  a  corporation  not  yet 
created,  but  its  incorporation  ex- 
pected, valid:  Ould  v.  Washington 
Hospital,  95  U.  S.  303;  Trustees  etc, 
V.  Beatty,  28  N.  J.  Eq.  570;  [Coit  v. 
Comstock,  51  Conn.  352;  50  Am.  Rep. 
29;  Jones  v.  Habersham,  107  U.  S. 
174,  191.]  Gift  to  the  treasurer  of  a 
county  and  his  successors  in  office, 
the  income  for  aiding  poor,  held  valid: 
Clement  v.  Hyde,  50  Vt.  716;  28  Am. 
Rep.  522.  [Gift  to  the  selectmen  of  a 
town,  valid:  Beardsley  v.  Selectmen 
of  Bridgeport,  53  Conn.  489;  55  Am. 
P»,ep.  152.  Gift  to  a  municipal  cor- 
poration, valid:  Peynado  v.  Peynado, 
82  Ky.  5.]  Where  a  bequest  was 
made  to  two  towns,  in  trust,  to  apply 
the  income  to  the  education  of  poor 
children  and  the  relief  of  poor  widows 
it  was  held  that  the  town  was  not  a 


1523  PUBLIC   OR   CHARITABLE   TRUSTS.  §  1027 

§  1027.  The  Doctrine  of  Cy-Pres.  —  In  administering 
charitable  gifts,  the  English  courts  have  leaned  so  strongly 
in  favor  of  sustaining  the  trusts,  even  when  the  donor's 
specified  purpose  becomes  impracticable,  that  they  in- 
vented at  an  early  day,  and  have  fully  established,  the 
so-called  doctrine  of  cy-pres.  This  doctrine  may  be  stated 
in  general  terms  as  follows:  Where  there  is  an  intention 
exhibited  to  devote  the  gift  to  charity,  and  no  object  is 
mentioned,  or  the  particular  object  fails,  the  court  will 
execute  the  trust  cy-pres,  and  will  apply  the  fund  to  some 
charitable  purposes,  similar  to  those  (if  any)  mentioned 
by  the  donor.  "  If  the  donor  declare  his  intention  in 
favor  of  charity  indefinitely,  without  any  specification  of 
objects,  or  in  favor  of  defined  objects  which  happen  to 
fail  from  whatever  cause,  —  even  though  in  such  cases 
the  particular  mode  of  operation  contemplated  by  the 
donor  is  uncertain  or  impracticable,  —  yet  the  general 
purpose  being  charity,  such  purpose  will,  notwithstand- 
ing the  indefiniteness,  illegality,  or  failure  of  its  imme- 
diate objects,  be  carried  into  effect,"*  In  the  first  kind 
of  cases,  where  the  donor  has  specified  no  object,  the 
court  will  determine  upon  some  scheme  which  shall 
carry  out  the  general  intention;  in  the  second  kind, 
where  the  donor's  specified  object  fails,  the  court  will 

1  In  the  following  cases  this  doctrine  combe  v.  Wintringham,  13  Beav.  87; 
is  defined,  discussed,  applied,  and  il-  Bennett  v.  Hay ter,  2  Beav.  8J ;  Marsh 
lustrated:  Sinnett  v.  Herbert,  L.  R.  7  v.  Att'y-Gren.,  2  Jolius.  &  H.  61;  Att'y 
Ch.  232;  Chamberlayne  v.  Brockett,  Gen.  v.  Marchant,  L.  R.  3  Eq.  42-^; 
L.  R.  8  Ch.  206;  Att'y-Gen,  v.  Baxter,  Att'y-Gen.  v.  Bunce,  L.  R.  6  Eq.  563; 
I  Vern.  248;  Att'y-Gen.  v.  Andrew,  3  In  re  Latymer's  Charity,  L.  R.  7  Eq. 
Ves.  633;  Corbyu  v.  French,  4  Ves.  353;  In  re  Maguire,  L.  R.  9  Eq.  632; 
418;  Att'y-Gen.  v.  Bishop  of  Oxford,  Merchant  Tailors'  Co.  v.  Att'y-Gen., 
cited  4  Ves.  431;  Gary  v.  Abbot,  7  L.  R.  11  Eq.  35;  6  Ch.  512;  In  re 
Ves.  490;  Moggridge  v.  Thackwell,  7  Prison  Charities,  L.  R.  16  Eq.  129; 
Ves.  36;  Mills  v.  Farmer,  1  Mer.  55;  Att'y-Gen.  v.  St.  John's  Hospital, 
19  Ves.  483,  485;  Pieschel  v.  Paris,  2  L.  R.  1  Ch.  92;  2  Ch.  Div.  554;  Man- 
Sim.  &  St.  384;  De  Costa  v,  De  Pas,  Chester  School  Case,  L.  R.  2  Ch.  497; 
Amb.  228;  2  Swanst.  487;  Hay  ter  v.  Att'y-Gen.  v.  Wax  Chandlers'  Co., 
Trego,  5Russ.  113;  Simon  v.  Barber,  L.  R.  5  Ch,  503;  Att'y-Gen.  v.  Duke 

5  Russ.  112;  Att'y-Gen.  v.  Ironmon-  of  Northumberland,  L.  R.  7  Ch.  Div. 
gers'  Co.,  Craig  &  P.  208;    10  Clark  745;  [Pease  v,  Pattinson,  32  Ch,  Div. 

6  F.  908;  Att'y-Gen.  v.  Glyn,  12  Sim.  154;  In  re  White's  Trusts,  33  Ch.  Div. 
84;  Att'y-Gen.  v.  Bisliop  of  Llandaff,  452;  Biscoe  v,  Jackson,  35  Ch,  Div. 
cited  2  Mylne  &  K.  586;  Incorporated  460;  and  see  also  Minot  v.  Baker,  147 
Soc.  V.  Price,  1  Jones  &  L.  498;  Los-  Mass.  348;  9  Am.  St.  Rep.  713.] 


§  1027  EQUITY   JURISPRUDENCE.  1524 

determine  upon  another  object  similar  to  that  mentioned 
by  the  donor.  A  limitation  upon  the  generality  of  the 
doctrine  seems  to  be  settled  by  the  recent  decisions,  that 
where  the  donor  has  not  expressed  his  charitable  inten- 
tion generally,  but  only  by  providing  for  one  specific 
particular  object,  and  this  object  cannot  be  carried  out^ 
or  the  charity  provided  for  ceases  to  exist  before  the  gift 
takes  effect,  then  the  court  will  not  execute  the  trust;  it 
wholly  fails/  The  true  doctrine  of  cy-pres  should  not  be 
confounded,  as  is  sometimes  done,  with  the  more  general 
principle  which  leads  courts  of  equity  to  sustain  and 
enforce  charitable  gifts,  where  the  trustee,  object,  and 
beneficiaries  are  simply  uncertain.  There  is  a  radical 
distinction  between  the  two,  although  the  doctrine  of  cy- 
pres may  be  to  some  extent  an  expansion  or  enlargement 
of  the  other  principle."  In  the  great  majority  of  the 
American  states  the  courts  have  utterly  rejected  the 
peculiar  doctrine  of  cy-pres  as  inconsistent  with  our  in- 
stitutions and  modes  of  public  administration.  A  few  of 
the  states  have  accepted  it  in  a  modified  and  partial  form.^ 

'  Fisk  V.   Att'y-Gen.,   L.  R.  4  Eq.  trustees,  and  still  be  consistent  with 

521;  New  v.  Bonaker,  L.  R.  4  Eq.  655;  the  general  position  which  they  have 

In  re  Clerk's  Trust,  L.  R.  1  Ch.   Div.  assumed. 

497;    Clephane   v.   Provost   of   Edin-         *  It  has  generally  been  said  that  thd 

burgh,  L.  R.   1  H.  L.  S.  417;  Cherry  doctrine  of  cy-pres  and  the  power  to 

V.  Mott,   1   Mylne  &  C.   123;  Clark  v.  enforce  it  belong  to  and  result  from 

Taylor,   1  Drew.  642;  Russell  v.  Kel-  the   executive  authority   held    by   the 

lett,  3  Smale  &  G.  264;  Langford  v.  English  chancellor  as  a  representative 

Gowland,  3  GifF.   617;   [Broadbent  v.  of  the  crown  in  its  character  as  pare/i^s 

Barrow,  29  Ch.  Div.  560;  Stratton  v.  patrice,  and  are  not  a  part  of  the  judi- 

Physio- Medical  College,  144  Mass.  508;  cial  functions  possessed  by  the  court  of 

In  re  Slevin,  (1891)  1  Ch.  87S;  Mormon  chancer}';  while  in  the  United  States 

Church  v.  United  States,  136  U.  S.  1.]  the  courts   are  clothed  with   judicial 

*  Some   of   the  cases   in  which   the  functions   only,    the    prerogative   be- 

court   has   professedly  relied   on   the  longing  to  the  parens  putrice  being  held 

doctrine  of  C2/-p7'es,  and  which  are  cited  by  the  legislatures.     It  may  well  be 

as  illustrations  of  it,  in  a  preceding  doubted,  I  think,  whether  this  view  is 

note,  seem   to  be  nothing  more  than  entirely  correct:  See  Starkweather  v 

instances  in  which  trusts  with  uncer-  Am.   Bible  Soc,   72  111.   50;  22  Am 

tain  trustees  or  objects  have  been  bus-  Rep.  133;  Heiss  v.  Murphey,  40  Wis 

tained.     The  suggestion  of  the  text  is  276;    Heuser   v.   Harris,   42   111.   425 

not  merely  verbal;  it  has  a  practical  Gilman    v.     Hamilton,     16    111.    225 

importance  in  this  country.     It  shows  [also  Minot  v.  Baker,  147  Mass.  348; 

that  the  courts  in  the  American  states  9   Am.    St.    Rep.    713.      In    Mormon 

which  have  utterly  rejected  the  doc-  Church  v.  United  States,  136  U.  S.  1, 

trine  of  cy-pres  may  sustain  and  en-  the  question  was  discussed,  and  it  wa» 

force  charitable  trusts  which  are  sim-  held  that  the  legislature  may,  at  any 

ply  uncertain  in  their  objects  or  their  rate,  delegate  such  power  to  the  court.} 


1525  PUBLIC    OR    CHARITABLE    TRUSTS.  §  1028 

§  1028.  Origin  and  Extent  of  the  Equitable  Juris- 
diction. —  Such  being  the  general  nature  of  charitable 
trusts,  the  origin  and  extent  of  the  jurisdiction  oyer 
thein  remains  to  be  examined.  The  question  is  one  of 
little  practical  importance  in  England,  since  the  jurisdic- 
tion is  there  exercised  as  though  it  were  entirely  derived 
from  the  statute  of  charitable  uses  of  Elizabeth.^  The 
question,  however,  becomes  of  vital  importance  in  this 
country,  —  is  absolutely  fundamental,  — since  the  statute 
of  Elizabeth  has  been  held  to  be  in  force  in  but  a  very 
few  of  the  states.  The  opinion  at  one  time  prevailed 
that  the  peculiar  equitable  jurisdiction  over  charities, 
•except  in  cases  where  a  trust  valid  by  the  ordinary  rules 
•of  law  and  equity  was  created,  was  derived  solely  from 
the  statute.^  Other  English  judges  have  maintained  the 
opinion  that  the  jurisdiction  in  its  full  extent  was  pos- 
sessed by  the  court  of  chancery  by  virtue  of  its  general 
powers,  and  that  the  statute  had  only  the  effect  to  regu- 
late that  jurisdiction,  and  to  define  more  distinctly  the 
■classes  of  objects  which  are  charitable.  This  conclusion 
has  been  sustained,  and  even  demonstrated  as  correct, 
by  the  researches  of  the  English  record  commissioners.' 

*  43  Eliz.,  c.  4.  This  statute,  in  a  The  early  Massachusetts  cases,  Going 
particular  and  definite  manner,  de-  v.  Emery,  16  Pick.  107,  26  Am.  Dec. 
olares  the  powers  of  chancery, regulates  645,  and  Burbank  v.  Whitney,  24  Pick, 
the  proceedings  for  the  enforcement  146,  35  Am.  Dec.  312,  seem  to  inti- 
of  charitable  trusts,  and  enumerates  mate  that  the  statute  was  in  force  in 
the  purposes  which  are  charitable  as  Massachusetts,  and  that  the  jurisdic- 
■quoted  ante,  in  §  1020.  tion  was  based  upon  it;  but  this  view 

*  This  view  was  sustained  by  rfjcto  of  was  finally  discarded  in  Bartlett  v. 
some  able  English  judges,  and  by  some  Nye,  4  Met.  378.  In  Illinois,  the  stat- 
decisions  of  American  courts:  See  a  ute  seems  to  be  regarded  as  the  source 
<:?ic<«m  of  Lord  Loughborough  in  Att'y-  of  jurisdiction:  Starkweather  v.  Am. 
<ien.  V.  Bowyer,  3  Ves.  714,  726;  and  Bible  Soc,  72  111.  50;  Heuser  v.  Har- 
the  decisions  in  Baptist  Ass'n  v.  Hart's  ris,  42  111.  425;  Oilman  v.  Hamilton, 
Ex'rs,  4  Wheat.  1;  Gallego's  Ex'rs  v.  16  111.  225;  [Andrews  v.  Andrews,  110 
Att'y-Gen.  3  Leigh,  450;  24  Am.  Dec,  lU.  223.] 

650;  McCord  v.  Ochiltree,  8  Blackf.  'Burford  v.  Lenthall,  2  Atk.  551, 
15,  22;  Common  Council  of  Richmond  and  Att'y-Gen.  v.  Middleton,  2  Ves. 
V.  State,  5  Ind.  334.  These  two  cases  Sr.  327,  per  Lord  Hardwicke;  Att'y- 
held  that  the  jurisdiction  was  derived  Gen.  v.  Tancred,  Amb.  351;  1  W. 
solely  from  the  statute,  and  that  the  Black.  90;  1  Eden,  10,  per  Lord  North- 
statute  was  in  force  in  Indiana,  but  ington;  Att'y-Gen.  v.  Skinners'  Co.,  2 
they  were  completely  overruled  as  to  Russ.  407,  420,  per  Lord  Eldon;  a  very 
both  points  by  Grimes's  Ex'rs  v.  Har-  decided  opinion  of  Lord  Redesdale  in 
mon,  35  Ind.  198;  9  Am.  Rep.  690.  Att'y-Gen.  v.  Mayor  etc.  of  Dublin, 


§  1029  EQUITY   JURISPRUDENCE.  1526 

The  question  has  been  repeatedly  passed  upon  by  the 
American  courts.  Wherever  the  system  of  charitable 
trusts  has  been  accepted  at  all,  it  has  generally  been  held 
that  the  jurisdiction  belongs  to  equity  as  a  part  of  its 
ordinary  authority  over  express  trusts,  and  is  not  refer- 
able for  its  origin  to  the  statute  of  Elizabeth.  This  con- 
clusion was  necessary  to  support  the  jurisdiction  in  a 
great  majority  of  the  states,  since  that  statute  had  not 
been  adopted  as  a  part  of  their  local  legislation.^ 

§  1029.  Charitable  Trusts  in  the  United  States. — 
With  regard  to  the  extent  to  which  charitable  trusts 
have  been  adopted  and  the  jurisdiction  over  them  exer- 
cised in  the  various  states,  there  is  the  utmost  conflict  of 
judicial  decision.  It  seems  possible,  however,  without 
attempting  any  strict  comparison  of  the  cases  or  any 
minute  classifications  of  the  rules,  to  arrange  the  differ- 
ent states  according  to  three  general  types,  which  shall 
represent  with  reasonable  accuracy  and  certainty  the 
existing  condition  of  the  law  on  the  subject  in  this 
country.     First  class:   This   class   includes   those   states 

1    Bligh,    N.   S.,    312,    347,  348;   and  Rep.  522;  Ex'rs  of  Burr  v.  Smith,  7 

equally  clear  opinion  of  Lord  Chan-  Vt.  241;  29  Am.  Dec.  154;  Bartlett  v, 

cellor  8ugden  in  Incorporated  Soc.  v.  Nye,  4  Met.  378;  Going  v.  Emery,  16 

Richards,  1  Dru.  &  War.  258;  1  Con.  Pick.  107;  26  Am.  Dec.  645;  Burbank 

&  L.  58.     The  examination  of  the  an-  v.  Whitney,  24   Pick.    146;    35   Am. 

cient  records  of  the  court  of  chancery  Dec.  312  (these  two  latter  cases  left 

by  the  commissioners  has  disclosed  a  the  question  in  some  doubt);  McCartee 

large  number  of  cases  brought  in  that  v.  Orphan  Asylum  Soc,  9  Cow.  437, 

court  and  decided  prior  to  the  statute,  474-482,  per  Jones,  C. ;    Williams  v. 

in  which  charities  of  the  most  indefinite  Williams,  8   N.    Y.    525;   Andrew  v. 

and  general  character  were  sustained.  New   York  Bible   Soc,  4  Sand.   156j 

thus  proving  that  the  court  then  ex-  Ayres  v.  Methodist  Ch.,  3  Sand.  351; 

ercised  the  same  kind  of  jurisdiction  Bascom  v.  Albertson,  34  N.   Y.  584, 

which  it  has  exercised  since  the  stat-  604;    Norris   v.    Thomson's   Ex'rs,   \9 

ute:  See  Coop.  Pub.  Rec  355.  N.  J.  Eq.  307;  Comm'rs  of  Lagrange 

^  The  position   above  stated   is   af-  Co.  v.  Rogers,  55  Ind.  297;  Grimes's 

firmed  in  the   same   positive   manner  Ex'rs  v.  Harmon,  35  Ind.  198;  9  Am. 

by  repeated   and  most  able  decisions  Rep.  690;  overruling  McCord  v.  Och- 

of  the  United  States  supreme  court:  iltree,  8   Blackf.    15;   Miller  v.  Chit- 

Ould  V.  Washington  Hospital,  95  U.  S.  tenden,    2    Iowa,    315;     Dickson     v. 

303;  Vidal  v.  Girard's  Ex'rs,  2  How.  Montgomery,   1  Swan,  348;  Carter  v. 

127,  155,  194,  196;  Wheeler  v.  Smith,  Balfour's  Adm'r,  19  Ala.  814;  Beal  v. 

9  How.  55,  77;  Fontain  v.  Ravenel,  17  Fox's  Ex'rs,  4  Ga.  404;  [Hutchins  v. 

How.  369;  Griffith  v.  State,  2  Del.  Ch.  George,  44   N.  J.   Eq.   126;    Howe  v. 

421;  State  v.  Griffith,  2  Del.  Ch.  392;  Wilson,  91  Mo.  45;  60  Am.  Rep.  226; 

Estate  of  Hinckley,  58  Cal.  457;  How-  Missouri   Hist.    Soc.    v.    Academy  of 

ard  v.   Am.   Peace  Soc,  49  Me.  288;  Science,  94  Mo.  459.] 
Clement  v.  Hyde,  50  Vt.  716;  28  Am. 


1527 


PUBLIC    OR    CHARITABLE    TRUSTS. 


§  1029 


in  which  charitable  trusts  have  been  abrogated  or  not 
adopted.*    .Either  from  a  statutory  abolition  of  all  uses 


'  The  excepted  instances  authorized 
by  statute  are  generally  cases  where 
corporations  may  receive  and  hold 
property,  in  trust,  for  some  object 
■which  is  charitalile.  The  states  con- 
Btituting  this  class  are  the  following:  — 

New  York:  Bascom  v.  Albertsou,  34 
N.  Y.  5S4;  Levy  v.  Levy,  33  N.  Y. 
97;   Holmes  v.  Mead,  62  N.   Y.  332; 
Beekman  v.  Bonsor,  23  N.  Y.  298;  80 
Am.    Dec.    269;    Dodge   v.    Pond,    23 
N.  Y.    09;   Burrill   v.  Boardman,    43 
N.    Y.    254,    263;    3    Am.    Rep.    694; 
Adams  v.  Perry,  43  N.  Y.  487;  Rose 
V.  Rose,  4   Abb.    App.    108;    but   see 
Power  V.  Cassidj',  79  N.  Y.  602,  35 
Am.  Rep.  550,  where  a  will  gave  prop- 
erty  to  his  executors,  "to  be  divided 
by  them  among  such  Roman  Catho- 
lic  charities,   institutions,   schools,   or 
churches  in  the  city  of  New  York  "  as 
a  majority  of  his  executors  should  de- 
cide, and  in  such  proportions  as  they 
should  think  proper.     There  were  in 
New    York   City  many  such   Roman 
Catholic  institutions  incorporated  and 
authorized  by  statute  to  take  by  devise 
or  bequest;  a  majority  of  the  execu- 
tors designated  certain  of  these  insti- 
tutions as  the  beneficiaries.     Held,  the 
testamentary  disposition  was  not  void 
from  uncertainty,  but  was  operative, 
and   the  acts   of   the   executors  were 
eflfectual.     This  result,  of  course,  de- 
pended upon  the  fact  that  all  the  bene- 
ticiaries  were  corporations  authorized 
to  hold  property,  in  trust,   for  chari- 
table purposes.     In  Williams  v.  Wil- 
liams, 8  N.  Y.  525,  a  majority  of  the 
court  of  appeals  admitted  the  doctrine 
under  great  restrictions;  but  this  decis- 
ion, and  all  the  earlier  ones  which  sus- 
tained the  doctrine  to  a  much  fuller 
extent,   have    been    overruled    by  the 
cases   above   cited.     [The    opinion    of 
Rapallo,    J.,    in    Holland    v.    Alcoek, 
108  N.  Y.  312,  contains  an  exhaustive 
review   of    the    New   York    decisions. 
It  was  held  that  the  doctrine  of  Power 
V.  Cassidy  could  not  be  extended  to  a 
case  where  the  number  of  beneficiaries 
among  whom   a  selection   was   to   be 
made  was   indefinitely   large.     So   in 
Fosdick  v.  Town  of  Hempstead,   125 
N.  581,  21  Am.  St.  Rep.  753,  it  was 
held   that   a    bequest    to   a  town,   in 
trust,  for  "the  poor"  of  the  town  was 


invalid  for  uncertainty,  not  being  re- 
stricted to  those  for  whose  support 
the  town  is  under  a  statutory  liabil- 
ity.  See  also  Prichard  v.  Thompson, 
95  N.  Y.  76;  47  Am.  Rep.  9.  See  fur- 
ther, in  interpretation  of  statutes  lim- 
iting testamentary  gifts  to  charitable 
corporations,  Stephenson  v.  Short,  92 
N.  Y.  433,  per  Rapallo,  J.;  Hollis  v. 
Drew  Theological  Seminary,  95  N.  Y. 
166.] 

Wiscoyjsin:  Ruth  v.  Oberbrunner,  40 
Wis.  238;  Heiss  v,  Murphey,  40  Wis. 
276.  See  Dodge  v.  Williams,  46  Wis. 
70,  and  Gould  v,  Taylor  Orphan  Asy- 
lum, 46  Wis.  106,  for  examples  of  gifts 
to  corporations;  [Webster  v.  Morris, 
66  Wis.  366;  57  Am.  Rep.  278;  Estate 
of  Hoffen,  70  Wis.  522;  Fadness  v. 
Braunborg,  73  Wis.  257  (gift  to  cor- 
poration).] 

Michiijun:  Methodist  Church  v. 
Clark,  41  Mich.  730  (there  is  no  dis- 
tinction between  trusts  for  charitable 
purposes  and  any  others,  and  the  same 
requisites  are  necessary  to  their  valid- 
ity); see  Attorney-General  v.  Soule, 
28  Mich.  153;  [Hatheway  v.  New  Bal-  . 
timore,  48  Mich.  251.] 

{Minnesota:  Little  v.  Willford,  31 
Mion.  173.] 

In  all  the  foregoing  states  the  same 
type  of  statute  has  been  adopted,  in 
terms  abolishing  all  uses  and  trusts, 
except  a  few  well-defined  species  of 
active  express  trusts  which  do  not  in- 
clude any  ordinarj-  form  of  charitable 
use.  The  courts  of  these  states  have 
felt  themselves  compelled  to  hold  that 
all  charitable  trusts  were  abolished, 
except  such  as  would  be  valid  forms, 
under  the  exception.s  of  the  statute. 
No  other  conclusion  seems  to  me  pos- 
sible, except  by  a  judicial  repeal  of 
the  legislation. 

Maryland:  Dashiell  v.  Attorney- 
General,  5  Har.  &  J.  392,  400;  6  Har. 
&  J.  1;  9  Am.  Dec.  572;  Wilderman 
v.  Baltimore,  8  Md.  551;  Methodist 
Church  V.  Warren,  28  Md.  338,  353; 
Needles  v.  Martin,  33  Md.  609;  Mur- 
phy V.  Dallam,  1  Bland,  529;  [Church 
Extension  etc.  v.  Smith,  56  Md.  362; 
Rizer  v.  Perry,  58  Md.  112;  Henry 
Watson  etc.  Soc.  v.  Joluiston,  58  Md. 
139;  Barnum  v.  Mayor  etc.  of  Balti- 
more, 62  Md.  275;  50  Am.  Rep.  219; 


1029 


EQUITY   JURISPRUDENCE. 


1528 


and  trusts,  with  a  few  specified  exceptions,  or  from  the 
general  provisions  of  the  law  against  perpetuities,  or  from 
the  general  policy  of  the  state  legislation,  "charitable 
trusts"  do  not  exist  at  all,  except  where  they  are  merely 
the  express  private  trusts  permitted  by  the  law,  or  except 
in  those  particular  instances  authorized  by  statute.  The 
equitable  system  of  distinctively  charitable  trusts  is  aban- 
doned. Second  class:  This  class  includes  the  larger  por- 
tion of  the  states  in  which  "charitable  trusts"  exist  under 
a  somewhat  modified  and  restricted  form.*     There  is  not 


Isaac  V.  Emory,  64  Md.  333;  Crisp  v. 
Crisp,  65  Md.  422;  Maught  v.  Getzen- 
danner,  65  Md.  527;  57  Am.  Rep.  352; 
Eutaw  Place  Baptist  Church  v.  Shive- 
ley,  67  Md.  493;  1  Am.  St.  Rep.  412, 
and  note.] 

North  Carolina:  McAuley  v.  Wil. 
son,  1  Dev.  Eq.  276;  18  Am.  Dec.  587; 
Trustees  v.  Chambers's  Ex'rs,  3  Jones 
Eq.  253;  Holland  v.  Peck,  2  Ired.  Eq. 
255;  White  v.  Attorney-General,  4 
Ired.  Eq.  19;  44  Am.  Dec.  92;  Miller 
V.  Atkinson,  63  N.  C.  537. 

Virginia:  Virginia  v.  Levy,  23Gratt. 
21;  Carter  v.  Wolfe,  13  Gratt.  301; 
Seaburn's  Ex'r  v.  Seaburn,  15  Gratt. 
423;  Gallego's  Ex'rs  v.  Attorney-Gen- 
eral, 3  Leigh,  450;  24  Am.  Dec.  650; 
Kain  v.  Gibboney,  101  U.  S.  362;  3 
Hughes  C.  C.  397.  [Virginia  now  ap- 
parently belongs  to  the  second  class: 
See  Protestant  etc.  Soc.  v.  Church- 
man's Rep's,  80  Va.  718  (disapproving 
the  earlier  Virginia  cases,  which,  as  is 
pointed  out  in  the  elaborate  opinion 
of  Richardson,  J.,  had  followed  the 
false  lead  of  Baptist  Ass'n  v.  Hart,  4 
Wheat.  1).  The  position  of  Virginia, 
however,  may  still  be  in  doubt,  as  the 
actual  decision  of  the  case  seems  to 
have  been  rested  on  other  grounds  not 
inconsistent  with  the  previous  cases.] 

West  Virginia:  Venable  v.  Coffman, 
2  W.  Va.  *310;  Carpenter  v.  Miller's 
Ex'r,  3  W.  Va.  174;  100  Am.  Dec. 
744;  [Mong  v.  Rush,  29  W.  Va.  119; 
Wilson  V.  Perry,  29  W.  Va.  169,— 
following  the  earlier  Virginia  cases.] 

In  all  these  states  a  trust  for  chari- 
table purposes  would  be  upheld,  pro- 
vided it  possessed  all  the  elements  of 
a  valid  ordinary  private  trust;  that  is, 
the  trustee  was  a  certain  person  com- 
petent to  take  and  hold  the  property. 


the  beneficiaries  were  certain  or  capa- 
ble of  being  made  so,  and  no  perpetu- 
ity was  created.  In  other  words,  an 
express  trust,  otherwise  valid,  would 
not  become  invalid  because  the  ulti- 
mate purpose  was  charitable. 

'  The  following  states  are  placed  in 
this  class;  but  there  is  a  great  diver- 
sity in  the  particular  rules  prevailing 
in  the  different  states,  and  only  a  geii- 
eral  resemblance  in  their  decisions:  — 

Alabama:  Johnson's  Adm'rv,  Long- 
mire,  39  Ala.  143;  Williams  v.  Pear- 
son, 38  Ala.  299;  Carter  v.  Balfour's 
Adm'r,  19  Ala.  814;  Antones  v.  Es- 
lava,  9  Port.  527;  [Burke  v.  Roper,  79 
Ala.  l.'?8;  Johnson  v.  Holifield,  79  Ala. 
423;  58  Am.  Rep.  596.] 

Arkansas:  Grissom  v.  Hill,  17  Ark. 
483. 

California:  Hinckley's  Estate,  58 
Cal.  457. 

Connecticut:  Bull  v.  Bull,  8  Conn. 
47;  20  Am.  Dec.  86;  Chatham  v. 
Brainerd,  11  Conn.  60;  Brewster  v. 
McCall,  15  Conn.  274;  American  Bible 
Soc.  V.  Wetmore,  17  Conn.  181;  Hamp- 
den V.  Rice,  24  Conn.  350;  White  v. 
Fisk,  22  Conn.  31;  Treat's  Appeal,  30 
Conn.  113;  Birchard  v.  Scott,  39  Conn. 
63.  A  statute  similar  to  that  of  Eliza- 
beth is  enacted:  [Fairfield  v.  Lawson, 
50  Conn.  501;  47  Am.  Rep.  669;  Coit 
v.  Comstock,  51  Conn.  352;  50  Am. 
Rep.  29;  Tappan's  Appeal,  52  Conn. 
412;  Bristol  v.  Bristol,  53  Conn.  242; 
Beardsley  v.  Selectmen  of  Bridgeport, 
53  Conn.  489;  55  Am.  Rep.  152;  Camp 
V.  Crocker's  Adm'r,  54  Conn.  21.] 

Delaware:  GriflSth  v.  State,  2  Del. 
Ch,  421;  State  v.  Griffith,  2  Del.  Ch. 
392;  [Doughten  v.  Vandever,  5  Del. 
Ch.  51;  Field  v.  Drew  Theol.  Sem.,41 
Fed.  Rep.  371.] 


1529 


PUBLIC   OR   CHARITABLE   TRUSTS. 


§1029 


a  little  divergence  in  the  views  maintained  by  the  courts 
of  the  various  states  composing  this  class.     In  a  few  of 


Georgia:  Walker  v.  Walker,  25  Ga. 
420;  Beall  v.  Fox,  4  Ga.  404;  Jones  v. 
Habersham,  3  Woods,  443;  fJones  v. 
Habersham,  107  U.  S.  177;  Beckwith 
V.  St.  Philip's  Parish,  69  Ga.  564.] 

Illinois:  Starkweather  v.  Am.  Bible 
Soc,  72  111.  50;  22  Am.  Rep.  133; 
Heuser  v.  Harris,  42  111.  425;  Gilmaa 
V,  Hamilton,  16  111.  225;  [Andrews  v. 
Andrews,  110  111.  223;  Mills  v.  New- 
berry,  112  111.  123;  54  Am.  Rep.  213; 
Hunt  V.  Fowler,  121  111,  269.] 

Indiana:  Comm'rs  of  Lagrange  Co. 
V.  Rogers,  55  Ind.  297;  Craig  v.  Se- 
crist,  54  Ind.  419;  Cruse  v.  Axtell,  50 
Ind.  49;  Grimes's  Ex'rs  v.  Harmon,  35 
Ind.  198;  9  Am.  Rep.  690;  Ex  parte 
Lindley,  32  Ind.  367;  Sweeney  r. 
Sampson,  5  Ind.  465;  Common  Coun- 
cil of  Richmond  v.  State,  5  Ind.  334; 
McCord  V.  Ochiltree,  8  Blackf.  15. 

Iowa:  Miller  v.  Chittenden,  2  Iowa, 
315,  352;  Johnson  v.  Mayne,  4  Iowa, 
]S0;  Lepage  v.  McNamara,  5  Iowa,  124, 
146;  [Byers  v.  McCartney.  62  Iowa, 
339;  Seda  v.  Huble,  75  Iowa,  429;  9 
Am.  St.  Rep.  495.] 

Louisiana:  Society  of  Orphan  Boys 
V.  New  Orleans,  12  La.  Ann.  62;  New 
Orleans  v.  McDonogh,  12  La.  Ann. 
240;  Fink  v.  Ex'r  of  Fink,  12  La.  Ann. 
301. 

Maine:  Maine  Bapt.  Miss.  Con.  v. 
Portland,  65  Me.  92;  Swasey  v.  Am. 
Bible  Soc,  57  Me.  523;  Howard  v. 
Am,  Peace  Soc,  49  Me.  288;  Preach- 
ers'  Aid  Soc.  v.  Rich,  45  Me.  552; 
Tappan  v.  Deblois,  45  Me.  122;  Shap- 
leigh  V.  Pilsbury,  1  Me.  271;  [Piper  v. 
Moulton,  72  Me.  155;  Simpson  v.  Wel- 
come, 72  Me.  496;  39  Am.  Rep.  349; 
Bangor  v.  Masonic  Lodge,  73  Me.  428; 
40  Am.  Rep.  369;  Dascomb  v.  Mars- 
ton,  80  Me.  223.] 

Mississippi:  Wade  v.  Am.  Colon. 
Soc,  7  Smedes  &  M.  663;  45  Am.  Dec 
324. 

Missomi:  State  v.  Prewett,  20  Mo. 
165;  Chambers  v.  St.  Louis,  29  Mo. 
543;  Russell  v.  Allen,  5  Dill,  235; 
Academy  of  Visitation  v.  Clemens,  50 
Mo.  167;  [Howe  v.  Wilson,  91  Mo.  45; 
60  Am.  Rep.  226;  Missouri  Hist.  Soc. 
V,  Acalemy  of  Science,  94  Mo.  459.] 

Neio  Hamfshire:  Dublin  Case,  33 
N.  H.  459;  Chapin  v.  School  Dist., 
35  N.  H.  445;  Browa  v.  Concord,  33 


N.  H.  285;  Second  Cong.  Soc  v.  First 
Cong.  Soc,  14  N.  H.  315;  Duke  v. 
Fuller,  9  N.  H.  536;  32  Am.  Dec  392; 
[Goodale  v.  Mooney,  60  N.  H.  528; 
49  N.  H.  334;  Gafney  v.  Kenison, 
64  N.  H.  354;  Academy  v.  Adams,  65 
N.  H.  225.] 

New  Jersey:  Goodell  v.  Union  Ass'n, 
29  N.  J.  Eq.  32;  De  Camp  v.  Dobbins, 
29  N.  J.  Eq.  .S6;  [affirmed  31  N.  J. 
Eq.  671;]  Trustees  etc.  v.  Beatty,  28 
N.  J.  Eq.  570;  Stevens  v.  Shippen,  23 
N.  J.  Eq.  487;  Mason's  Ex'rs  v.  Meth. 
Epis.  Ch.,27  N.  J.  Eq.  47;  Thomson's 
Ex'rs  V.  Norris,  20  N.  J.  Eq.  489; 
Norris  v.  Thomson's  Ex'rs,  19  N.  J. 
Eq.  307;  Att'y-Gen.  v.  Moore's  Ex'rs, 
19  N,  J.  Eq.  503;  [Taylor  v.  Trustees, 
34  N.  J.  Eq.  101;  Brown  v.  Paucoast, 

34  N.  J.  Eq.  324;  Hesketh  v.  Murphy, 

35  N.  J.  Eq,  23;  36  N,  J.  Eq.  384; 
Union  Methodist  Epia.  Ch.  v,  Wilkin- 
son, 36  N.  J.  Eq.  141;  Ditwiller  v. 
Hartman,  37  N.  J.  Eq.  348;  Hutchina 
V.  George,  44  N.  J.  Eq.  126;  George  v. 
Biaddock,  45  N.  J.  Eq.  757;  14  Am. 
St.  Rep.  754.] 

Ohio:  Am.  Bible  Soc.  v.  Marshall, 
15  Ohio  St.  537;  Urmey's  Ex'rs  v. 
Wooden,  1  Ohio  St.  160;  59  Am.  Dec. 
615;  Hullman  v.  Honcomp,  5  Ohio  St. 
237;  Mclntire's  School  v.  Zanesville, 
9  Ohio,  203;  [Mannix  v.  Purcell,  46 
Ohio  St.  102;  15  Am.  St.  Rep.  562.]  ^ 

Pennsylvania:  Humane  Fire  Co. 'a 
Appeal,  88  Pa.  St.  3S9;  Swift's  Ex'rs 
V.  Eaton  Beneficial  Soc,  73  Pa.  St. 
362;  Zeisweiss  v.  James,  63  Pa.  St. 
465;  3  Am.  Rep.  558;  Mayer  v.  Soc. 
for  Visitation  of  the  Sick,  2  Brewst. 
385;  Philadelphia  v,  Girard,  45  Pa.  St. 
9;  84  Am.  Dec.  470;  McLean  v.  Wade, 
41  Pa.  St.  266;  Miller  v.  Porter,  53 
Pa.  St.  292;  Henderson  v.  Hunter,  59 
Pa.  St.  335;  Philadelphia  v.  Fox,  64 
Pa.  St.  169;  Soohan  v.  Philadelphia, 
33  Pa.  St.  9;  Price  v.  Maxwell,  23 
Pa.  St.  23;  Griffitts  v.  Cope,  17  Pa.  St. 
96;  McLaiu  v.  School  Directors,  51 
Pa.  St.  196;  Evangelical  Association's 
Appeal,  35  Pa.  St.  316;  Mission.  Soci- 
ety's Appeal,  30  Pa.  St.  425;  Cresson's 
Appeal,  .30  Pa.  St.  437;  Barr  v.  Weld. 
24  Pa.  St.  84;  Brendle  v.  German  Ref. 
Cong.,  33  Pa.  St.  415;  Witman  v.  Lex, 
17  Serg.  &  R.  88;  17  Am.  Dec  644; 
Gregg  V.  Irish,  6  Pa.  St.  211;  Wright  v. 


§  1029 


EQUITY    JURISPRUDENCE. 


1530 


them  the  statute  of  Elizabeth  is  held  to  be  in  force,  or  one 
similar  to  it  has  been  enacted.  In  the  majority  of  them 
the  doctrine  of  charitable  trusts,  as  a  part  of  the  ordinary 
jurisdiction  and  functions  of  equity,  has  been  accepted  in 
a  modified  and  limited  form;  such  trusts  are  upheld  when 
the  property  is  given  to  a  person  sufficiently  certain,  and 
for  an  object  sufficiently  definite.  With  regard  to  this 
element  of  certainty  in  the  trustee,  and  the  objects,  there 
is  much  diversity  of  decision.  The  doctrine  of  cy-pres  is 
generally  rejected.  Third  class :  This  class  includes  a  very 
few  states  which  have  accepted  the  doctrine  in  its  full 
extent.^     The  states  composing  this  group  have  not  even 


Linn,  9  Pa.  St.  433;  Pickering  v.  Shot- 
well,  10  Pa.  St.  23;  Hillyardv.  Miller, 
10  Pa.  St.  326;  Methodist  Ch.  v.  Rem- 
ington, 1  Watts,  218;  26  Am.  Dec.  61; 
Martin  v.  McCord,  5  Watts,  493;  30 
Am.  Dec.  342;  Ex  parte  Cassel,  3 
Watts,  408,  440;  Morrison  v.  Beirer, 
2  Watts  &  S.  81 :  Zimmerman  v.  An- 
ders, 6  Watts  &  S.  218;  40  Am.  Dec. 
552;  Philadelphia  v.  Elliott,  3  Rawle, 
170;  Girard  v.  Philadelphia.  7  Wall. 
l;Vidal  v.  Girards  Ex'rs,  2  How.  127; 
[Jones  V.  Renshaw,  130  Pa.  St.  .327; 
Manners  v.  Phila.  Library  Co.,  93  Pa. 
St.  165;  39  Am.  Rep.  741.] 

Ekode  Island:  Meeting  St.  Bap. 
Soc.  V.  Hail,  8  R.  I.  234;  Potter  v. 
Thornt.^,  7  R.  L  252;  Derby  v.  Derby, 
4  R.  I.  414.  [Pell  V.  Mercer,  14  R.  I. 
412,  declares  that  the  cy-pres  doctrine 
exists  in  Rhode  Island.] 

South  Carolina:  Attornev-General  v. 
Jolly,  1  Rich.  Eq.  99;  2"  Strob.  Eq. 
379;  Attorney-General  V.  Clergy  Soc, 
8  Rich.  Eq.  190;  Gibson  v.  McCall,  1 
Rich.  174;  Combe  v.  Brazier,  2  Desaus. 
Eq.  431. 

Tennessee:  Dickson  v.  Montgomery, 
1  Swan,  348;  White  v.  Hale,  2  Cold. 
77;  Gass  v.  Ross,  3  Sneed,  211;  Frank- 
lin V.  Armfield,  2  Sneed,  305;  Green  v. 
Allen,  5  Humph.  170;  [Fite  v.  Beasley, 
12  Lea,  328.] 

Texas:  Laird  v.  Bass,  50  Tex.  412; 
Paschal  v.  Acklin,  27  Tex.  173;  Bell 
Co.  V.  Alexander,  22  Tex.  350;  73  Am. 
Dec.  268;  Hopkins  v.  Upshur,  20  Tex. 
89;  70  Am.  Dec.  375;  [Ryan  v.  Porter, 
61  Tex.  106;  Pierce  v.  Weaver,  65 
Tex.  44.] 


Vermont:  Clement  v.  Hyde,  50  Vt. 
716;  28  Am.  Peep.  522;  Burr  v.  Smith, 
7  Vt.  241;  29  Am.  Dec.  154;  Penfield 
V.  Skinner,  11  Vt.  296;  Stone  v.  Griffin, 
3  Vt.  400. 

[  Virginia:  See  Protestant  etc.  Soc. 
V.  Churchman's  Rep's,  80  Va.  718.] 

United  States  Supreme  Court:  Ould 
V.  Washington  Hospital,  95  U.  S.  303; 
Kain  v.  Gibboney,  101  U.  S.  362;  3 
Hughes  C.  C.  397;  Girard  v.  Philadel- 
phia, 7  Wall.  1 ;  Vidal  v.  Girard's  Ex'rs, 
2  How.  127;  Wheeler  v.  Smith,  9  How. 
55;  Fontain  v.  Ravenel,  17  How.  369; 
Bap.  Ass'n  v.  Hart's  Ex'rs,  4  Wheat. 
1;  [Russell  v.  Allen,  107  U.  S.  172; 
Mormon  Church  v.  United  States,  136 
U.  S.  1.] 

A  few  of  the  states  in  this  list  — 
e.  g..  New  Jersey  —  might  perhaps  be 
properly  placed  in  the  third  class, 
since  their  courts  uphold  trusts  very 
uncertain,  both  as  to  trustee  and  ob- 
ject; but  none  of  them,  I  believe, 
profess  to  accept  the  English  doctrine 
in  all  its  fullness. 

*  Massachusetts.  —  The  doctrine  is 
freely  and  fully  accepted,  and  the  rule 
of  cy-pres  is  enforced:  Att'y-Gen.  v. 
Parker,  126  Mass.  216;  Sohier  v. 
Burr,  127  Mass.  221;  Boxford  etc.  Soc. 
V.  Harriman,  125  Mass.  321;  McDon- 
ald V.  Mass.  Gen.  Hospital,  120  Mass. 
432;  21  Am.  Rep.  529;  Old  South  Soc. 
V.  Crocker,  119  Mass.  1;  20  Am.  Rep. 
299;  Fellows  v.  Miner,  119  Mass.  541; 
Gooch  V.  Ass'n  for  Relief  etc.,  109 
Mass.  558;  Nichols  v.  Allen,  130  Mass. 
211;  39  Am.  Rep.  445;  Olliffe  v.  Wells, 
130  Mass.  221;  Att'y-Gen.  v.  Garrison, 


1531 


PUBLIC   OR   CHARITABLE    TRUSTS. 


§  1029 


totally  rejected  the  doctrine  of  cy-pres,  although  they  do 
not  apply  it  so  freely  and  under  such  extreme  circum- 
stances as  would  be  done  in  England.  The  general  sys- 
tem seems,  at  least,  to  be  so  far  adopted  that  when  an 
intention  to  give  property  to  charitable  uses  is  clearly 
manifested,  but  the  disposition  is  uncertain  and  indefi- 
nite, either  as  to  the  trustee  or  as  to  the  objects  and  bene- 
ficiaries, the  trust  is  upheld  or  defeated,  upon  the  same 
principles  as  those  which  would  be  followed  by  the  Eng- 
lish courts. 


101  Mass.  223;  Fairbanks  v.  Lamson, 
99  Mass.  533;  Hosea  v.  Jacobs,  98 
Mass.  65;  Jackson  v.  Phillips,  14 
Allen,  539;  Att'y-Gen.  v.  Old  South 
Soc,  13  Allen,  474;  Saltonstall  v.  San- 
ders, 11  Allen,  446;  Odell  v.  Odell,  10 
Allen,  1;  Drury  v.  Natick,  10  Allen, 
169;  Att'y-Gen.  v.  Trinity  Church,  9 
Allen,  422;  Dexter  v.  Gardner,  7 
Allen,  243;  Tainter  v.  Clark,  5  Allen, 
66;  Bliss  V.  Am.  Bible  Soc,  2  Allen, 
334;  Easterbrooks  v.  Tillinghast,  5 
Gray,  171;  Am.  Acad.  v.  Harvard  Col- 
lege, 12  Gray,  582;  Wells  v.  Heath,  10 
Gray,  17;  North  Adams  etc.  Soc.  v. 
Fitch,  8  Gray,  421;  Harvard  College  v. 
Soc.  Prom.  Theol.  Educ,  3  Gray,  280; 
Wells  V.  Doane,  3  Gray,  201;  Earle  v. 
Wood,  8  Cush.  430;  Nourse  v.  Mer- 
riam,  8  Cush.  11;  Parker  v.  May,  5 
Cush.  336;  Winslow  v.  Cummings,  3 
Cush.  358;  Brown  v.  Kelsey,  2  Cush. 
243;  Baker  v.  Smith,  13  Met.  34; 
Sohier  v.  St.  Paul's  Church,  12  Met. 
250;  Washburn  v.  Sewall,  9  Met.  280; 
Tucker  v.  Seaman's  Aid  Soc,  7  Met. 
188;  Bartlett  v.  Nye,  4  Met.  378; 
Burbank  v.  Whitney,  24  Pick.  146;  35 
Am.  Dec.  312;  Sanderson  v.  White,  18 
Pick.  328;  29  Am.  Dec  591;  Going  v. 
Emery,  16  Pick.  107;  26  Am.  Dec.  645; 
Hadley  v.  Hopkins  Acad.,  14  Pick. 
240;  Bartlett  v.  King,  12  Mass.  537; 
7  Am.  Dec.  99;  Barker  v.  Wood,  9 


Mass.  419;  [Suter  v.  Hilliard,  132 
Mass.  412;  42  Am.  Rep.  444;  Bates  v. 
Bates,  134  Mass.  110;  45  Am.  Rep. 
305;  In  re  Schouler,  134  Mass.  426; 
White  V.  Ditson,  134  Mass.  351;  Kent 
V.  Dunham,  142  Mass.  216;  56  Am. 
Rep.  667;  Morville  v.  Fowle,  144  Mass. 
109;  Minot  v.  Baker,  147  Mass.  348;  9 
Am.  St.  Rep.  713;  Stratton  v.  Physio- 
Medical  College,  149  Mass.  508;  Bul- 
lard  V.  Chandler,  149  Mass.  532; 
14  Am.  St.  Rep.  442;  Weeks  v.  Hob- 
son,  150  Mass.  377;  Burbank  v.  Bur- 
bank,  152  Mass.  254;  Darcy  v.  Kelley, 
153  Mass.  433.] 

Kentucky.  —  The  statute  is  adopted, 
and  the  court  carries  out  the  doctrine 
fully,  in  cases  of  uncertain  trustees 
and  objects,  applying  the  rule  of 
cy-pres:  Cromies  v.  Louisville  etc. 
Soc,  3  Bush,  365;  Bap.  Church  v. 
Presb.  Church,  18  B.  Mon.  635;  Had- 
den  V.  Chorn,  8  B.  Mon.  70;  Att'y-Gen. 
V.  Wallace,  7  B.  Mon.  611;  Moore  v. 
Moore,  4  Dana,  354;  29  Am.  Dec.  417; 
Gass  V.  Wilhite,  2  Dana,  170;  26  Am. 
Dec.  446;  [Peynadov.  Peynado,  82  Ky. 
5;  Kinney  v.  Kinney,  86  Ky.  GIO.] 

[Rhode  Island.  —  Under  the  decision 
in  Pell  V.  Mercer,  14  R.  I.  412,  the 
doctrine  of  cy-pi-es  seems  to  be  fully 
adopted.  See  also  Rhode  Island  Hospi- 
tal Trust  Co.  V.  Olney,  14  R.  I.  449; 
Peckham  v.  Newton,  15  R.  I.  321.] 


§  1030 


EQUITY  JUEISPRUDENCB. 


1532 


SECTION  V. 

TRUSTS    ARISING   BY  OPERATION   OF   LAW  — RESULTING  AND 
CONSTRUCTIVE  TRUSTS. 


§  1030. 
§§  1031-1043. 
§§  1032-1036. 

§  1032. 

§  1033. 

§  1034. 

g 1035. 

§  1036. 
§§  1037-1043. 

§  1038. 

§  1039. 

§  1040. 

§  1041. 

§  1042. 

§  1043. 
§§  1044-1058. 

§  1045. 

§  1046. 

§  1047. 

§  1048. 

§  1049. 
§  1050. 
§  1051. 

§  1052. 

§  1053. 
§  1054. 
§  1055. 
§  1056. 
§  1057. 
S  1058. 


ANALYSIS. 

General  nature  and  kinds. 

First.     Resulting  trusts. 

First  form:  trusts  resulting  to  donor. 

1.  Property  conveyed  on  some  trust  which  fails. 
Same;  essential  elements. 

2.  A  trust  declared  in  part  only  of  the  estate  conveyed. 

3.  In  conveyances  without  consideration. 
Parol  evidence. 

Second  form:  conveyance  to  A,  price  paid  by  B. 

Special  rules. 

Purchase  in  name  of  wife  or  child. 

Admissibility  of  parol  evidence. 

The  same;  between  family  relatives. 

Legislation  of  several  states. 

Interest  and  rights  of  the  beneficiary. 

Second,     Constructive  trusts. 

Kinds  and  classes. 

1.  Arising  from  contracts  express  or  implied. 

2.  Money  received  equitably  belonging  to  another. 

3.  Acquisition  of  trust  property  by  a  volunteer,  or  purchaser 
with  notice. 

4.  Fiduciary  persons  purchasing  property  with  trust  funds. 

5.  Renewal  of  a  lease  by  partners  and  other  fiduciary  persons. 

6.  Wrongful  appropriation  or  conversion  into  a  dififerent  form 
of  another's  property. 

7.  Wrongful  acquisition  of  the  trust  property  by  a  trustee  or 
other  fiduciary  person. 

8.  Trusts  ex  maleficio. 

(1)  A  devise  or  bequest  procured  by  fraud, 

(2)  Purchase  upon  a  fraudulent  verbal  promise. 

(3)  No  trust  from  a  mere  verbal  promise. 

9.  Trust  in  favor  of  creditors. 

Rights  and  remedies  of  the  beneficiaries. 


§  1030.  General  Nature  and  Kinds.  —  The  second  main 
division  of  trusts,  and  the  one  which,  in  this  country 
especially,  affords  the  widest  field  for  the  jurisdiction  of 
equity  in  granting  its  special  remedies  so  superior  to  the 
mere  legal  recoveries  of  damages,  embraces  those  which 


1533  TRUSTS   ARISING   BY   OPERATION   OF   LAW.      §  1030 

arise  by  operation  of  law,  from  the  deeds,  wills,  contracts, 
acts,  or  conduct  of  parties,  either  with  or  without  their 
intention,  but  without  any  express  words  of  creation.*  A 
broad  distinction  separates  all  express  trusts  from  those 
which  arise  by  operation  of  law.  In  the  former  class  the 
trust  relation  is  rightful  and  permanent.  In  the  latter, 
there  is  no  such  element  of  right  and  permanency.  Even 
if  the  trust  relation  is  not  wholly  wrongful,  resulting 
from  fraud  or  other  unconscientious  act,  still  a  certain 
antagonism  between  the  cestui  que  trust  and  the  trustee  is 
involved  in  the  very  existence  of  the  trust;  and  instead 
of  the  idea  of  permanence,  the  substantial  right  of  the 
beneficiary  is  that  the  trust  should  be  ended  by  a  convey- 
ance of  the  legal  title  to  himself.^  All  trusts  by  operation 
of  law  consist,  therefore,  in  a  separation  of  the  legal  and 
the  equitable  estates,  one  person  holding  the  legal  title 
for  the  benefit  of  the  equitable  owner,  who  is  regarded 
by  equity  as  the  real  owner,  and  who  is  entitled  to  be 
clothed  with  the  legal  title  by  a  conveyance.'  Certain 
instances  of  this  class  are  trusts  only  sub  modo;  they  are 
termed  trusts,  because  the  beneficial  owner  is  entitled  to 
the  same  remedies  against  the  holder  of  the  legal  title 

^  The  proposed  Civil  Code  of  New  simple  name  by  which  to  designate 
York  (sec.  1169)  and  the  Civil  Code  of  the  entire  class  of  trusts  arising  by 
California  (sec.  2217)  have  invented  operation  of  law  would  be  "implied 
the  wholly  unnecessary  name  of  "in-  trusts"  as  distinguished  from  "ex- 
voluntary  trusts  "  to  designate  this  press  trusts  "  created  by  words  inten- 
class.  Express  trusts  they  call  "  vol-  tionally  used.  Unfortunately,  how- 
iintary,"  and  define  in  such  general  ever,  the  term  "implied  trusts"  is 
and  inaccurate  terms  that  a  voluntary  constantly  used  by  text-writers  and 
trust  is  made  to  include  every  instance  judges  in  so  many  and  varying  senses, 
of  fiduciary  position,  —  an  attorney,  that  it  would  only  produce  confusion 
agent,  and  even  a  confidential  em-  and  uncertainty  if  one  should  employ 
ployee.  There  is,  of  course,  the  com-  it  in  this  single  and  restricted  mean- 
mon  element  of  confidence  in  all  these  ing. 

fiduciary  relations  and  in  trusts;  but         '  See  vol.  1,  §  148.     [See  also  Cone 

the  essential  conception  of  a  "trust"  v.  Dunham,  59  Conn.  145.] 
is,  that  it  always  involves  and  relates         '  The  correctness  of  this  conclusion 

toproperty;  "trust,"  in  its  legal  mean-  is  shown  by  the  fact  that  no  resulting 

ing,  not  only  describes  a  confidential  or  constructive  trust  growing  out  of 

relation  between  two  persons,  but  also  the  relations  of  parties  or  the  use  of 

includes  the  property  which  is  the  sub-  funds  will   be   enforced    against    the 

ject-matter  of  that  relation,  and  which  holder  of  the  legal  title  who  is  clothed 

is  stamped  with  the  trust  character,  with  an  equal  equity,  even  in  favor  of 

A  legal  "  trust "  is  necessarily  a  species  an  infant:  Haggard  v.  Benson,  3  Teno. 

of  ownership.     The  most  natural  and  Ch.  268. 


§  1031  EQUITY  JURISPRUDENCE.  1534 

which  are  given  to  the  beneficiary  under  a  true  trust.* 
All  trusts  which  arise  by  operation  of  law  are,  as  the  name 
indicates,  excepted  from  the  requirements  of  the  statute 
of  frauds.^  This  entire  grand  division  consists  of  two 
ircneral  classes:  resulting:  trusts  and  constructive  trusts. 
The  line  of  distinction  between  these  two  classes  is  clear 
and  definite;  the  failure  to  observe  it  has  produced  much 
unnecessary  confusion.'  I  shall  describe,  first,  resulting 
trusts,  and  second,  constructive  trusts,  following  a  classifi- 
cation which  seems  to  me  the  necessary  consequence  of 
fundamental  principles. 

§  1031.  First.  Resulting  Trusts.  — In  all  species  of 
resulting  trusts,  intention  is  an  essential  element,  although 
that  intention  is  never  expressed  by  any  words  of  direct 
creation.  There  must  be  a  transfer,  and  equity  infers 
the  intention  that  the  transferee  was  not  to  receive  and 
hold  the  legal  title  as  the  beneficial  'owner,  but  that  a 
trust  was  to  arise  in  favor  of  the  party  whom  equity  would 
regard  as  the  beneficial  owner  under  the  circumstances. 
The  equitable  theoTy  of  consideration,  heretofore  explained, 
is  the  source  and  underlying  principle  of  the  entire  class.* 
Resulting  trusts,  therefore,  are  those  which  arise  where 
the  legal  estate  in  property  is  disposed  of,  conveyed,  or 
transferred,  but  the  intent  a.ppears  or  is  inferred  from  the 
terms  of  the  disposition,  or  from  the  accompanying  facts 
and  circumstances,  that  the  beneficial  interest  is  not  to 
go  or  be  enjoyed  with  the  legal  title.     In  such  case  a  trust 

'  This  is  especially  true  of  those  stances  are  treated  by  some  as  result- 
trusts  ex  maleficio  which  arise  from  ing,  by  others  as  constructive.  Even 
actual  fraud,  and  certain  others  which  courts  have  sometimes  failed  to  rec- 
arise  from  a  breach  of  fiduciary  duty:  ognize  the  line  of  distinction  which 
See  po.s<,  §  1053,  concerning  construct-  separates  the  two;  thus  in  a  recent 
ive  trusts.  case  (Bickel's  Appeal,  86  Pa.  St.  204), 

^  See  ante,  §  1008;  Ward  v.  Arm.  the  court  are  represented  as  holding 
strong,  84  III.  151.  It  follows  that  that  a  resulting  trust  in  land  only 
such  trusts  need  not  be  "declared"  arises  from  fraud  in  obtaining  the 
nor  "evidenced  "  by  any  writing;  the  land,  or  from  the  payment  of  the  pur- 
fact  of  their  existence  may  be  proved  chase-money.  In  any  accurate  sense 
by  parol.  of   the  term,  a  resulting  truat  never 

*  Hardly   any   two   writers   entirely  arises  from  fraud, 

agree  in  their  classification  of  resulting  *  See  ante,  §  981, 
and  constructive  trusts;  the  same  in- 


1535  TRUSTS    ARISING    BY    OPERATION    OF   LAW.       §  1032 

is  implied  or  results  in  favor  of  the  person  for  whom  the 
equitable  interest  is  assumed  to  have  been  intended,  and 
whom  equity  deems  to  be  the  real  owner.  This  person  is 
the  one  from  whom  the  consideration  actually  comes,  or 
who  represents  or  is  identified  in  right  with  the  consid- 
eration; the  resulting  trust  follows  or  goes  with  the  real 
consideration.*  All  true  resulting  trusts  may  be  reduced 
to  two  general  types:  1.  "Where  there  is  a  gift  to  A,  but 
the  intention  appears,  from  the  terms  of  the  instrument, 
that  the  legal  and  beneficial  estates  are  to  be  separated, 
and  that  he  is  either  to  enjoy  no  beneficial  interest  or 
only  a  part  of  it.  In  order  that  a  case  of  this  kind  may 
arise,  there  must  be  a  true  gift  so  far  as  the  immediate 
transferee,  A,  is  concerned;  the  instrument  must  not  even 
state  any  consideration,  and  no  valid  complete  trust  must 
be  declared  in  favor  of  A  or  of  any  other  person.  Such 
trusts,  therefore,  generally  arise  from  wills,  although  they 
may  arise  from  deeds.  If  the  conveyance  be  by  a  deed, 
the  trust  will  result  to  the  grantor;  if  it  be  by  a  will,  the 
trust  will  result  to  the  testator's  residuary  devisees  or  leg- 
atees, or  to  his  heirs  or  personal  representatives,  accord- 
ing to  the  nature  of  the  property  and  of  the  dispositions. 
2.  The  second  type  includes  the  cases  where  a  purchase 
has  been  made,  and  the  legal  estate  is  conveyed  or  trans- 
ferred to  A,  but  the  purchase  price  is  paid  by  B.  I  shall 
briefly  examine  these  two  forms. 

§  1032.  First  Form  —  Trust  Resulting  to  the  Donor. 
—  This  type  includes  the  three  following  subdivisions: 
1.  "Where  property  is  conveyed  by  will  or  deed  upon  some 
particular  trust  or  particular  objects,  and  these  purposes 
fail  in  whole  or  in  part,  or  the  particular  trusts  are  so 
uncertain  and  indefinite  that  they  cannot  be  carried  into 

*  The  theoi-y  of  equity  is,  that  a  that  he  is  to  hold  as  trustee,  as  to  the 
transfer  takes  place  by  will,  deed,  or  whole  or  a  part  of  the  estate,  for  the 
otherwise,  but  that  it  is  the  intention  party  whom  the  circumstances  show 
of  all  the  parties  to  the  transaction,  to  be  the  real  beneficial  owner.  This 
presumed,  if  not  expressed,  that  the  description  completely  excludes  the 
transferee  of  the  legal  title  is  not  to  notion  of  fraud  as  a  source  of  result- 
enjoy   the   beneficial   ownership,    but  ing  trusts. 


§  1032 


EQUITY   JURISPRUDENCE. 


1536 


efifect,  or  tliey  lapse,  or  they  are  illegal,  —  in  all  of  these 
cases  a  trust,  either  with  reference  to  the  whole  property  or 
to  the  residuum,  results  in  favor  of  the  grantor,  or  the  heirs, 
residuar}^  devisees  or  legatees,  or  personal  representatives 
of  the  testator/  The  following  are  illustrations:  Where 
property  is  given  by  will  or  deed,  stated  to  be  on  trust,  but 
no  trust  is  declared;  or  upon  trusts  thereafter  to  be  de- 
clared, but  no  such  declaration  is  made;  or  is  given  upon 
some  -trust  which  has  wholly  failed  and  become  inopera- 
tive;^ or  when  property  is  given  upon  a  trust  which  is  too 
uncertain,  indefinite,  and  vague  in  its  declaration  to  be 
carried  into  effect;'''  or  if  property  is  given  upon  a  trust 
which  is  illegal,  and  therefore  void,^  or  upon  a  trust  which 


1  Aston  V.  Wood,  L.  R.  6  Eq.  419; 
Symes  v.  Hughes,  L.  R.  9  Eq.  475; 
Cardigan  v.  Cruzon-Howe,  L.  R.  9  Eq. 
358;  Richards  v.  Delbridge,  L.  R.  18 
Eq.  11;  Wild  v.  Banning,  L.  R.  2  Eq. 
577;  Fisk  v.  Att'y-Gen.,  L.  R,  4  Eq. 
521;  Longley  v.  Longley,  L.  R.  13  Eq. 
133;  Haigh  v.  Kaye,  L.  R.  7  Ch.  469; 
Biddulph  V.  Williams,  L.  R.  1  Ch. 
Div.  203;  Pawson  v.  Brown.  L.  R.  13 
Ch.  Div.  202;  Cruse  v.  Barley,  3  P. 
Wins.  20;  Hill  v.  Bishop  of  London,  1 
Atk.  618-620;  Robinson  v.  Taylor,  2 
Brown  Ch.  589;  Ripley  v.  Waterworth, 
7  Ves.  425,  435;  Stansfield  v.  Haberg- 
ham,  10  Ves.  273;  Stubbs  v.  Sargon, 
3  Mylne  &  C.  507;  2  Keen,  2-55;  Gibbs 
V.  Rumsey,  2  Ves.  &  B.  294;  Ommanev 
V.  Butcher,  1  Turn.  &  R.  260,  270; 
Wood  V.  Cox,  2  Mylne  &  C.  684;  1 
Keen,  317;  Fowler  v.  Garlike,  1  Russ. 
&  M.  232;  Nichols  V.  Allen,  130  Mass. 
211;  39  Am.  Rep.  445;  Olliffe  v. 
Wells,  130  Mass.  221;  Easterbrooks 
V.  Tillinghast,  5  Gray,  17;  Straat  v. 
Uhrig,  56  Mo.  482;  Bennett  v.  Hut- 
son,  33  Ark.  762;  McCollister  v.  Wil- 
ley,  52  Ind.  382;  [see  also  Schlessinger 
V.  Mallard,  70  Cal.  326;]  and  see  the 
following  notes. 

^  Aston  V.  Wood,  L.  R.  6  Eq.  419; 

,    Symes  v.  Hughes,  L.   R.   9  Eq.  475; 

i  Cardigan  v.  Cruzon-Howe,  L.  R.  9  Eq. 
358;  Haigh  v.  Kaye,  L.  R.  7  Ch.  469; 
Biddulph  V.  Williams,  L.  R.  1  Ch. 
Div.  203;  Pawson  v.  Brown,  L.  R.  13 
Ch.  Div.  202;  Brown  v.  Jones,  1  Atk. 
188;  Dawson  v.  Clark,  18  Ves.  247, 
254;  Morice  V.  Bishop  of  Durham,  10 


Ves.  537;  Pratt  v.  Sladden,  14  Ves 
193,  198;  Sidney  v.  Shelley,  19  Ves, 
352,  359;  Collins  v.  Wakeman,  2  Ves, 
683;  Dunnage  v.  White,  1  Jacob  &  W 
583;  Southouse  v.  Bate,  2  Ves.  &  B. 
396;  Brookman  v.  Hales,  2  Ves.  &  B 
45;  Woollett  v.  Harris,  5  Madd.  452 
Att'y-Gen.  v.  Windsor,  8  H.  L.  Cas, 
.369;  24  Beav.  679;  Gloucester  v.  Os 
born,  1  H.  L.  Cas.  272;  3  Hare,  131; 
Goodere  v.  Lloyd,  3  Sim.  538;  Taylor 
V.  Haygarth,  14  Sim.  8;  Flint  v.  War- 
ren, 16  Sim.  124;  Coard  v.  Holderness, 
20  Beav.  147;  Fitch  v.  Weber,  6  Hare, 
145;  Onslow  v.  Wallis,  1  Macn.  &  G. 
506;  Barrs  v.  Fewkes,  2  Hem.  &  M. 
60;  Bennett  v.  Hutson,  33  Ark.  762; 
Russ  v.  Mebius,  16  Cal.  350;  Sturte- 
vant  v.  Jaques,  14  Allen,  523,  526; 
Shaw  V.  Spencer,  100  Mass.  382,  388; 
97  Am.  Dec.  107. 

*  James  v.  Allen,  3  Mer.  17;  Leslie 
V.  Duke  of  Devonshire,  2  Brown  Ch. 
187;  Stubbs  v.  Sargon,  3  Mylne  &  C. 
507;  2  Keen,  255;  Vezey  v.  Jamson,  1 
Sim.  &  St.  69;  Fowler  v.  Garlike,  1 
Russ.  &  M.  232;  Ellis  v.  Selli>',  1 
Mylne  &  C.  286;  7  Siin.  352;  Kendall 
V.  Granger,  5  Beav.  300;  Williams  v. 
Kershaw,  5  Clark  &  F.  Ill;  Nichols 
V.  Allen,  130  Mass.  211;  39  Am.  Rep. 
445;  Olliffe  v.  Wells,  130  Mass.  221; 
see  Power  v.  Cassidy,  79  N.  Y.  602; 
35  Am.  Rep.  550;  [Heiskell  v.  Trout, 
31  W.  Va.  810.] 

*  Richards  v.  Delbridge,  L.  R.  18 
Eq.  11;  Pawson  v.  Brown,  L.  R.  13 
Ch.  Div.  202;  Gibbs  v.  Rumsey,  2  Ves. 
&   B.    294;    Carrick   v.    Errington,    2 


1537  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §  1033 


fails  by  lapse,  and  the  property  is  not  otherwise  disposed 
of.^ 

§1033.  The  Same.  Essential  Elements.  —  In  this  and 
all  other  forms  belonging  to  the  class  under  present  con- 
sideration, there  must  be  no  pecuniary  consideration 
coming  from  the  grantee,  for  such  a  consideration  would 
raise  a  trust  in  his  own  favor,  and  clothe  him  with  the 
beneficial  interest.  Even  if  the  conveyance  merely  re- 
cites a  pecuniary  consideration,  the  same  effect  would  be 
produced.  Furthermore,  the  deed  or  will  must  contain 
no  declaration  of  use  covering  the  whole  estate  in  favor 
■)f  the  grantee  or  devisee;  such  a  declaration  of  use 
would  raise  a  trust  in  his  favor,  vest  in  him  the  beneficial 
estate  to  its  extent,  and  so  far  defeat  any  resulting  trust. 
Resulting  trusts  of  this  type  are  matters  of  intention. 
There  is  a  substantial  distinction  between  giving  prop- 
erty expressly /or  a  particular  purpose,  and  giving  it  only 
subject  to  a  particular  purpose.'^     If  the  intention  appears 


P.  Wms.  361;  Arnold  v.  Chapman,  1 
Ves.  Sr.  lOS;  Page  v.  Leapingwell,  18 
Ves.  463;  Jones  v.  Mitchell,  1  Sim.  & 
St.  290;  Cook  v.  Statieners'  Co.,  3 
Mylne  &  K.  262;  Pilkington  v. 
Boughey,  12  Sim.  114;  Russell  v. 
Jackson,  10  Hare,  204;  Dashiell  v. 
Att'y-Gen.,  6  Har.  <fe  J.  1;  Stevens 
V.  Ely,  1  Dev.  Eq.  497;  Lemmond  v. 
Peoples,  6  Ired.  Eq.  137. 

^  Ackroyd  v.  Smithson,  1  Brown  Ch. 
503;  Spink  v.  Lewis,  3  Brown  Ch.  355; 
Hutcheson  v.  Hammond,  3  Brown  Ch. 
128;  Williams  v.  Coade,  10  Ves.  500; 
Muckleston  v.  Brown,  6  Ves.  52,  63; 
Davenport  v,  Coltman,  12  Sim.  588, 
610;  Hawley  v.  James,  5  Paige,  318. 
[See  also  Sperling  v.  Rochfort,  16  Ch. 
Div.  18.]  If  the  property,  where  the 
prior  trust  fails  by  lapse  or  otherwise, 
is  given  to  some  other  person,  then  no 
trust  results. 

^  The  reason  of  this  distinction  lies 
wholly  in  the  intention  or  assumed  in- 
tention of  the  donor.  When  property 
is  given  to  A  expressly  /or  a  specific 
purpose,  the  instrument  showing  a 
clear  intention  that  the  gift  is  /or  that 
purpose  alone,  — e.  g.,  land  is  given  on 
trust  to  pay  the  grantor's  debts,  —  then 
2  Eq.  Jue.— 97 


as  to  so  much  of  the  property  given  as 
is  not  required  for  the  expressed  pur- 
pose, a  trust  results  to  the  donor.  On 
the  other  hand,  when  property  ia 
given  to  A,  suhjert  only  to  or  charged 
toith,  a  particular  purpose,  the  gift 
is  lield  to  be  absolute;  a  beneficial 
interest  as  well  as  the  legal  estate 
vests  in  the  donee;  and  no  trust  re- 
sults to  the  donor,  even  tliough  the 
special  purpose  wholly  fails,  —  much 
less  when  there  is  a  residuum  of  the 
property  left  after  it  is  accomplished. 
The  case  is  completely  analogous  to  a 
conveyance  or  bequest  to  A  of  all  the 
legal  and  beneficial  interest  in  prop- 
erty, subject  to  or  encumbered  by  a 
mortgage  or  any  other  kind  of  lien. 
It  follows  that  where  property  is  de- 
vised or  bequeathed  to  A,  sidject  to  or 
charged  loith  the  payment  of  the  tes- 
tator's debts  or  legacies,  A  takes  the 
entire  interest,  subject  only  to  the 
lien  or  charge,  and  tliere  is  no  result- 
ing trust:  King  v.  Deiiison,  1   Ves.  & 

B.  260,  272;  Wood  v.  Cox,  2  Mylne  & 

C.  684;  Tregonwell  v.  Sydenham,  3 
Dow,  194,  210.  King  v.  Denison, 
supra,  is  the  leading  case  illustrating 
this  distinction.     The  court  said:  "If 


§§  1034,  1035         EQUITY   JURISPRUDENCE. 


1538 


from  the  whole  instrument  that  the  donee  is  to  take  the 
beneficial  interest,  even  though  subject  to  the  particular 
object  or  purpose  designated,  then  no  trust  will  result  to 
the  donor,  if  that  object  or  purpose  should  fail. 

§  1034.  2.  A  Trust  Declared  in  a  Part  only  of  the 
Estate  Conveyed.  —  A  second  subdivision  includes  those 
cases  where  the  owner  of  both  the  legal  and  the  equitable 
estates  conveys  the  legal  estate,  but  does  not  convey  the 
equitable  estate,  or  conveys  only  a  portion  of  it,  and  a 
trust  in  the  entire  equitable  estate  in  the  one  instance,  or 
in  the  part  of  it  undisposed  of  in  the  other,  will,  in  gen- 
eral, result  to  the  grantor,  or  to  the  heirs  or  representa- 
tives of  the  testator.* 

§  1035.  3.  In  Conveyances  without  Consideration. — 
It  was  a  doctrine  of  the  English  equity,  in  pursuance  of 
the  ancient  principle  that  the  use  followed  or  was  raised 
by  the  consideration,  that  when  land  was  conveyed  by 
deed  without    any  consideration,  and   without  any  use 

I  give  to  A  and  to  his  heirs  all  my 
real  estate,  charged  with  my  debts, 
that  is  a  devise  to  him  for  a  particular 
purpose,  but  not  for  that  purpose 
alone.  If  the  devise  to  him  is  on  trust, 
to  pay  my  debts,  that  is  a  devise  for  a 
particular  purpose,  and  nothing  more. 
And  the  effect  of  these  two  modes  ad- 
mits just  the  difference;  the  former  is 
a  devise  of  an  estate  for  the  purpose 
of  giving  the  devisee  the  beneficial  in- 
terest, subject,  however,  to  a  particular 
purpose  by  way  of  charge;  the  latter 
is  a  devise  for  a  particular  purpose, 
with  no  intention  to  give  him  any  benefi- 
cial interest.'^ 

'  As  examples:  Property  is  con- 
veyed, devised,  or  bequeathed  upon 
Bome  particular  trust  which  does  not 
embrace  the  entire  estate,  —  as  to  A  in 
fee,  m  trust  for  B  during  his  life,  —  or 
the  purposes  of  which  do  not  exhaust 
t!ie  whole  beneficial  interest,  —  e.  g., 
in  trust  to  pay  the  testator's  debts,  or 
som^  particular  debts,  or  to  pay  some 
specified  annuity,  —  a  trust  in  the  resi- 
due will  result;  or  a  devise  of  all  the 
testator's  estate  of  every  kind,  upon 
trusts  applicable  only  to  personal 
jToperty,  a  trust  as  to  the  real  est  ite 
devised  will  result  to  the  heirs:  Long- 


ley  V.  Longley,  L.  R.  13  Eq.  133;  Cot- 
tington  V.  Fletcher,  2  Atk.  155;  Ell- 
cock  V.  Mapp,  3  H.  L.  Cas.  492;  2 
Phill.  Ch.  793;  JSTorthen  v.  Carnegie, 
4  Drew.  587;  King  v.  Denison,  1  Vea. 
&  B.  260,  272;  Watson  v.  Hayes,  5 
Mylne  &  C.  125;  Dunnage  v.  Vi^hite, 
1  Jacob  &  W.  583;  Lloyd  v.  Lloyd, 
L.  R.  7  Eq.  458;  Marshal  v.  Crutwel, 
L.  R.  20  Eq.  328;  Parnell  v.  Kingston, 
3  Smale  &  G.  337,  344;  Lloyd  v.  Spil- 
let,  2  Atk.  149,  150;  Hobart  v.  Coun- 
tess of  Suffolk,  2  Vern.  644;  Davidson 
V.  Foley,  2  Brown  Ch.  203;  Benbow 
V.  Townsend,  1  Mylne  &  K.  506;  Hal- 
ford  V.  Stains,  16  Sim.  488;  Cooke  v. 
Dealey,  22  Beav.  196;  Sewell  v.  Denny, 
10  Beav.  315;  Read  v.  Stedman,  26 
Beav.  495;  McCollister  v.  VVilley,  52 
Ind.  382;  Ponce  v.  McElvy,  47  Cal. 
154,  159;  Kennedy  v.  Nunan,  52  Cal. 
326;  Loring  v.  Eliot,  16  Gray,  568; 
Hogan  V.  Jaques,  19  N.  J.  Eq.  123; 
97  Am.  Dec.  644;  Hogan  v.  Stayhorn, 
65  N.  C.  279.  [See  also  Packard  v. 
Marshall,  138  Mass.  301;  Skellinger's 
Ex'rs  V.  Skellinger's  Ex'r,  32  N.  J.  Eq. 
659;  Schlessinger  v.  Mallard,  70  Cal. 
326;  Weaver  v.  Leiman,  52  Md.  708; 
Blount  v.  Walker,  31  S.  C.  13;  Cook* 
V.  Smith,  45  Ch.  Div.  38.1 


1539  TRUSTS   ARISING   BY    OPERATION    OF   LAW.      §  1035 


or  trust  being  declared,  a  trust  resulted  to  the  feoffor,  the 
feoffee  taking  only  the  naked  legal  title.  This  doctrine, 
however,  had  no  application  to  conveyances  which  oper- 
ated  under  the  statute  of  uses,  since  a  use  was  raised  in 
favor  of  the  immediate  grantee  by  a  *'  bargain  and  sale  " 
between  strangers,  and  by  a  "  covenant  to  stand  seised  " 
between  relatives.  If  the  doctrine  has  any  existence 
iinder  the  conveyancing  system  of  this  country,  so  that  a 
trust  should  result  to  the  grantor  from  the  absence  of  a 
consideration,  it  can  only  be  where  the  deed  simply  con- 
tains words  of  grant  or  transfer,  and  does  not  recite  nor 
imply  any  consideration,  and  does  not,  in  the  habendum 
clause  or  elsewhere,  declare  any  use  in  favor  of  the  gran- 
tee, and  the  conveyance  is  not  in  fact  intended  as  a  gift.* 


»  Gould  V.  Lynde,  114  Mass.  366, 
holds  that  no  trust  results  to  the 
grantor  upon  a  warranty  deed  ia  the 
usual  form,  which  recites  a  considera- 
tion, and  contains  an  habendum  to  the 
grantee's  use:  Osborn  v.  Osborn,  29 
N.  J.  Eq.  385  (no  trust  results  upon  a 
voluntary  conveyance  from  a  husband 
to  his  wife);  Bragg  v.  Geddes,  93  III. 
39;  Stucky  v.  Stucky,  30  N.  J.  Eq. 
646;  Davis  v.  Baugh,  59  Cal,  568; 
Gerry  v.  Stimson,  60  Me.  186;  Phil- 
brook  V.  Delano,  29  Me.  410;  Farring- 
ton  V.  Barr,  36  N.  H.  86;  Graves 
V.  Graves,  29  N.  H.  129;  Titcomb  v. 
Morrill,  10  Allen,  15;  Bartlett  v.  Bart- 
lett,  14  Gray,  277;  Cairns  v.  Colburn, 
104  Mass.  274;  Rathbua  v.  Rathbun, 
€  Barb.  98,  105;  Bank  of  United  States 
v.  Housman.  6  Paige,  526;  Squire  v. 
Harder,  1  Paige,  494;  19  Am.  Dec.  446; 
Miller  v.  Wilson,  15  Ohio,  108;  [Ohmer 
V.  Boyer,  89  Ala.  273;  Moore  v.  Jor- 
dan, 65  Miss.  229;  7  Am.  St.  Rep. 
€41.] 

The  doctrine  would  doubtless  apply 
under  the  special  condition  of  facts 
described  in  the  text.  The  case  of 
Russ  V.  Mebius,  16  Cal.  350,  contains 
an  instructive  discussion  of  the  sub- 
ject. The  plaintiff,  C.  R.,  was  owner 
in  fee  of  a  certain  lot  of  land;  he  con- 
veyed the  lot  to  his  father,  the  only 
consideration  being  a  verbal  promise 
by  the  father  to  make  a  will  and 
thereby  devise  to  the  plaintiflF  certain 
other  property  of  a  stipulated  value. 


The  father  died  still  holding  the  lot, 
but  without  in  any  manner  performing 
his  agreement  with  the  plaintiflF,  — 
without  bequeathing  to  him  any  prop- 
erty. The  plaintiflF  brought  this  suit 
to  establish  a  trust  and  to  compel  a 
reconveyance  of  the  land.  The  court 
held  that  as  the  father's  verbal  agree- 
ment was  void  and  unperformed,  there 
was  no  consideration,  express  or  im- 
plied, for  the  conveyance;  and  as  it 
was  clear  that  no  gift  was  intended,  a 
trust  resulted  in  favor  of  the  plaintiflF, 
and  he  was  entitled  to  have  a  convey- 
ance to  himself  of  the  legal  title.  Mr. 
Justice  Cope  said  (p.  355):  "We  are 
unable  to  see  why  the  case  does  not 
fall  within  the  doctrine  of  resulting 
trusts.  The  agreement  was  void,  and 
the  conveyance  was  executed  without 
any  consideration,  express  or  implied. 
It  is  shown  tliat  the  transaction  was 
not  intended  as  a  gift,  and  as  there 
was  no  consideration,  a  trust  resulted 
in  favor  of  the  plaintiflF  by  implication 
of  law  ";  quoting  Story's  Eq.  Jur. ,  sees. 
1197,  1198.  In  discussing  another  as- 
pect of  the  case  tlie  judge  said:  "It 
was  stated  on  the  argument  that  the 
conveyance  from  the  plaintiflF  to  his 
father  did  not  express  the  real  consid- 
eration for  wliich  it  was  given,  but  ac- 
knowledged the  payment  by  the  father 
of  a  nominal  consideration  in  money. 

This  is  an  important  matter 

If  the  statement  was  correct,  parol, 
evidence   was    inadmissible   to  estab- 


§§  1036,  1037         EQUITY   JURISPRUDENCE.  1540 

§  1036.  Parol  Evidence.  —  In  all  the  instances  belong- 
ing to  this  first  form  of  resulting  trust,  the  intention  that 
the  donee  is  not  to  enjoy  the  beneficial  interest,  but  that 
a  trust  is  to  result,  or  the  contrary  intention,  must  appear 
expressly  or  by  implication  from  the  terms  of  the  instru- 
ment itself  by  which  the  property  is  conveyed.  If  the 
instrument  is  a  will,  then  no  extrinsic  evidence  is  ever 
admissible  to  show  the  testator's  meaning,  nor  even  to 
show  a  mistake.'  If  the  instrument  is  a  deed,  no  extrin- 
sic evidence  of  the  donor's  intention  is  admissible,  unless 
fraud  or  mistake  is  alleged  and  shown.  If,  therefore, 
there  is  in  fact  no  consideration,  but  the  deed  recites  a 
pecuniary  consideration,  even  merely  nominal,  as  paid  by 
the  grantee,  this  statement  raises  a  conclusive  presump- 
tion of  an  intention  that  the  grantee  is  to  take  the  bene- 
ficial estate,  and  destroys  the  possibility  of  a  trust  resulting 
to  the  grantor,  and  no  extrinsic  evidence  would  be  ad- 
mitted to  contradict  the  recital,  and  to  show  that  there  is 
in  fact  no  consideration, — except  in  a  case  of  fraud  or 
mistake.'' 

§  1037.  Second  Form.  Conveyance  to  A  —  Price  Paid 
by  B.  —  In  pursuance  of  the  ancient  equitable  principle 

lish  the  trust,  and  the  plaintiff  ....  After  the  father's  death,  the  son  filed 
must  eventually  fail  to  obtain  the  re-  a  bill  to  have  a  trust  declared.  The 
lief  which  he  asks:  ....  Story's  Eq.  master  of  rolls  held  that  the  recital  of 
Jur.,  sec.  1199.  The  doctrine  of  re-  a  pecuniary  consideration  raised  a  con- 
sulting use3  and  trusts  is  founded  elusive  presumption  that  a  beneficial 
upon  a  mere  implication  of  law,  and,  interest  was  intended  to  be  given  to- 
in  general,  this  implication  cannot  be  the  grantee,  and  cut  off  the  resulting 
indulged  in  favor  of  the  grantor,  where  trust  in  favor  of  the  grantor;  and  parol 
it  is  inconsistent  with  the  presump-  evidence  was  not  admissible,  in  the  ab- 
tions  arising  from  the  deed.  Unless  sence  of  any  fraud  or  mistake  (which 
there  is  some  evidence  of  fraud  or  mis-  was  not  pretended),  to  show  the  falsity 
take,  the  recitals  in  the  deed  are  con-  of  the  recital;  see  also,  to  the  same 
elusive  upon  the  grantor,  and  no  re-  effect.  Squire  v.  Harder,  1  Paige,  494 j 
suiting  trust  can  be  raised  in  his  favor  19  Am.  Dec.  446. 
in  opposition  to  the  express  terms  of  *  See  ante,  §  871,  cases  in  note, 
a  conveyance."  The  judge  quoted  the  '  Leman  v.  Whitley,  4  Russ.  423j 
strong  case  of  Le  nan  v.  Wiiitley,  4  Russ  v.  Mebius,  1(3  Cal.  350;  Squire  v. 
Russ.  423,  where  a  son  had  conveyed  Harder,  1  Paige,  494;  19  Am.  Dec. 
land  to  a  father,  upon  no  actual  con-  446.  [See  also  Salisbury  v.  Clarke,  61 
sideration,  but  upon  a  mere  temporary  Vt.  453;  Ohmer  v.  Boyer,  89  Ala.  273; 
and  verbal  arrangement;  but  ijie  deed  Moore  v.  Jordan,  65  Miss.  229;  7  Am. 
recited  and  acknowledged  a  pecuniary  St.  Rep.  641;  Feeney  v.  Howard,  7^ 
consideration  as  paid  by  the  father.  Cal.  525,  530;  12  Am.  St.  Rep.  162.J 


1541  TRUSTS    AKISIXG    BY    OPERATION    OF    LAW.       §  1037 

that  the  beneficial  estate  follows  consideration  and  at- 
taches to  the  party  from  whom  the  consideration  comes/ 
the  doctrine  is  settled  in  England  and  in  a  great  major- 
ity of  the  American  states,  that  where  property  is  pur- 
chased and  the  conveyance  of  the  legal  title  is  taken  in 
the  name  of  one  person,  A,  while  the  purchase  price  is 
paid  by  another  person,  B,  a  trust  at  once  results  in  favor 
of  the  party  who  pays  the  price,  and  the  holder  of  the  legal 
title  becomes  a  trustee  for  him.  In  order  that  this  effect 
may  be  produced,  however,  it  is  absolutely  indispensable 
that  the  payment  should  be  actuall}''  made  by  the  benefi- 
ciary, B,  or  that  an  absolute  obligation  to  pay  should  be 
incurred  by  him,  as  a  part  of  the  original  transaction  of 
purchase,  at  or  before  the  time  of  the  conveyance;  no 
subsequent  and  entirely  independent  conduct,  interven- 
tion, or  payment  on  his  part  would  raise  any  resulting 
trust.'' 


»  See  ante,  §  981. 

*  This  description  assumes  that  the 
conveyance  to  A  is  made  with  the 
knowledge  and  consent,  express  or  im- 
plied, of  B,  who  pays  the  price,  —  that 
the  whole  transaction  is  in  pursuance 
of  a  common  understanding  or  arrange- 
ment. If  the  conveyance  is  taken  by 
A  secretly,  contrary  to  B's  wishes,  in 
violation  of  a  duty  owed  to  him,  or  in 
fraud  of  his  rights,  the  trust  which 
arises  in  B's  favor  is  not  "resuLing," 
but  is  "constructive."  The  two  kinds 
are  often  confounded,  but  the  distinc- 
tion is  important,  and  especially  so  in 
those  states  where  the  "  resulting " 
trusts  of  this  form  have  been  in  terms 
abolished  by  statute.  The  leading 
case  is  Dver  v.  Dyer,  2  Cox,  92;  1 
Lead.  Cas".  Eq.,  4th  Am.  ed.,  314, 
319,  333;  see  notes  of  the  English  and 
American  editors  for  a  full  collection 
of  authorities.  Lord  Cliief  Baron  Eyre 
laid  down  the  general  doctrine  as  fol- 
lows: "The  clear  result  of  all  the 
cases,  without  a  single  exception,  is, 
that  the  trust  of  a  legal  estate,  whether 
taken  in  the  names  of  the  purchaser 
and  others  jointly,  or  in  the  names  of 
others  without  that  of  the  purchaser, 
whether  in  one  name  or  several, 
whether  jointly   or  successively,    re- 


sults to  the  man  who  advances  the 
purchase-money."  See  also  Withers 
v.  Withers,  Amb.  151;  Wray  v.  Steele, 
2  Ves.  &  B.  3S8;  Loyd  v.  Read.  1  P. 
Wms.  607;  Rider  v.  Kidder,  10  Ves. 
360;  Case  v.  Codding,  38  Cal.  191; 
Dikeman  v.  Norrie,  36  Cal.  94;  Rob- 
erts v.  Ware,  40  Cal.  6.34;  Currey  v. 
Allen,  34  Cal.  254;  Millard  v.  Hatha- 
way,  27  Cal.  119;  Bayles  v.  Baxter, 
22  Cal.  575;  Hidden  v.  Jordan,  21 
Cal.  92;  Wasley  v.  Foreman,  38  Cal. 
90;  Bludworth  v.  Lake,  33  Cal.  255; 
Davis  v.  Baugh,  59  Cal.  568;  Hutch- 
inson V.  Hutchinson,  8  Pac.  Law  J. 
636;  Lehman  v.  Lewis,  62  Ala.  129; 
Burks  V.  Burks,  7  Baxt.  353;  Mathis 
v.  Stufflebeam,  94  111.  481;  Smith  v. 
Patton,  12  W.  Va.  541;  Hampson  v. 
Fall,  64  Ind.  382;  Keller  v.  Kunkel, 
46  Md.  565;  Brooks  v.  Shelton,  54 
Miss.  353;  Boskowitz  v.  Davis,  12 
Nev.  446;  Du  Val  v.  Marshall,  ,30  Ark. 
230;  Lee  v.  Browder,  51  Ala.  288;  Bil- 
lings V.  Clinton,  6  S.  C.  90;  Sale  v. 
McLean,  29  Ark.  612;  Midmer  v.  Mid- 
mer's  Ex'rs,  26  IST.  J.  El^.  299;  Murphy 
V.  Pealjody,  63  Ga.  522.  Such  a  re- 
sulting trust  may  arise  where  a  hus- 
band has  paid  for  property  with  money 
belonging  to  his  wife,  and  has  takea 
the  title  iu  his  own  name,  and  where 


§  1038 


EQUITY   JURISPRUDENCE. 


11A2 


§  1038.  Special  Rules.  —  To  the  general  doctrine  are 
added  the  following  more  specific  rules:  The  trust  results 
whether  the  title  is  taken  in  the  name  of  one  grantee 
only,  or  of  two  or  more  grantees  jointly;  in  the  latter  case 
there  are  joint  trustees.'     A  trust  also  results  in  favor  of 

V.  Beck,  43  K  J.  Eq.  39;  Rice  v.  Pen- 
nypacker,  5  Del.  Ch,  33;  Gregory  v. 
Peoples,  80  Va.  355;  Heiskell  v.  Pow- 
ell, 23  W.  Va.  717;  Thurber  v.  La. 
Roque,  105  N.  C.  301;  Simmons  v» 
Jennings,  60  Miss.  886;  Richardson  v. 
Taylor,  45  Ark.  472;  Burns  v.  Ross, 
71  Tex.  516;  Boyer  v.  Lihbei',  88  Ind. 
235;  Harris  V,  Mclntyre,  118  111.  275r 
Reynolds  v.  Sumner,  126  111.  58;  9 
Am.  St.  Rep.  523,  and  note;  La  Fitte 
V.  Rups,  13  Col.  207;  Parker  v.  New- 
itfc,  IS  Or.  274;  Woodard  v.  Wright, 
82  Cal.  202;  and  cases  cited  in  follow- 
ing notes.  As  illustrating  the  rule 
that  tlie  payment  must  be  made,  or 
an  absolute  obligation  incurred,  by  the- 
beueticiary,  as  a  part  of  the  original 
transaction  of  purchase,  see  Ducie  v. 
Ford,  138  U.  S.  587;  In  re  Stanger, 
35  Fed.  Rep.  241;  Niver  v.  Crane,  9S 
N.  Y.  40;  Krauth  v.  Thiele,  45  N.  .T. 
Eq.  408;  McDevitt  v.  Frantz,  85  Va. 
740;  Murry  v.  Sell,  23  W.  Va.  476 j 
Richardson  v.  Day,  20  S.  C.  418; 
Brown  v.  Cave,  23  S.  C.  251;  Boozer 
V.  Teague,  27  S.  C.  348;  Whaley  v. 
Whaley,  71  Ala.  159;  Bibb  v.  Hunter,. 
79  Ala.  351;  Miluer  v.  Freeman,  40- 
Ark.  62;  Williams  v.  San  Saba  County, 
59  Tex.  442;  Oury  v.  Saunders,  77 
Tex.  278;  Boyer  v.  Libbey,  88  Ind. 
235;  Hunt  v.  Friedman,  63  Cal.  510. 
If  it  be  shown  that  the  money  was- 
advanced  as  a  loan,  merely,  to  the 
grantee,  the  implication  of  a  resulting, 
trust  is,  of  course,  defeated:  Whaley 
V.  Whaley,  71  Ala.  159.  But  the  fact 
that  the  payment  was  made  with 
money  borrowed  for  the  purpose  frouv 
the  person  in  whose  name  the  title  was 
taken  does  not  prevent  the  trust  from 
resulting  to  the  person  making  such 
payment:  Robinson  v.  Leflore,  59 
Miss.  148;  Gardner  v.  Rundell,  70 
Tex.  453;  Thomas  v.  Jameson,  77  Cal. 
91;  or  the  advancement  may  consjst 
in  the  extinguishment  of  a  pre-exist- 
ing debt  owing  from  the  grantee  to 
the  beneficiary:  Thomas  v.  Thomas, 
62  Miss.  531.] 

'  Ex  parte  Houghton,  17  Ves.   251^ 
253;  Rider  v.  Kidder,  10  Ves.  360,  367. 


a  parent  has  in  like  manner  paid  for 
property  with  money  of  his  child,  and 
taken  the  conveyance  to  himself;  but 
if  the  transaction  is  secretly  done,  in 
violation  of  a  fiduciary  duty,  the  trust 
would  be  constructive,  I'ather  than  re- 
sulting. See,  as  examples,  Johnson  v. 
Anderson,  7  Baxt.  251;  Thomas  v. 
Standiford,  49  Md.  181;  Catherwood 
V.  Watson,  65  Ind.  576  (but  cut  ofif  by 
a  sale  to  a  honajide  purchaser);  Loftea 
V.  Witboard,  92  111.  461;  Tilford  v. 
Torrey,  53  Ala.  120;  Moss  v.  Moss, 
95  111.  449  (but  is  cut  off  by  a  general 
release  of  all  claims  given  to  her  hus- 
band); Cunningham  v.  Bell,  83  N.  C. 
328.  [See  also  Nettles  v.  Nettles,  67 
Ala.  599  (barred  by  laches);  Kline  v. 
Ragland,  47  Ark.  Ill;  Parker  v.  Coop, 
60  Tex.  Ill;  Blum  v.  Rockers,  71  Tex. 
668;  Kinlow  v.  Kinlow,  72  Tex.  639; 
Camp  V.  Smith,  98  Ind.  409;  Brough- 
ton  V.  Brand,  94  Mo.  169;  Mosteller 
V.  Mosteller,  40  Kan.  658.]  In  the 
following  cases  no  trust  resulted  to 
the  wife  under  the  circumstances: 
Kenneday  v.  Price,  57  Miss.  771; 
Hause  v.  Hause.  57  Ala.  262;  Bibb  v. 
Smith,  12  Heisk.  728;  McCullough  v. 
Ford,  96  111.  439;  Hon  v.  Hon,  70  Ind. 
135.  See  also,  as  illustrations  of  the 
general  doctrine,  Kelley  v.  .Jenness, 
50  Me.  455;  79  Am.  Dec.  623;  Baker 
v.  Vining,  30  Me.  121,  126;  50  Am. 
Dec.  617;  Hopkinson  v.  Dumas,  42 
N.  H.  296;  Hall  v.  Young,  37  N.  H. 
134;  Clark  v.  Clark,  43  Vt.  685;  Ken- 
dall V.  Mann,  11  Allen,  15;  Dean  v. 
Dean,  6  Conn.  285;  Boyd  v.  McLean, 
1  Johns.  Ch.  582;  Cutler  v.  Tuttle,  19 
N.  J.  Eq.  549,  558;  Nixon's  Appeal, 
63  Pa.  St.  279;  Stewart  v.  Brown,  2 
Serg.  &  R.  461;  Cecil  Bank  v.  Snively, 
23  Md.  253;  McGovern  v.  Knox,  21 
Ohio  St.  547,  551;  8  Am.  Rep.  80; 
Milliken  v.  Ham,  36  Ind.  166;  Latham 
V.  Henderson,  47  111.  185;  Johnson  v. 
Quarles,  46  Mo.  423;  McLenan  v.  Sul- 
livan, 13  Iowa,  521;  Rogan  v.  Walker, 
1  Wis.  .527;  Frederick  v.  Haas,  5  Ner. 
389.  [See  also,  as  recent  examples, 
Connor  v.  Follansbee,  59  N.  H.  124; 
Moore  v.  Stinson,  144  Mass.  596;  Beck 


1543  TRUSTS   AKISINQ   BY    OPERATION    OF   LAW.      §  1039 

one  who  pays  only  a  part  of  the  price.  In  other  vrorcis, 
where  two  or  more  persons  together  advance  the  price, 
and  the  title  is  taken  in  the  name  of  one  of  them,  a  trust 
will  result  in  favor  of  the  other  with  respect  to  an  undi- 
vided share  of  the  property  proportioned  to  his  share  of 
the  price. ^  The  doctrine  in  all  of  its  phases  applies  alike 
to  personal  and  to  real  property.^ 

§  1039.  Purchase  in  the  Name  of  a  Wife  or  Child.  — 
Wherever  the  real  purchaser  —  the  one  who  pays  the 
price  —  is  under  a  legal,  or  even  in  some  cases  a  moral, 
obligation  to  maintain  the  person  in  whose  name  the 
purchase  is  made,  equity  raises  the  presumption  that  the 
purchase  is  intended  as  an  advancement  or  gift  to  such 
recipient,  and  no  trust  results.  If,  therefore,  a  purchase 
of  either  real  or  personal  property  is  made  by  a  husband 
in  the  name  of  his  lawful  wife,  or  in  the  joint  names  of 
himself  and  his  wife,  or  such  a  purchase  is  made  by  a 
father  in  the  name  of  his  legitimate  child,  or  in  the  joint 
names  of  himself  and  child,  no  trust  results  in  favor  of 
the  husband  or  father,  but  the  transaction  is  presumed 
to  be  a  gift  or  advancement  to  or  for  the  benefit  of  the 
wife  or  child.*    It  appears  to  be  now  settled  that  the  same 

*  Wray  v.  Steele,  2  Ves.  &  B.  388;  fer  in  whole  or  part:  Loyd  v.  Read,  1 
Case  V.  Codding,  38  Cal.  191;  Dike-  P.  V^ms.  607:  Ex  parte  Houghton,  17 
man  v.  Norrie,  36  Cal.  94;  McCreary  Ves.  251,  253;  Rider  v.  Kidder,  10 
V.  Casey,  50  Cal.  349;  Miller  v.  Bird-  Ves.  360;  Soar  v.  Foster,  4  Kay  &  J. 
song,  7  Baxt.  531 ;  Cramer  v.  Hoose,  152;  Beecher  v.  Major,  2  Drew.  &  S. 
93  111.  503;  Smith  v.  Patton,  12  W.  431;  Garrick  v.  Taylor,  29  Beav.  79; 
Va.  541;  Rhea  v.  Tucker,  56  Ala.  450;  7  Jur.,  N.  S.,  1174;  Sidmouth  v.  Sid- 
Smith  v.  Smith,  85  111.  189.  [See  also  mouth,  2  Beav.  447,  454;  and  cases 
Thurber  V.  La  Roque,  105  N.  C.  301;  under  last  paragraph.  [See  also 
Brown  V.  Cave,  23  S.  C.  251;  Bibb  v.  Robbins  v.  Robbins,  89  N.  Y.  251, 
V.   Hunter,    79  Ala.   351;  Thomas  v.  258.] 

Thomas,  62  Miss.  531;  Blum  V.  Rogers,         '  Kingdon  v.   Bridges,  2  Vern.   67: 

71  Tex.  668;  Harris  v.  Mclntyre,  118  Rider  v.   Kidder,   lOVes.   360;   Drew 

111.  275;  Tenney  v.  Simpson,  37  Kan.  v.  Martin,  2  Hem.  &  M.   130;  Devoy 

353;  41  Kan.  561;  Bear  v.  Koenigstein,  v.  Devoy,  3  Smale  &  G.  403;  Soar  v. 

16  Neb.  65;  Thomas  v.   Jameson,   77  Foster,  4  Kay  &  J.  152  (must  be  a  law- 

Cal.  91;  and  see  Bailey  V.  Hemen way,  ful  wife);  Dyer  v.   Dyer,   2  Cox,  92; 

147  Mass.  326.]  Finch  v.  Finch,  15  Ves.  43,  50;  Mur- 

*  Where  a  bond,  or  shares  of  stock,  less  v.  Franklin,  1  Swanst.  13,  17,  18; 
or  annuity,  or  any  other  thing  in  ac-  Grey  v.  Grey,  2  Swanst.  594,  597; 
tion,  or  kind  of  personal  property,  is  Tucker  v.  Burrow,  2  Hem.  &  M.  515, 
assigned  to  one  person,  a  trust  therein  524;  Williams  v.  Williams,  32  Beav. 
will  result  in  favor  of  another  who  ad-  370;  Christy  v.  Courtenay,  13  Beav. 
vances  the  consideration  of  the  trans-  96;   Sidmouth  v.  Sidmouth,  2  Beav. 


§  1040  EQUITY  JURISPRUDENCE.  1544 

rule  applies  to  a  mother  who  purchases  property  in  the 
name  of  her  child,  or  in  the  joint  names  of  herself  and 
child,  and  pays  the  price  with  her  own  separate  funds; 
no  trust  results/  The  rule  also  applies  where  the  person 
advancing  the  price  has  placed  himself  in  loco  parentis 
towards  the  other.^ 

§  1040.  Admissibility  of  Parol  Evidence.  —  Since  these 
resulting  trusts  are  not  embraced  within  the  statute  of 
frauds,  their  existence  need  not  be  evidenced  by  any 
writing,  and  may,  therefore,  be  established  by  parol.  In 
cases  belonging  to  the  first  form,  —  purchases  between 
strangers, —  if  the  deed  does  not  show  on  its  face  that  the 
price  was  actually  paid  by  another,  and  even,  according 
to  many  decisions,  if  the  deed  recites  that  the  payment 
was  made  by  the  grantee  therein,  the  real  fact  may 
always  be  established  by  parol  evidence;  it  may  be 
proved  by  parol  that  the  purchase  price  was  wholly  or 
partly  paid  by  another  person,  and  thus  a  trust  may  be 
shown  to  result  in  his  favor.     Where  the  trust  does  not 

447;    Low   V.    Carter,    1    Beav.    426;  Ch.  .343;  but  see,  per  contra,  Flynt  v. 

Vaucev.  Vance,  1  Beav.  605;  Sayre  v.  Hubbard,  57  Miss.  471. 
Hughes,  L.  R.  5  Eq.  376;  In  re  Cur-         ^  Beckford  v.  Beckford,  Lofft,  490 

teis's  Trusts,  L.  R.  14  Eq.  217;  Mar-  (father  and  illegitimate  son);  Ebrand 

shal  V.    Crutwell,   L.   R.   20  Eq.   328  v.  Dancer,  2  Cas.  Ch.  26  (grandfather 

(where  a  trust  did  result  upon  a  bank  and   grandchild);  Currant  v.   Jago,   1 

account  being  transferred  into  names  Coll.   C.  C.  261   (husband  and  wife's 

of  husband  and  wife  merely  for  con-  nephew);  Higdon  v.  Higdon,  57  Miss. 

venience);  Stevens  v.  Stevens,  70  Me.  264  (brother  and  his  sisters);  Loyd  v. 

92;   Lorentz  v.    Lorentz,    14  W.    Va.  Read,  1  P.  Wras.  607;  Forrest  v,  For- 

809;  Lochenour  V.  Lochenour,  61  Ind.  rest,    11    Jur.,    N.    S.,  317;   Sayre  v. 

595;  Baker  v.    Baker,  22  Minn.   262;  Hughes,  L.  R.  5  Eq.  376,  380;  Smith 

Norton  v.   Mallory,    3   Thomp.   &  C.  v.  Patton,   12  W.  Va.  541;  [Hamilton 

640;  Gilbert  v.  Gilbert,  2  Abb.  App.  v.    Steele,    22  W.   Va.    348;]    but  in 

256;  Farrell  v.  Lloyd,  69  Pa.  St.  239.  Tucker  v.  Burrow,  2  Hem.  &  M.  515, 

[See  also  Lane  v.   Lane,  80  Me.   570;  Page  Wood,  V.  C,  held  that  the  mere 

Bennett  v.  Camp,  54  Vt.  36;  Whitley  fact  that  a  person  had  placed  himself 

V.   Ogle,  47   N.    J.    Eq.    67;  Wheeler  in  foco  pi?-eH<w  towards  the  illegitimate 

V.  Kidder,   105  Pa.    St.  270;  McClin-  son   of    his   daughter   did    not   alone 

tock   v.    Loisseau,    31    W.    Va.    865;  bring  a  purchase  made  in  the  name  of 

Tburber  v.  La  Roque,  105  N.  C.  301;  "such  illegitimate  grandson  within  this 

Cerney  v.  Pawlot,  66  Wis.  262;  Schus-  rule  which  prevents  a  resulting  trust, 

ter  V.  Schuster,   93   Mo.    438;    Gilli-  He  said:  "The  court  has  never  held 

land  v.  Gilliland,  96  Mo.  522.]  that  any  presumption  of  advancement 

^  In  re  De  Visme,  2  De  Gex,  J.  &  S.  arose  merely  from  the  fact  of  so  dis- 

17  (holds  that  a  trust  did  result);  Sayre  tant  a  relationship  (if  it  be  a  relation- 

V.  Hughes,  L.  R.  5  Eq.  376,  381;  Bat-  ship)  as  this,  nor  yet  merely  from  the 

stone  V.  Salter,  L.  R.  19  Eq.  250;  10  fact  that  one  of  the  parties  was  in  loco 

Ch.  431;  Fowkes  v.  Pascoe,  L.  R.  10  parentis  to  the  other." 


1545 


TRUSTS   ARISING   BY   OPERATION   OP   LAW. 


1040 


appear  on  the  face  of  the  deed  or  other  instrument  of 
transfer,  a  resort  to  parol  evidence  is  indispensable.  It 
is  settled  by  a  complete  unanimity  of  decision  that  such 
ovidence  must  be  clear,  strong,  unequivocal,  unmistak- 
able, and  must  establish  the  fact  of  the  payment  by  the 
alleged  beneficiary  beyond  a  doubt.  Where  the  payment 
of  a  part  only  is  claimed,  the  evidence  must  show,  in  the 
same  clear  manner,  the  exact  portion  of  the  whole  price 
which  was  paid.'  Parol  evidence  is  also  admissible  on 
the  part  of  the  grantee  to  defeat  a  trust.  Since  the  whole 
doctrine  of  a  resulting  trust  depends  upon  an  equitable 
presumption  of  an  intention,  so  this  presumption  may  be 
overcome  by  parol  evidence  of  an  actual  intention  on  the 
part  of  the  one  paying  the  price,  that  the  transaction  was 
to  be  a  gift.^ 


^  A  few  of  the  earliest  decisions 
did  not  permit  such  evidence,  on  the 
ground  that  it  would  violate  the  stat- 
ute of  frauds,  but  they  have  long  been 
overruled.  Several  of  the  cases  cited 
below  are  examples  of  what  kind  and 
amount  of  parol  evidence  is  or  is  not 
sufficient  to  raise  a  trust,  and  also 
when  such  a  trust  may  be  shown  by 
circumstantial  evidence  alone:  Gas- 
coigne  v,  Thwing,  1  Vern.  366;  Bart- 
lett  V.  Pickersgill,  1  Eden,  515;  Ryall 
V.  Ryall,  1  Atk.  59;  Willis  v.  Willis, 
2  Atk.  71;  Lench  v.  Lench,  10  Ves. 
511,  517;  Groves  v.  Groves,  3  Younge 
&  J.  163;  Heard  v.  Pilley,  L.  R.  4  Ch. 
548,  552;  Whitmore  v.  Learned,  70 
Me.  276;  Parker  v.  Snyder,  31  N.  J. 
Eq.  164;  Agricultural  etc.  Ass'n  v. 
Brewster,  51  Tex.  257;  Miller  v. 
Blose's  Ex'r,  30  Gratt.  744;  Smith 
v.  Patton,  12  W.  Va.  541;  Rhea  v. 
Tucker,  56  Ala.  450;  Hyden  v.  Hy- 
den,  6  Baxt.  406;  Lee  v.  Browder,  51 
Ala.  288;  Billings  v.  Clinton,  6  S.  C. 
90;  Hennessey  v.  Walsh,  55  N.  H. 
515  (evidence  insufficient);  McCreary 
v.  Casey,  50  Cal.  349;  Murphy  v.  Pea- 
body,  63  Ga.  522;  Byers  v.  Wackman, 
16  Ohio  St.  440;  Frederick  v.  Haas,  5 
Nev.  389;  Boyd  v.  McLean,  1  Johns. 
Ch.  582,  586;  Page  v.  Page,  8  N.  H. 
187,  195;  Baker  V.  Vining,  30  Me.  121, 
126;  50  Am.  Dec.  617;  Thomas  v. 
Standiford.  49  Md.  181.  [See  also 
Ducie  V.  Ford,  138  U.  S.  587;  In  re 


Rtanger,  35  Fed.  Rep.  241;  Hoover 
V.  Hoover,  129  Pa.  St.  201;  Witts  v. 
Hornev,  59  Md.  584;  Donaghe  v. 
Tam3,"81  Va.  132;  Lofton  v.  Sterrett, 
23  Fla.  565;  Bibb  v.  Hunter,  79  Ala. 
351;  Simmons  v.  Jennings,  60  Miss. 
886  (trust  presumed  for  creditors  of 
person  advancing  the  consideration); 
Thomas  v.  Thomas,  62  Miss.  531;  Mur- 
phy V.  Hanscome,  76  Iowa,  192;  Adams 
V.  Burns,  96  Mo.  361;  Burdett  v.  May, 
100  Mo.  13;  Parker  v.  Newitt,  18  Or. 
274.] 

*  Of  course  a  gift  may  be  made  be- 
tween strangers,  and  may  be  made  in 
the  form  of  a  purchase  of  property 
conveyed  to  A,  the  donee,  while  the 
donor,  B,  pays  the  price.  Whenever 
this  condition  of  fact  is  shown  by  the 
evidence,  no  trust  can  result:  Lane  v. 
Dighton,  Amb.  409;  Bellasis  v.  Comp- 
ton,  2  Vern.  294;  Benbow  v.  Town- 
send,  1  Mylne  &  K.  506;  Deacon  v. 
Colquhoun,  2  Drew.  21 ;  Beecher  v. 
Major,  2  Drew.  &  S.  431;  Garrick  v. 
Taylor,  29  Beav.  79;  7  Jur.,  N.  S., 
1174;  Wheeler  v.  Smith,  1  Giff.  300; 
Carter  v.  Montgomery,  2  Tenu.  Ch. 
216;  [Ward  v.  Ward,  59  Conn.  188; 
Tryon  v.  Huntoon,  67  Cal.  325;  Walsh 
V.  McBride,  72  Md.  45];  and  the  pre- 
sumption may  thus  be  rebutted  as  to 
a  part  of  the  trust,  and  not  as  to  the 
remainder:  Rider  v.  Kidder,  10  Ves. 
360,  368,-  Benbow  v.  Towusend,  1 
Mylne  &  K.  506. 


§§  1041,  1042  EQUITY    JURISPRUDENCE.  1546 

§  1041.  The  Same.  Between  Family  Relatives. — In 
trusts  of  the  second  form,  between  family  relatives,  no 
evidence  is  necessary,  in  the  first  instance,  to  show  the 
operation  of  the  rule,  since  a  presumption  arises  on  the 
face  of  the  transaction  that  a  gift  was  intended,  and  that 
no  trust  results.  This  result,  however,  is  merely  a  pre- 
sumption, and  may  be  overcome.  Extrinsic  evidence, 
either  written  or  parol,  is  admissible  on  behalf  of  the 
husband  or  parent  paying  the  price  to  rebut  the  pre- 
sumption of  an  advancement  or  gift,  and  to  show  that  a 
trust  results;  and  conversel}'-,  such  evidence  may  be  used 
to  fortify  and  support  the  presumption.  In  general,  this 
extrinsic  evidence,  to  defeat  an  advancement  and  estab- 
lish a  trust  as  against  the  party  to  whom  the  property  is 
conveyed  or  transferred  and  those  holding  under  him, 
must  consist  of  matters  substantially  contemporaneous  with 
the  purchase,  conveyance,  or  transfer,  so  as  to  be  fairly 
connected  with  the  transaction.* 

§  1042.  Legislation  of  Several  States.  —  The  second 
form  of  resulting  trusts  in  real  property,  above  described, 
where  the  title  to  land  is  taken  in  the  name  of  one  person 
and  the  price  is  paid  by  another,  has  been  abolished  by 

*  Kilpin  V.  Kilpin,  1   Mylne  &  K,  Possession  of  the  estate  and  receipt  of 

620;    Lamplugh   v.    Lamplugh,    1    P.  its  rents  by  the  father  during  his  life, 

Wms.   Ill,  113;  Hall  v.  Hill,  1  Dru.  after  conveyance  to  his  child:   Lam- 

&  War.  94,  114;  Murless  v.  Franklin,  plugh  v,  Lamplugh,  1  P.   Wms.   Ill; 

1    Swanst.   13;   Tucker  v.   Burrow,  2  Taylor  v.  Taylor,  1  Atk,  386;  Christy 

Hem.    &   M.   515,   524;   Sidmouth   v.  v.  Courtenay,  13  Beav.  96;  [Bogy  v. 

Sidmouth,  2  Beav.  447,  455;  Williams  Roberts,  48  Ark.  17;  3  Am.  St.  Rep. 

V.  Williams,  32  Beav.  370;  Dumper  v.  211;   White   v.    White,  52  Ark.   188; 

Dumper,  3  Gifif.  583;  Devoy  v.  Devoy,  Maxwell   v.    Maxwell,   109   111.   588;] 

3  Smale  &  G.  403;  Stevens  v.  Stevens,  nor  receipt  by  the  father  of  the  divi- 

70  Me.  92.     [See  also  Lister  v.  Lister,  dends   of    investments   made    in    the 

.35  N.  J.  Eq.  49;  Read  v.  Huff,  40  N.  name   of   his   son:   Sidmouth   v.    Sid- 

J.  Eq.  229;  Earnest's  Appeal,  106  Pa.  mouth,  2  Beav.  447;  but  see  Smith  v. 

St.  310;  Hayes's  Appeal,  123  Pa.   St.  Warde,  15  Sim.  56;  nor  a  devise,  be- 

1.38;   Hamilton  v.  Steele,  22  W.  Va.  quest,  or  lease  of  the  property  by  the 

348;   McClintock  v.  Loisseau,  31  W.  husband  or  parent  after  the  purchase: 

Va.  865;  Harden  v.  Darwin,  66  Ala.  Crabb  v.  Crabb,   1  Mylne  &  K.  511: 

.55.]  Dummer  v.   Pitcher,  2   Mylne  &   K, 

What  facts  are  suflScient  or  not  to  262;  Jeans   v.    Cooke,  24   Beav.  513: 

rebut  the  presumption  of  an  advance-  Murless   v.   Franklin,    1    Swanst.    13; 

ment  or  gift,  and   to  establish   a  re-  [the  presumption  is  repelled  by  proof 

suiting  trust,  is  a  question  frequently  that  the  deed  was  executed  to  defraud 

considered  by  the  English  cases.     The  the  husband's   creditors:   Thurber  v. 

following  have  been  held  not  sujicient:  La  Roque,  105  N.  C.  301.] 


1547  TRUSTS   ARISING   BY   OPERATION    OF   LAW.      §  1042 


the  legislation  of  several  states.^  In  pursuance  of  these 
statutes,  which  follow  substantially  a  common  type  in  all 
these  states,  no  trust  ever  results  in  favor  of  the  one  who 
pays  the  purchase  price,  wholly  or  partly,  where  the  title 
is  with  liis  knowledge  taken  in  the  name  of  another  per- 
son; but  in  place  thereof,  a  trust  arises  in  favor  of  the  cred- 
itors of  the  one  thus  paying  or  advancing  the  price.  This 
provision  does  not,  however,  include  the  cases  where  the' 
grantee  takes  the  deed  in  his  own  name  without  the 
knowledge  and  consent  of  the  person  paying  the  money, 
nor  where  the  purchase  is  made  in  his  own  name  with 


>  New  York.  —Rev.  Stats.  1875,  pt. 
2,  c.  1,  art.  6,  sees.  51,  52,  53,  p. 
1105,  sec.  51:  "Where  a  grant  for  a 
valuable  consideration  shall  be  made  to 
one  person,  and  the  consideration 
therefor  shall  be  paid  by  another,  no 
use  or  trust  shall  result  in  favor  of  the 
person  by  whom  such  payment  shall 
be  made;  but  the  title  shall  vest  in 
the  person  named  as  the  alienee  in 
such  conveyance,  subject  only  to  the 
provisions  of  the  next  section."  Sec. 
52:  "  Every  such  conveyance  shall  be 
presumed  fraudulent  as  against  the 
creditors  at  that  time  of  the  person 
paying  the  consideration;  and  where  a 
fraudulent  intent  is  not  disproved,  a 
trust  shall  result  in  favor  of  such  cred- 
itors, to  the  extent  that  may  be  neces- 
sary to  satisfy  their  just  demands." 
Sec.  53:  "  The  provisions  of  the  preced- 
ing section  51  shall  not  extend  to  cases 
where  the  alienee  named  in  the  convey- 
ance shall  have  taken  the  same  as  an 
absolute  conveyance  in  his  own  name, 
without  the  consent  or  knowledge  of 
the  person  paying  the  consideration, 
or  where  such  alienee,  in  violation  of 
some  trust,  shall  have  purchased  the 
lands  so  conveyed  with  moneys  be- 
longing to  another  person." 

Michigan. — 2  Comp.  Laws  1871, 
p.  1331,  sec.  7:  Same  as  New  York, 
sec.  51.  Sec.  8:  Same  as  New  York, 
sec.  52,  except  the  words  "at  that 
time  "are  omitted.  Sec.  9:  Same  as 
New  York,  sec.  53.  [Howell's  Stats. 
1882,  sees.  5569-5571.] 

Minnesota.  — Young's  Stats.  1880, 
p.  553,  sees.  7,  8,  9  [Kelly's  Stats. 
1891,  sec.  4009,  4011]:  Same  as  New 
York,  sees.  51,  52,  53. 


Wisconsin.  —  2  Taylor's  Rev.  Stats. 
1872,  p.  1129,  sec.  7:  Same  as  New 
York,  sec.  51.  Sec.  8:  Same  as 
New  York,  sees.  2071,  2077,  2078, 
sec.  52,  except  the  words  "at  that 
time  "  are  omitted.  Sec.  9:  Same  as 
New  York,  sec.  53.  [Sanborn  and 
Berryman's  Stats.  1889,  sees.  2077- 
2079.] 

Kansas.  —  Dassler's  Comp.  Laws 
1881,  p.  989  [c.  114],  sec.  6:  Same  as 
New  York,  sec.  51.  Sec.  7:  Substan- 
tially the  same  as  New  York,  sec.  52, 
except  that  it  extends  to  subsequent 
as  well  as  prior  creditors,  if  the  fraud- 
ulent intent  is  shown.  Section  8  pro- 
vides that  the  preceding  section  6 
shall  not  apply  to  the  same  cases  de- 
scribed in  New  York,  sec.  53,  and 
then  adds  the  following  case:  "Or 
where  it  shall  be  made  to  appear  that, 
by  agreement,  and  without  any  fraud- 
ulent intent,  the  party  to  whom  th© 
conveyance  was  made,  or  in  whom  the 
title  shall  vest,  was  to  hold  the  land 
or  some  interest  therein,  in  trust,  for 
the  party  paying  the  purchase-money, 
or  some  part  thereof." 

Indiana. — 1  Stats.  1876,  p.  915, 
sees.  6,  7,  8:  Same  as  the  Kansas  sees. 
6,  7,  8.  [2  Rev.  Stats.  1888,  sees. 
2974-2976.] 

Kentucky. — Gen.  Stats.  1873,  p. 
587,  [c.  63,  art.  1,]  sec.  19:  Substaa- 
tially  same  as  New  York,  sec.  51. 
The  Georgia  Code  1873,  p.  400,  sec. 
2316,  defines  "implied"  trusts, — re- 
sulting and  constructive,  —  but  with- 
out altering  the  doctrines  of  equity 
as  generally  settled,  simply  declara- 
tory of  existing  rules. 


§  1042  EQUITY   JURISPRUDENCE.  1548 

another's  money,  in  violation  of  some  duty  or  confidence; 
in  these  instances  the  trust,  which  is  then  really  construct- 
ive rather  than  resulting,  still  arises.  All  of  these  stat- 
utes seem  to  be  confined  in  their  terms  to  conveyances  of 
real  property,  so  that  the  settled  rules  concerning  resulting 
trusts  in  personal  property  appear  to  be  left  untouched. 
They  also  relate  solely  to  the  second  form  of  resulting 
trusts,  as  heretofore  described,  so  that  the  instances  of  the 
first  form,  where  a  trust  results  to  the  grantor,  remain 
unaltered,  and  the  rules  concerning  them  in  full  force.  In 
construing  the  first  and  main  clause  of  the  statute  which 
abolishes  the  resulting  trust  in  favor  of  the  person  paying 
the  price,  it  is  thoroughly  settled  by  the  New  York  courts 
that  the  provision  implies  his  consent  and  co-operation 
in  the  mode  of  transfer,  so  that  he  in  fact  induces  the 
conveyance  of  the  title  to  the  grantee,  and  that  it  does  not 
apply  unless  he  were  aware  that  the  conveyance  was  so 
made,  and  the  title  was  so  taken.  This  seems  to  be  the 
correct  construction  of  the  provision,  which  is  the  same 
in  all  the  statutes.*  With  regard  to  the  true  interpreta- 
tion of  the  clause  creating  a  trust  in  favor  of  the  credi- 
tors of  the  person  paying  the  price,  there  has  been  some 
conflict  among  the  decisions  and  dicta  of  the  New 
York  courts.'     Cases  arising  under  the  similar  statutory 

^  Reitz  ▼.  Reitz,  80  N.  Y.  538;  re-  voked  to  cover  a  fraud,  see  Robbins  v. 

versing   14   Hun,    536;  Lounsbury  v.  Robbins,  89  N.  Y.  256.] 
Pardy,  18  N.  Y.  515;  Day  v.  Roth,  18         *  The    earlier    cases    regarded    the 

N.  Y.  448;  Siemon  v.  Schurck,  '29  N.  clause  as  creating  a  pure  trust  in  favor 

Y.  598,    610:  Traphagen  v.   Burt,  67  of  the  creditors,  which  they  could  en- 

N.  Y.  30;  Underwood  v.  Sutcliffe,  77  force   simply    as    cestuis  que  trtistent, 

N.  Y.  58.     Thus  it  is  held  that  where  without  taking  any  legal  proceedings 

a  father  paid  the  price  and  had  a  con-  against     their     debtor:     Garfield    v. 

veyance  made  to  a  third  person,  the  Hatmaker,    15   N.    Y.    475;  Wood  v. 

purchase  being  intended  for  the  bene-  Robinson,   22  N.  Y.  564;  McCartney 

tit  of  a  child  and  as  an  advancement,  v.  Bostwick,  32  N.  Y.  53;  31  Barb.  390. 

the  whole  transaction  being  completed  The    later   decisions    hold   that   only 

without  the  child's  knowledge,  a  trust  judgment  creditors  can  reach  the  land 

resulted  in  favor  of  such  child:  Sie-  by  ci'dinary  creditors' suit  after  having 

mon  V.  Schurck,  supra;  33  Barb.  9;  Gil-  exhausted  their  legal  remedies  against 

bert  V.  Gilbert,    2   Abb.     App.    256.  the   debtor:  Ocean  Nat.   Bank  v.  01- 

[See  also  Woerz  v.   Rademacher,  120  cott,  46  N.   Y,    12;    Dunlap  v.   Haw- 

N.  Y.  67;  Niver  v.  Crane,  98  N.  Y.  kins,  59  N.  Y.  342;  2  Thomp.  &  C. 

40.     That  the  provision  cannot  be  in-  292. 


1549 


TRUSTS    ARISING    BY    OPERATION    OF    LAW. 


1043 


provisions  of  the  other  states  are  collected  in  the  foot- 
note.^ 

§  1043.  Interest  and  Rights  of  the  Beneficiary.  —  The 
interest  of  the  cestui  que  trust  in  a  resulting  trust  is  not  a 
mere  "equity";  it  is  an  equitable  estate  in  the  land  or 
other  thing  of  which  the  legal  title  is  vested  in  the  trus- 
tee; and  as  such,  it  may  be  conveyed,  transferred,  devised, 
jr  otherwise  dealt  with  as  property.^     It  is  valid,  and 


*  Michigan:  Munch  v,  Shabel,  37 
Mich.  166;  Weare  v.  Linnell,  29  Mich. 
224;  Linsley  v.  Sinclair,  24  Mich.  380; 
Fisher  v.  Fobes,  22  Mich.  454;  Jack- 
son V.  Cleveland,  15  Mich.  94;  90  Am. 
Dec.  266;  Groesbeck  v.  Seeley,  13 
Mich.  329;  Maynard  v.  Hoskins,  9 
Mich.  485;  Trask  v.  Green,  9  Mich. 
358;  [Fairbairn  v.  Middlemiss,  47 
Mich.  372;  Pulford  v.  Morton,  62 
Mich.  25.] 

Minnesota :  Baker  v.  Baker,  22 
Minn.  262;  Rogers  v.  McCauley,  22 
Minn.  384;  Matthews  v.  Torinus,  22 
Minn.  132;  Johnson  v.  Johnson,  16 
Minn.  512;  Durfee  v.  Pavitt,  14  Minn. 
424;  Gorton  V.  Massey,  12  Minn.  145; 
Foster  v.  Berkey,  8  Minn.  351;  Baker 
V.  Terrell,  8  Minn.  195;  Sumner  v. 
Sawtelle,  8  Minn.  309;  Irvine  v.  Mar- 
shall, 7  Minn.  286;  Wentworth  v. 
V7entworth,  2  Minn.  277;  72  Am.  Dec. 
97;  [Connelly  v.  Sheridan,  41  Minn. 
18.] 

Kentucky:  Ewing  v.  Bibb,  7  Bush, 
654;  Martin  v.  Martin,  5  Bush,  47; 
Graves  v.  Graves,  3  Met.  167;  Lind- 
say V.  Williams's  Ex'rs,  2  Duvall,  475; 
Aynesworth  v.  Haldeman,  2  Duvall, 
565. 

[Wisconsin:  Skinner  v.  James,  69 
Wis.  605;  Campbell  v.  Campbell,  70 
Wis.  311;  Cerney  v.  Pawlot,  66  Wis. 
262.] 

Kansas:  There  is  one  marked  dif- 
ference between  the  statutes  of  Kan- 
sas and  Indiana  and  those  of  the  other 
states.  While  the  presum-ption  of  a 
resulting  trust  in  favor  of  the  one 
paying  the  money  is  abrogated,  it 
seems  that  such  trust  may  be  created 
by  express  aqreement  between  the  per- 
son taking  the  conveyance  to  himself 
and  the  person  paying  the  price,  even 
though  this  agreement  is  parol: 
Kennedy  v.  Taylor,  20  Kan.  558; 
Mitchell    V.   Skinner,    17   Kan.    563; 


Franklin  v.  Colley,  10  Kan.  260;  Lyons 
V.  Bodenhanier,  7  Kan.  455;  Morrall 
V.  Waterson,  7  Kan.  199;  Winkfield 
V.  Brinkman,  21  Kan.  682;  [Tenney 
V.  Simpson,  .37  Kan.  353;  41  Kan.  561; 
Fink  V.  Umscheid,  40  Kan.  271;  Mos- 
teller  v.  Mosteller,  40  Kan.  658.] 

Indiana:  Derry  v.  Derry.  74  Ind. 
560;  Hon  v.  Hon,  70  Ind.  135;  McCol- 
lister  v.  Willey,  52  Ind.  382;  Tracy  v. 
Kelley,  52  Ind.  535;  Hampson  v.  Fall, 
64  Ind.  382;  Lochenour  v.  Lochenour, 
61  Ind.  595;  Milliken  v.  Ham,  36  Ind. 
166;  Hubble  v.  Osborn,  31  Ind.  249; 
Gaylord  v.  Dodge.  31  lod.  41;  Glide- 
well  V.  Spaugh,  26  Ind.  319;  McDon- 
ald V.  McDonald,  24  Ind.  68;  Cather- 
wood  V.  Watson,  65  Ind.  576;  [Camp 
V.  Smith,  98  Ind.  409;  Boyer  v.  Libby, 
88  Ind.  235;  Lord  v.  Bishop,  101  Ind. 
334.] 

Georgia:  I  add  some  illustrations 
of  the  Georgia  Code  concerning  im- 
plied trusts,  although  it  does  not  at 
all  follow  the  New  York  type  de- 
scribed in  the  text.  Resulting  trusts: 
Houser  v.  Houser,  43  Ga.  415;  Street 
V.  Lynch,  38  Ga.  631;  McKinney  v. 
Burns,  31  Ga.  295;  Chastain  v.  Smith, 
30  Ga.  96;  Gordon  v.  Green,  10  Ga. 
534;  Williams  v.  Turner,  7  Ga.  348; 
Pitts  V.  Bullard,  8  Ga.  5;  46  Am. 
Dec.  405.  Constructive  trusts:  Brown 
V.  Crane,  47  Ga.  483;  Alexander  v. 
Alexander,  46  Ga.  283;  Adams  v. 
Jones,  39  Ga.  479.  508;  Cameron  v. 
Ward,  8  Ga.  245;  [Cottle  v.  Harrold, 
72  Ga.  8.30.] 

»  Stump  V.  Gaby,  2  De  Gex,  M.  &  G. 
623,  630;  Gresley  v.  Mousley,  4  De 
Gex  &  J.  78,  90,  92;  Uppington  v. 
Bullen,  2  Dru.  &  War.  184;  Dickinson 
V.  Burrell,  L.  R.  1  Eq.  337;  Morgan  v. 
Holford,  1  Smale  &  (J.  101;  Malin  v. 
Malin,  1  Wend.  625;  Clapper  v. 
House,  6  Paige,  149;  Cogswell  v. 
Cogswell,  2  Edw.  Ch.  231;  McKissick 


§  1044  EQUITY   JURISPRUDENCB.  1550 

may  be  enforced  not  only  against  the  trustee,  but  against 
his  heirs,  devisees,  personal  representatives,  and  all  others 
who  derive  title  from  him  as  volunteers  or  purchasers 
uitli  notice;  but,  being  a  purely  equitable  interest,  it  is 
cut  off  and  destroyed  as  against  all  bona  fide  purchasers 
or  mortgagees  from  the  trustee  for  a  valuable  considera- 
tion and  without  notice.^  The  cestui  que  trust  is  entitled 
to  the  remedy  of  compelling  a  conveyance  or  assignment 
of  the  legal  estate  to  himself  by  the  trustee,  or  perhaps,  in 
some  instances,  of  compelling  the  trustee  to  hold  the 
property  for  the  benefit  of  the  beneficiary,  and  subject  to 
his  power  of  enjoyment,  control,  and  disposition.' 

§  1044.  Second.  Constructive  Trusts. — Constructive 
trusts  include  all  those  instances  in  which  a  trust  is  raised 
by  the  doctrines  of  equity  for  the  purpose  of  working  out 
justice  in  the  most  efficient  manner,  where  there  is  no 
intention  of  the  parties  to  create  such  a  relation,  and  in 
most  cases  contrary  to  the  intention  of  the  one  holding 
the  legal  title,  and  where  there  is  no  express  or  implied, 
written  or  verbal,  declaration  of  the  trust.  They  arise 
when  the  legal  title  to  property  is  obtained  by  a  person 
in  violation,  express  or  implied,  of  some  duty  owed  to 
the  one  who  is  equitably  entitled,  and  when  the  property 
thus  obtained  is  held  in  hostility  to  his  beneficial  rights 
of  ownership.  As  the  trusts  of  this  class  are  imposed  by 
equity,  contrary  to  the  trustee's  intention  and  will,  upon 
property  in  his  hands,  they  are  often  termed  trusts  in 

V.    Pickle,   16   Pa.   St.   140;  Kent  v.  twenty-one    vears    in    enforcing    it); 

Mahaffey,  10  Ohio  St.  204;  Kane  Co.  Baker  v.  Hardin,  10  Heisk.  300  (not 

V.  Herrington,  50  111.  232.     [See  also  afifected    by    judgments    against    the 

Cottle  V.  Harrold,  72  Ga.  830;  and  in  trustee);   Moss  v.   Moss,   95  111.  449 

general,  ante,  §  375.]  (resulting   trust    in    favor   of   a  wife 

^  Lehman    v.    Lewis,    62  Ala.    129;  barred    by   a  general    release   of    all 

Flynt  V.  Hubbard,  57  Miss.  471;  Cath-  claims  and  demands  given  by  her  to 

erwood  v.  Watson,  65  Iiid.  576;  Mc-  her  husband);  Roy  v.  McPherson,  11 

Clure  V.  Doak,  6  Baxt.  364  (postponed  Nel).  197  (resulting  trust  in  favor  of  a 

to  the   lien  of   a  judgment  recovered  wife  postponed   to  the  liens  of  judg- 

against  the  trustee);    Haggard  v.  Ben-  ments    against    her    husband).       [See 

eon,   3   Tenn.    Ch.  268;   Hampson  v.  Lord  v.  Bishop,  101  Ind.  334.] 

Fall,  64  Ind.  382;  King  v.  Pardee,  96  '^  Millard  v.  Hathaway,  27  Cal.  119; 

U.  S.  90  (in  Pennsylvania  a  resulting  Maloy  v.  Sloan,  44  Vt.  311.     [See  also 

trust  in  land  is  barred  by  a  delay  of  Burns  v.  Boss,  71  Tex.  516.] 


1551 


TRUSTS   ARISING    BY    OPERATION    OF   LAW. 


1044 


invitum;  and  this  j3hrase  furnishes  a  criterion  generally- 
accurate  and  sufficient  for  determining  what  trusts  are 
truly  "  constructive."  An  exhaustive  analysis  would  show, 
I  think,  that  all  instances  of  constructive  trusts  properly 
so  called  may  be  referred  to  what  equity  denominates 
fraud,  either  actual  or  constructive,  as  an  essential  ele- 
ment, and  as  their  final  source.  Even  in  that  single 
class  where  equity  proceeds  upon  the  maxim  that  an 
intention  to  fulfill  an  obligation  should  be  imputed,  and 
assumes  that  the  purchaser  intended  to  act  in  pursuance 
of  his  fiduciary  duty,  the  notion  of  fraud  is  not  invoked, 
simply  because  it  is  not  absolutely  necessary  under  the 
circumstances;  the  existence  of  the  trust  in  all  cases  of 
this  class  might  be  referred  to  constructive  fraud.'  This 
notion  of  fraud  enters  into  the  conception  in  all  its  possi- 
ble degrees.  Certain  species  of  the  constructive  trusts 
arise  from  actual  fraud;  many  others  spring  from  the 
violation  of  some  positive  fiduciary  obligation;  in  all  the 
remaining  instances  there  is,  latent  perhaps,  but  none 
the  less  real,  the  necessary  element  of  that  unconscien- 
tious  conduct   which    equity   calls   constructive    fraud.* 


*  I  refer  to  the  class  of  cases  where 
a  trustee  uses  trust  funds  to  pay  for 
property  purchased  in  his  own  name; 
equity  assumes  that  he  intended  to  act 
in  accordance  with  his  fiduciary  duty, 
although  in  the  majority  of  such  in- 
stances the  actual  intentiou  ia  un- 
doubtedly to  violate  the  duty.  It 
will  be  seen  that,  in  my  opinion,  cer- 
tain kinds  of  so-called  trusts  which  are 
often  spoken  of  as  "constructive"  do 
not  at  all  belong  to  that  class. 

*  The  effect  of  actual  or  constructive 
fraud  in  producing  these  trusts  is  well 
describeil  in  Mr.  Perry's  treatise  (sec. 
166):  "If  one  party  procures  the  legal 
title  to  property  from  another  by 
fraud,  misrepresentation,  or  conceal- 
ment, or  if  a  party  makes  use  of  some 
influential  or  confidential  relation 
which  he  holds  towards  the  ow'ner  of 
the  legal  title  to  obtain  such  legal 
title  from  him  upon  more  advanta- 
geous terms  than  he  could  otherwise 
have  obtained  it,  equity  will  convert 
6uch    party   thus   obtaining   property 


into  a  trustee.  If  a  person  obtains 
the  legal  title  to  property  bj'^  such  arts 
or  acts  or  circumstances  of  circumven- 
tion, imposition,  or  fraud,  or  if  he  ob- 
tains it  by  virtue  of  a  confidential 
relation  and  influence  under  such  cir- 
cumstances that  he  ought  not,  accord- 
ing to  the  rules  of  equity  and  good 
conscience,  to  hold  and  enjoy  the  ben- 
eficial interest  of  the  property,  courts 
of  equity,  in  order  to  administer  com- 
plete justice  between  the  parties,  will 
raise  a  trust  by  construction  out  of 
such  circumstances  or  relations;  and 
this  trust  they  will  fasten  upon  the 
property  in  the  hands  of  the  offending 
jjarty,  and  will  convert  him  into  a 
trustee  of  the  legal  title,  and  will  or- 
der him  to  hold  it  or  to  execute  the 
trust  in  such  manner  as  to  protect  the 
rights  of  the  defrauded  party  who  is 
the  beneficial  owner."  See  Jenckes 
v.  Cook,  9  R.  I.  520;  McLane  v.  John- 
son, 4.'i  Vt.  48;  Collins  v.  Collins,  6 
Laus.  ri68:  Thompson  v.  Thompson,  16 
Wis.  91;  Pillow  v.  Brown,  26  Aik.  240. 


§  1044  EQUITY   JURISPRUDENCE.  1552 

Courts  of  equity,  by  thus  extending  the  fundamental 
principle  of  trusts  —  that  is,  the  principle  of  a  division 
between  the  legal  estate  in  one  and  the  equitable  estate  in 
another  —  to  all  cases  of  actual  or  constructive  fraud  and 
breaches  of  good  faith,  are  enabled  to  wield  a  remedial 
power  of  tremendous  efficacy  in  protecting  the  rights  of 
property;  they  can  follow  the  real  owner's  specific  prop- 
erty, and  preserve  his  real  ownership,  although  he  has 
lost  or  even  never  had  the  legal  title,  and  can  thus  give 
remedies  far  more  complete  than  the  compensatory  dam- 
ages obtainable  in  courts  of  law.  The  principle  is  one  of 
universal  application;  it  extends  alike  to  real  and  to  per- 
sonal property,  to  things  in  action,  and  funds  of  money. 
Salutary  and  efficient  as  the  principle  is,  however,  many 
of  the  constructive  trusts  which  it  creates  are  only  trusts 
sub  modo;  they  have  little  resemblance,  in  their  essential 
nature,  to  express  trusts.'  In  applying  this  principle,  care 
should  be  taken  to  distinguish  between  actual  trusts  and 
those  relations  which  are  only  trusts  by  way  of  metaphor; 
between  persons  who  are  true  trustees  holding  the  legal 
title  for  a  beneficial  owner,  and  those  who  simply  occupy 
a  position  which  is  analogous  in  some  respects  to  that  of 
a  trustee.  The  use  of  these  terms  to  designate  relations 
and  parties  which  have  no  essential  element  in  common 
with  actual  trusts  and  trustees  can  only  produce  confu- 
sion and  inaccuracy.' 

*  The  language  of  Lord  Westbury  they  would  be  entitled  to  against  an 
on  this  point,  in  Rolfe  v.  Gregory,  4  exjiress  trustee  who  had  fraudulently 
De  Gex,  J.  &  S.  576,  579,  is  very  in-  committed  a  breach  of  trust." 
structive.  The  case  was  one  where  a  ^  The  distinction  is  clearly  stated 
person  had  fraudulently  obtained  trust  by  Lord  Westbury  in  Knox  v.  Gye, 
property;  but  the  remarks  will  apply  L.  R.  5  H.  L.  656,  675.  It  was  ar- 
to  all  such  constructive  trusts  based  gued,  according  to  the  common  mode 
upon  actual  fraud:  "When  it  is  said  of  expression,  that  a  surviving  partner 
that  the  person  who  fraudulently  re-  is  a  trustee  of  the  share  of  his  de- 
ceives or  possesses  himself  of  trust  ceased  partner;  but  the  lord  chan- 
property  is  converted  by  this  court  cellor  referred  to  the  case  of  the 
into  a  trustee,  the  expression  is  used  vendor  and  vendee  of  land,  and  said 
for  the  purpose  of  describing  the  na-  that  although  the  vendor  might  by 
ture  and  extent  of  the  remedy  against  a  metaphor  be  called  a  trustee  for 
him,  and  it  denotes  that  the  parties  the  vendee,  he  toas  trustee  only  to  the 
entitled  beneficially  have  the  same  exteiit  of  his  obligation  to  perform  the 
rights  and  remedies   against   him  aa  agreement    between  himself   and    the 


1553  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §   1046 

§1045.  Kinds  and  Classes. — The  specific  instances 
in  which  equity  impresses  a  constructive  trust  are  num- 
berless,—  as  numberless  as  the  modes  by  which  property 
may  be  obtained,  through  bad  faith  and  unconscientious 
acts.  It  is  possible,  however,  to  distinguish  and  de- 
scribe the  general  groups  or  types  under  which  all  these 
instances  may  be  arranged,  and  thus  to  present  a  com- 
prehensive view  of  the  whole  subject. 

§  1046.  1.  Arising  from  Contract,  Express  or  Implied. 
—  There  are  certain  relations  which  are  often  spoken  of 
as  trusts,  and  as  constituting  a  species  of  constructive 
trusts,  but  which  are  not,  in  any  true  and  complete 
sense,  trusts,  and  can  only  be  called  so  by  way  of  anal- 
ogy or  metaphor.  Since  they  lack  the  element  of  fraud, 
they  do  not,  in  any  view,  properly  belong  to  the  division 
of  constructive  trusts.'  It  is  commonly  said  that  a  trust 
is  created  by  a  contract  for  the  sale  of  land;  that  the 
vendor  holds  the  legal  title  as  a  trustee  for  the  purchaser. 
Whatever  of  truth  there  is  in  this  mode  of  statement, 
whatever  of  a  real  trust  relation  exists,  it  certainly  has 
nothing  in  common  with  constructive  trusts;  it  rather 
resembles  an  express    trust.^     In  like  manner,  the   sur- 

vendee,  and  proceeded  as  follows:  "  In  '  There  is  a  tendency  among  writera 

like  manner  here  the  surviving  part-  to  enlarge  the  meaning  of  tlie  word 

ner  may  be  called  trustee  for  the  dead  "trust"  beyond  its  legitimate  signiti- 

man,  but  the  tru^t  is  limited  to  the  dis-  cation.      By  some,  the  various   equi- 

ckarge  of  the  obligation,  which  is  liable  table  liens  and  similar  rights  arising 

to  be  barred   by   the   lapse   of   time,  from  contract  are  made  to  be  the  mos*' 

As   between   the  express  trustee  and  important,  and   with  a  very  few  ex- 

cestui  que  trust,  time  will  not  run,  but  ceptions   the   only   instances    of   con- 

the  surviving  partner  is  not  a  trustee  slructive  trusts.     As  Lord  Westbury 

in  that  full   and  proper  sense.     It  is  shows,  such  a  mode  of  treatment  can 

most  important  to  mark  this  again  and  produce  nothing  but  confusion.     The 

again,  /or  there  is  not  a  more  fntitfal  cases  included  in  the  first  subdivision 

source  of  error  in  laio   than   the   inac-  of  the  text  are  not  constructive  trusts, 

curacy  of  language.     The   application  and  are  mentioned  simply  for  purposes 

to  a  man  who  is  improperly  and   by  of    completeness,   and   to   distinguish 

metaphor  only  called  a  trustee  of  all  between  correct  and  mistaken  coucep- 

the  consequences  which  would  follow  tions. 

if  he  were  a  trustee  by  express  declara-  *  See  ante,  vol.  1,  §§  368,  372;  [also 

tion, — in    other   words,    a    complete  §  1261;]  Coman  v.  Lakey,  80  N.   Y. 

trustee, — holding  the  property  exclu-  345,  350;  Pelton  v,  Westchester  Fira 

sively  for  the  benefit  of  the  cestui  que  Ins.  Co.,  77  N.  Y.  605.  607;  Henslerv. 

trust,  well  illustrates  the  remark  made  Sefrin,  19  Hun,  564;  Felch  v.  Hooper, 

by  Lord  Macclesfield,  that  nothing  in  119    Mass.   52;  Musham   v.  Mushani, 

lawissoapt  to  mislead  as  a  metaphor."  87  IlL  80.     In  the  face  of  the  great 
2Eq.  JUE.— 98 


§  1046  .  EQUITY   JURISPRUDENCE.  1554 

vivors  of  a  partnership  are  called  trustees  for  the  estate 
of  the  deceased  partner,  with  respect  to  his  share  of  the 
firm  property.  This  expression  is  mostly  metaphorical; 
there  is  certainly  nothing  in  the  relation  resembling  a 
constructive  trust.^  Extending  the  analogy  still  further, 
courts  regard  partnership  property,  after  an  insolvency 
or  dissolution  of  the  firm,  and  in  the  proceeding  for 
winding  up  its  affairs,  as  a  trust  fund  for  the  benefit 
of  the  firm  creditors;''  and  the  capital  stock  and  other 
property  of  private  corporations,  especially  after  their 
dissolution,  is  treated  as  a  trust  fund  in  favor  of  credi- 
tors.' These  statements  may  be  sufficiently  accurate  as 
strong  modes  of  expressing  the  doctrine  that  such  prop- 
erty is  a  fund  sacredly  set  apart  for  the  payment  of 
partnership  and  corporation  creditors,  before  it  can  be 
appropriated  to  the  use  of  the  individual  partners  or  cor- 
porators, and  that  the  creditors  have  a  lien  upon  it  for  their 
own  security;  but  it  is  plain  that  no  constructive  trust 
can  arise  in  favor  of  the  creditors  unless  the  partners  or 
directors,  through  fraud  or  a  breach  of  fiduciary  duty, 
wrongfully  appropriate  the  property,  and  acquire  the 
legal  title  to  it  in  their  own  names,  and  thus  place  it 
beyond  the  reach  of  creditors  through  ordinary  legal 
means.*  I  have  thus  collected  the  instances  which  are 
sometimes,  though  improperly,  classed  with  constructive 
•■•.rusts,  in  order  the  more  clearly  to  indicate  the  nature  of 

•  umber  of  decisions  and  opinions  by  119,  126;  Murray  r.  Murray,  5  Johns, 

the  ablest  courts,  it  would  be  impossi-  Ch.   60;  Youug  v.  Frier,  9  N.  J.  Eq. 

ble  to  assert  that  the  vendor  is  not  465. 

truly  a  trustee;  but  he  is  a  trustee  '  Wood  v.   Dummer,  3  Mason,  308; 

only  to  a  partial  extent,  measured  by  Mumma  v.  Potomac  Co.,  8  Pet.  281, 

his  obligation.     It  ia  plain  that   this  286;   Vose   v.    Grant,    15   Mass.    505, 

trust  arises  from  the  express  contract,  517,  522;  Spear  v.  Grant,  16  Mass.  9, 

is  included  within  its  terms  by  the  in-  15;  Lyman  v.  Bonney,  101  Mass.  562; 

terpretation  of  equity;  it  therefore  re-  Brewer  v.  Boston  Theatre,  104  Mass. 

sembles  those  express  trusts  which  are  378;  Goodin  v.  Cincinnati  etc.  Co.,  18 

inferred  from  the  entire  provisions  of  Ohio  St.    169;  98  Am.  Dec.  95;  Bart- 

an  instrument.  lett  v.   Drew,  57  N.  Y.  587;  60  Barb. 

i  See  Knox  v.  Gye,  L.  R.  5  H.  K  648;  Hastings  v.  Drew,  76   N.  Y.  9; 

656,  675,  per  Lord  Westbury.  Tinkham  v.  Borst,  31  Barb.  407. 

2  Campbell   v.    MuUett,    2   Swanst.  *  Hastings  v.  Drew,  76  N.  Y.  9,  16; 

551,   574;   West   v.  Skip,   1  Ves.    Sr.  Bartlett  v.  Drew,  67  N.  Y.    587;   60 

239,  456;  Ex  parte  Pvuffin,  6  Ves.  Sr.  Barb,  648. 


1555  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §  1048 

the  trusts  which  are  truly  constructive,  and  which  are 
described  in  the  following  paragraphs. 

§  1047.  2.  Money  Received  Which  Equitably  Belongs 
to  Another. —  By  the  well-settled  doctrines  of  equity,  a 
constructive  trust  arises  whenever  one  party  has  obtained 
money  which  does  not  equitably  belong  to  him,  and 
which  he  cannot  in  good  conscience  retain  or  withhold 
from  another  who  is  beneficially  entitled  to  It;  as,  for 
example,  when  money  has  been  paid  by  accident,  mis- 
take of  fact,  or  fraud,  or  has  been  acquired  through  a 
breach  of  trust,  or  violation  of  fiduciary  duty,  and  the 
iike.  It  is  true  that  the  beneficial  owner  can  often 
recover  the  money  due  to  him  by  a  legal  action  upon 
an  implied  assumpsit;*  but  in  many  instances  a  resort 
to  the  equitable  jurisdiction  is  proper  and  even  neces- 
sary.^ 

§  1048.  3.  Acquisition  of  Trust  Property  by  a  Volun- 
teer, or  Purchaser  with  Notice. — Wherever  property,  real 
or  personal,  which  is  already  impressed  with  or  subject  to 
a  trust  of  any  kind,  express  or  by  operation  of  law,  is  con- 
veyed or  transferred  by  the  trustee,  not  in  the  course  of 
executing  and  carrying  into  eff'ect  the  terms  of  an  express 
trust,  or  devolves  from  a  trustee  to  a  third  person,  who  is 
a  mere  volunteer,  or  who  is  a  purchaser  with  actual  or 
constructive  notice  of  the  trust,  then  the  rule  is  univer- 
sal that  such  heir,  devisee,  successor,  or  other  voluntary 
transferee,  or  such  purchaser  with  notice,  acquires  and 
holds  the  property  subject  to  the  same  trust  which  before 
existed,  and  becomes  himself  a  trustee  for  the  original 
beneficiary.  Equity  impresses  the  trust  upon  the  prop- 
erty in  the  hands  of  the  transferee  or  purchaser,  compels 
him  to  perform  the  trust  if  it  be  active,  and  to  hold  the 
property  subject  to  the  trust,  and  renders  him  liable  to 
all  the  remedies  which  may  be  proper  for  enforcing  the 

'  See  Frue  v.  Loring,  120  Mass.  507,  mony  with   the   general   doctrines  of 

—  a  decision  based  upon  the  narrow  equity. 

and     statutory     jurisdiction     of     the         '  Com.  Dig.,  tit.  Chancery,  2,  A,  I;  2 

Massachusetts  courts,  and  not  in  bar-  Fonbl.  Eq.,  b.  2,  c.  1,  sec.  1,  note  b. 


§  1048 


EQUITY   JURISPRUDENCE. 


1556 


rights  of  the  beneficiary.  It  is  not  necessary  that  such 
transferee  or  purchaser  should  be  guilty  of  positive  fraud, 
or  should  actually  intend  a  violation  of  the  trust  obliga- 
tion; it  is  sufficient  that  he  acquires  property  upon  which 
a  trust  is  in  fact  impressed,  and  that  he  is  not  a  bona  fide 
purchaser  for  a  valuable  consideration  and  without  notice. 
This  universal  rule  forms  the  protection  and  safeguard  of 
the  rights  of  beneficiaries  in  all  kinds  of  trust;  it  enables 
them  to,  follow  trust  property,  —  lands,  chattels,  funds  of 
securities,  and  even  of  money,  —  as  long  as  it  can  be  iden- 
tified, into  the  hands  of  all  subsequent  holders  who  are 
not  in  the  position  of  bona  fide  purchasers  for  value  and 
without  notice;  it  furnishes  all  those  distinctively  equi- 
table remedies  which  are  so  much  more  efiicient  in  se- 
curing the  beneficiary's  rights  than  the  mere  pecuniary 
i'ecoveries  of  the  law.*     Even  when  the  original  property 


*  Adair  v.  Shaw,  1  Schoales  &  L.  243, 
262;  Rolfe  v.  Gregory,  4  De  Gex,  J. 
&  S.  576;  Leigh  V.  Macauley,  1  Younge 
&  C.  260,  265,  266;  Smith  v.  Barnes, 
L.  R.  1  Eq.  65;  Boursot  v.  Savage, 
L,  R.  2  Eq.  134;  Newton  v.  Newton, 
L.  R.  6  Eq.  135;  Heath  v.  Crealock, 
L.  R.  18  Eq.  215;  In  re  European 
Bank,  L.  R.  5  Ch.  358,  362;  Ex  parte 
Cooke,  L.  R.  4  Ch.  Div.  123;  In  re 
Hallett's  Estate,  L.  R.  13  Ch.  Div. 
696;  Lane  v.  Dighton,  Arab.  409;  Man- 
sell  V.  Mansell,  2  P.  Wms.  678;  Lench 
V.  Lench,  10  Ves.  511;  Lewis  v.  Ma- 
docks,  17  Ves.  48,  56;  Pennell  v.  Def- 
fell,  4  De  Gex.  M.  &  G.  372,  388; 
Mayor  etc.  v.  Murray,  7  De  Gex,  M. 
&  G.  497;  Ernest  v.  Croysdill,  2  De 
Gex,  F.  &  J.  175;  Griffin  v.  Blanchar, 
17  Cal.  70;  Sharp  v.  Goodwin,  51  Cal. 
219;  Scott  V.  Umbarger,  41  Cal.  410; 
Price  V.  Reeves,  38  Cal.  457;  Siemon 
V.  Schurck,  29  N.  Y.  598;  Swinburne 
V.  Swinburne,  28  N.  Y.  568;  Stephens 
V.  Board  of  Education,  79  N.  Y.  183; 
35  Am.  Rep.  511  (trust  moneys  paid 
by  trustee  to  his  creditor  in  discharge 
of  an  antecedent  debt,  but  without 
notice  of  the  trust,  cannot  be  followed 
by  the  beneficiary);  Holden  v.  New 
York  and  Erie  Bank,  72  N.  Y.  286; 
Newton  V.  Porter,  69  N.  Y.  133,  137, 
1.39;  25  Am.  Rep.  152;  Dotterer  v. 
Pike,  60  Ga.  29;  Musham  v.  Musham, 


87  III.  80;  Phelps  v.  Jackson,  31  Ark. 
272;  Veile  v.  Blodgett,  49  Vt.  270; 
Dey  v.  Dey,  26  N.  J.  Eq.  182;  Mer- 
cier  V.  Hemme,  50  Cal.  606;  Boyd  v. 
Brinckin,  55  Cal.  427;  Planters'  Bank 
V.  Prater,  64  Ga.  609;  McVey  v.  Mc- 
Quality,  97  111.  93;  Burnett  v.  Gus- 
tafson,  54  Iowa,  86;  37  Am.  Rep.  190 
{moneys  paid  to  a  creditor  in  discharge 
of  an  antecedent  debt,  but  without  no- 
tice of  any  trust,  cannot  be  followed); 
Michigan  etc.  R.  R.  v.  Mellen,  44 
Mich.  321;  Winona  etc.  R.  R.  v.  St. 
Paul  etc.  R.  R.,  26  Minn.  179;  Me- 
chanics'  Bank  v.  Seton,  1  Pet.  399; 
Russell  V.  Clark's  Ex'rs,  7  Cranch,  69, 
97;  Wilson  v.  Mason,  1  Cranch,  24; 
Powell  V.  Monson  etc.  Mfg.  Co.,  3 
Mason,  347;  Murray  v.  Ballou,  1 
Johns.  Ch.  566;  Tradesman's  Bank 
V.  Merritt,  1  Paige,  302;  Mechanics' 
Bank  v.  Levy,  3  Paige,  606;  [Smith 
V.  Ayer,  101  U.  S.  320;  National  Bank 
V.  Ins.  Co.,  104  U.  S.  54;  Union  Pa- 
cific  R.  R.  Co.  V.  Mc Alpine,  129  U.  S. 
305,  314;  Wetmore  v.  Porter,  92  N.  Y. 
77;  Dodge  v.  Stevens,  94  N.  Y.  209; 
Baker  v.  New  York  Nat.  Ex.  Bank, 
100  N.  Y.  30;  Zimmerman  v.  Kinkle, 
108  N.  Y.  287;  Cobb  v.  Knight,  74 
Me.  253;  Leake  v.  Watson,  58  Conn. 
332;  18  Am.  St.  Rep.  270;  Swift  v. 
Williams,  68  Md.  236;  Bath  Paper 
Co.  V.  Langlev,  23  S.  C.  129;  Rabb  v. 


1557  TRUSTS   ARISING   BY   OPERATION    OF   LAW.      §  1049 

is  placed  beyond  the  reach  of  the  beneficiary  by  a  sale 
to  a  bona  fide  purchaser  for  value  and  without  notice,  the 
trust,  as  will  more  fully  appear  hereafter,  attaches  to  the 
proceeds  in  the  hands  of  the  trustee  who  makes  the  trans- 
fer. The  statement  and  grounds  of  the  rule  show  that  it 
does  not  extend  to  the  case  where  the  property  is  duly 
transferred  or  purchased  in  pursuance  of  an  express 
trust  to  convey  or  sell,  and  for  the  purpose  of  carrying 
such  trust  into  effect.  And  where  the  rule  does  apply, 
there  is  some  distinction  between  mone}^  and  other  kinds 
of  trust  property.  If  a  trustee  or  other  fiduciar}'-  person, 
in  violation  of  his  own  duty,  uses  trust  money  to  pay 
an  antecedent  debt  of  his  own  to  a  creditor  who  has  no 
notice  of  the  breach  of  trust,  or  that  the  money  is  subject 
to  the  trust,  in  such  a  manner  that  the  money  is  received 
as  a  general  payment,  and  not  as  a  distinct  and  separate 
fund,  then  the  money  becomes  free  from  the  trust,  and 
cannot  be  followed  by  the  beneficiary  into  the  hands  of 
the  creditor,  although,  in  general,  an  antecedent  debt  does 
not  constitute  a  valuable  consideration.^ 

§  1049.  4.  Fiduciary  Persons  Purchasing  Property  with 
Trust  Funds.  —  Anotlier  important  form  of  the  trust  arises 
from  the  acts  of  persons  already  possessing  some  fiduciary 
character  or  standing  in  some  fiduciary  relation.  When- 
ever a  trustee  or  other  person  in  a  fiduciary  capacity,  act- 
ing apparently  within  the  scope  of  his  powers,  —  that  is, 
having  authority  to  do  what  he  does,  —  purchases  property 
with  trust  funds,  and  takes  the  title  thereto  in  his  own 
name,  without  any  declaration  of  trust,  a  trust  arises  with 

Flenniken,  32  S.  C.  189;   Bigham  v,  marked";  when  received  by  the  cred> 

Coleman,  71  Ga.  576;  Lee  v.  Lee,  67  itor  and  mingled  with  his  other  pecu- 

Ala.  406,   423;    Drake   v.    Thyng,   37  niary  assets,  it  cannot  be  distinguished 

Ark.    228;    Mills   v.    Swearingen,    67  and  identified.     Under  these  circum- 

Tex.  2lJ9  (where  the  trust  moneys  are  stances  other  kinds  of  property  would 

loaned  in   pursuance  of   the  require-  remain  subject  to  the  trust,  since  the 

ments  of  the  trust,  the  borrower  does  creditor  would  not  be  a  bona  fide  pur- 

not   become    a   trustee);     Everett    v.  chaser /or  ra/we."  Stephens  v.  Board  of 

Railway  Co.,  67  Tex.  480;  Gilbert  v.  Education,  79  N.  Y.  183;  35  Am.  Rep. 

Sleeper,  71  Cal.  290.     See  also  ante,  511;   Burnett  v.  Gustafson,  54  Iowa, 

§§  688,  770.]  86;  37  Am.  Rep.   190;  Justh  v.  Bank 

*  The  reason  given  for  this  conclu-  of    Commonwealth,    66    N.    Y.    478, 

sion    is,    that    money    is    not    "ear-  484. 


§1049 


EQUITY   JURISPRUDENCE. 


1558 


respect  to  sucTi  property  in  favor  of  the  cestui  que  trust  or 
other  beneficiary.  Equity  regards  such  a  purchase  as 
made  in  trust  for  the  person  beneficially  interested,  inde- 
pendently of  any  imputation  of  fraud,  and  without  requir- 
ing any  proof  of  an  intention  to  violate  the  existing 
fiduciary  obligation,  because  it  assumes  that  the  pur- 
chaser intended  to  act  in  pursuance  of  his  fiduciary  duty^ 
and  not  in  violation  of  it.  This  doctrine  is  of  wide  ap- 
plication; it  extends  to  trustees,  executors  and  adminis- 
trators, directors  of  corporations,  guardians,  committees 
of  lunatics,  agents  using  money  of  their  principals,  part- 
ners using  partnership  funds,  husbands  purchasing  prop- 
erty with  money  belonging  to  the  separate  estate  of  their 
wives,  parents,  and  children,  and  all  persons  who  stand 
in  fiduciary  relations  towards  others.  Equity  jurispru- 
dence contains  few  more  efficient  doctrines  than  this 
in  maintaining  the  beneficial  rights  of  property.^     Th& 


'  This  form  of  trusts  is  treated  by 
some  writers  as  belonging  to  the  de- 
nomination of  "resulting  "  trusts,  and 
it  has  one  striking  element  in  common 
with  them,  —  the  intention  with  which 
it  is  presumed  the  purchase  was  made. 
In  every  other  respect  it  dififers  from 
resulting  trusts,  and  clearly  belongs, 
on  principle,  to  the  classof  "construct- 
ive "  trusts.  It  is  always  established 
in  invitum,  and  although  an  assump- 
tion of  fraud  is  not  necessary,  some 
element  of  fraud,  actual  or  construct- 
ive, is  in  fact  generally  present:  Deg 
V.  Deg,  2  P.  Wms,  412,  414;  Perry  v. 
Phellips,  4  Yes.  108;  17  Ves.  173; 
Bennett  v.  Mahew,  cited  1  Brown  Ch. 
232;  2  Brown  Ch.  287;  Keech  v.  Sand- 
ford,  Sel.  Cas.  Ch.  61;  1  Lead.  Cas. 
Eg.  48,  49,  62;  Lench  v.  Lench,  10 
Ves.  511;  Trench  v.  Harrison,  17  Sim. 
Ill;  Mathias  v.  Mathais,  3  Smale  & 
G.  552;  Ouseley  v.  Anstruther,  10 
Beav.  453,  461;  Flanders  v.  Thomp- 
son, 3  Woods,  9;  Watson  v.  Thompson, 
12  R.  I.  466;  Thomas  v.  Standiford, 
49  Md.  181;  Burks  v.  Burks,  7  Baxt. 
353;  Miller  V.  Birdsong,  7  Baxt.  531; 
Wmkfield  v.  Brinkman,  21  Kan.  682; 
Moss  v.  Moss,  95  111.  449;  Dodge  v. 
Cole,  97  111.  338;  37  Am.  Rep.  Ill; 
Derry  v.  Derry,  74  Ind.  560;   Roy  v. 


McPherson,  II  Neb.  197;  Reickhoff 
v.  Brecht,  51  Iowa,  633;  Barrett  v. 
Bamber,  81  Pa.  St.  247;  Jones  v. 
Dexter,  130  Mass.  380;  39  Am.  Rep; 
459;  Michigan  etc.  R.  R.  v.  Mellen, 
44  Mich.  321;  Schlaefer  v.  Corson,  52 
Barb.  510;  McLarren  v.  Brewer,  51 
Me.  402;  White  v.  Drew,  42  Mo.  561; 
Stow  V.  Kimball,  28  111.  93;  Barker 
v.  Barker,  14  Wis.  131;  Church  v. 
Sterling,  16  Conn.  38S;  Johnson  v. 
Dougherty,  18  N.  J.  Eq.  406;  Ban- 
croft  V.  Consen,  13  Allen,  50;  Reid 
V.  Fitch,  11  Barb.  399;  Bridenbecker 
V.  Lowell,  32  Barb.  9;  Robb's  Appeal, 
41  Pa.  St.  45;  Smith  v.  Burnham,  3 
Sum.  435;  Oliver  v.  Piatt,  3  How. 
333,  401;  Homer  v.  Homer,  107  Mass. 
82;  Settembre  v.  Putnam,  30  Cal. 
490;  Jenkins  v.  Frink,  30  Cal.  586; 
89  Am.  Dec.  134.  [See  also  Wood  v. 
Rabe,  96  N.  Y.  414;  48  Am.  Rep.  640; 
Hartsock  v.  Russell,  52  Md.  619;  Mc- 
CuUy  v.  McCully,  78  Va.  159;  Brazel 
V.  Fair,  26  S.  C.  370;  Rannels  v. 
Isgrigg,  99  Mo.  19;  Rose  v.  Hayden, 
35~Kan.  106;  57  Am.  Rep.  145;  Moritz 
v.  Lavelle,  77  Cal.  10;  11  Am.  St. 
Rep.  229,  and  cases  cited;  and  see 
ante,  §§  422,  587.] 

The  recent  case    of    Ferris  v.    Van 
Vechten,  73  N.    Y.  113,  reversing    9- 


1559  TRUSTS    AKISING   BY    OPERATION   OF   LAW.      §  1050 

evidence  that  the  purchase  was  made  with  trust  funds 
must,  however,  be  clear  and  unmistakable. 

§  1050.  5.  Renewal  of  Leases  by  Partners  and  Other 
Fiduciary  Persons.  —  Another  special  form  of  construct- 
ive trusts,  depending  upon  a  much  more  general  princi- 
ple to  be  examined  in  subsequent  paragraphs,  has  been 
established  by  a  unanimity  of  decision.  One  member  of 
a  partnership  cannot,  during  its  existence,  without  the 
knowledge  and  consent  of  his  copartners,  take  a  renewal 
lease,  in  his  own  name  or  otherwise,  for  his  own  benefit 
and  to  the  exclusion  of  his  fellows,  of  premises  leased  by 
the  firm  or  occupied  by  them  as  tenants.  A  lease  so 
taken  by  a  partner  inures  to  the  benefit  of  the  whole  firm;. 
it  is  regarded  as  a  continuation  of  or  as  "grafted  on"  the 
old  lease;  a  trust  will  be  impressed  upon  the  leasehold 
estate;  equity  will  treat  the  partner  as  a  trustee  for  the 
firm,  and  if  necessary  and  possible,  will  compel  him  to 
assign  the  renewal  lease  to  it;  if  a  condition  inserted  in 
such  lease  against  assigning  should  prevent  the  relief  of 
an  actual  assignment,  it  will  not  in  the  least  prevent  tha 
court  from  enforcing  the  trust  by  compelling  the  partner 
to  hold  the  legal  title  for  the  benefit  of  all.  This  rule  ap- 
plies under  every  variety  of  circumstances,  provided  the 
rights  of  the  other  partners  are  still  subsisting  at  the  time 
when  the  renewal  lease  is  obtained.  It  operates  with 
equal  force  whether  the  renewal  lease  was  to  begin  dur- 
ing the  continuance  of  the  firm  or  after  its  termination;. 

Hun,  12,  13  a  very  instructive  decis-  clearly  and  distinctly  traced,  and  pos- 

ion  illustrating  the  extent  and  limits  itively  shown  to  have  been  used  in  the 

of  this  doctrine.  An  attempt  was  made  purchase.     The   relief  could    not    be 

to  reach  land  purchased  by  a  trustee,  granted  upon  any  mere  inference.     If 

on  the   ground   that  it  was  paid   for  the  evidence  only  showed  that  at  one 

■with  trust  funds.     There  was  no  evi-  time  the  trustee   had   trust  funds  iu 

dence   as   to   what   amount  of     trust  his   hands,    and    that   afterwards   he 

moneys  was  thus   used,  and    in   fact  bought  and   took  the  title  to  a   piece 

there  was  no  direct  positive  evidence  of  land  in  his  own  name,  but  went  no 

that  any  such  funds  were  appropriated  farther,  the  court  could  not  draw  the 

by  the  trustee  in  paying  for  the  land,  inference    from  these  bare   facts  that 

Held,  that  the  doctrine  could  not  be  the  trust  funds  were  employed  in  th* 

invoked   on   behalf    of    the  plaintiff,  purchase,    and    could   not   impress   a 

While   the    general    rule   was    fully  trust  upon  the  land,    [See  also  Phillips 

admitted,  in  order  that  it  should  ba  v.  Overfield,    100  Mo.  466;   Sisemor© 

applicable,  the   trust   fund    must  be  v.   Pelton,  17  Or.  546.] 


S1050 


EQUITY   JURISPRUDENCE. 


1560 


whether  the  partnership  was  for  an  undetermined  period, 
or  was  to  end  at  a  specified  time,  and  the  renewal  lease  was 
not  to  take  effect  until  the  expiration  of  that  prescribed 
time;  whether  there  was  or  was  not  a  right  in  the  firm, 
by  contract,  custom,  or  courtesy,  to  a  renewal  of  the  origi- 
nal lease  from  the  lessor;  and  even  whether  the  landlord 
would  or  would  not  have  granted  a  new  lease  to  the  other 
partners  or  to  the  firm.  All  these  facts  are  wholly  im- 
material to  the  application  of  the  doctrine,  for  its  opera- 
tion does  not  in  the  slightest  degree  depend  upon  the 
terms  and  provisions  of  the  original  lease,  nor  upon  the 
attitude  of  the  landlord.  The  doctrine  is  not  confined  to 
partners;  it  extends  in  all  its  breadth  and  with  all  its  ef- 
fects to  trustees,  guardians,  and  all  other  persons  clothed 
with  a  fiduciary  character,  who  are  in  possession  of  prem- 
ises as  tenants  on  behalf  of  their  beneficiaries,  or  who  are 
in  possession  as  tenants  of  premises  in  which  their  bene- 
ficiaries are  interested.*     As  this  rule  results  from  the 


'  In  Phyfe  v.  Wardell,  5  Paige,  268, 
28  Am.  Dec.  430,  Walworth,  C,  thus 
states  the  doctrine  in  its  general  form: 
"  If  a  person  who  has  a  particular  or 
special  interest  in  a  lease  obtains  a 
renewal  thereof  from  the  circumstance 
of  his  being  in  possession  as  tenant, 
or  from  having  such  particular  inter- 
est, the  renewed  lease  is  in  equity  con- 
sidered as  a  mere  continuance  of  the 
original  lease,  subject  to  the  additional 
charges  upon  the  renewal,  for  the  pur- 
pose of  protecting  the  equitable  rights 
of  all  parties  who  had  anj'  interest, 
either  legal  or  equitable,  in  the  old 
lease."  In  Mitchell  v.  Reed,  61  N.  Y. 
]'23,  139,  19  Am.  Rep.  252,  the  court, 
after  a  full  examination  of  the  author- 
ities, summed  up  the  discussion  with 
the  following  propositions,  which  they 
held  to  be  settled  conclusions:  "  1.  A 
trustee  holding  a  lease,  whether  cor- 
porate or  individual,  holds  the  renewal 
as  a  trustee,  and  as  he  held  the  origi- 
nal lease.  2.  This  does  not  depend 
upon  any  right  which  the  cestui  que 
trust  has  to  the  renewal,  but  upon  the 
theory  that  the  new  lease  is,  in  tech- 
nical terms,  a  '  graft '  upon  the  old 
one;  and  that  the  trustee  'had  a  facil- 
ity,' by  means  of  his  relation  to  tlie  es- 


tate, for  obtaining  the  renewal,  from 
which  he  shall  not  personally  profit. 
3.  This  doctrine  extends  to  commer- 
cial partnerships,  and  one  of  several 
partners  cannot,  while  a  partnership 
continues,  take  a  renewal  lease  clan- 
destinely, or  '  behind  the  backs'  of  his 
associates,  for  his  own  benefit.  It  is 
not  material  that  the  landlord  would 
not  have  granted  the  new  lease  to  the 
other  partners,  or  to  the  firm.  4.  It 
is  of  no  consequence  whether  the  part- 
nership is  for  a  definite  or  an  indefinite 
period.  The  disability  to  take  the 
lease  for  individual  profit  grows  out 
of  the  partnership  relation.  While 
that  lasts,  the  renewal  cannot  be  taken 
for  individual  purposes,  even  though 
the  lease  does  not  commence  until 
after  the  expiration  of  the  partnership. 
5.  It  cannot  necessarily  be  assumed 
that  the  renewal  can  be  taken  by  an 
individual  member  of  the  firm,  even 
after  dissolution.  The  former  part- 
ners may  still  be  tenants  in  common; 
or  there  may  be  other  reasons  of  a 
fiduciary  nature  why  the  transaction 
cannot  be  entered  into."  This  con- 
clusion and  the  statements  of  the  text 
are  fully  sustained  by  the  following 
cases,  in  which  the  doctrine  has  been 


1561  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §  1051 


relation  of  trust  and  confidence  existing  between  the 
partners  or  other  persons  interested,  it  might  be  regarded 
as  an  outgrowth  of  the  doctrine  formulated  in  the  preced- 
ing paragraph.  It  is  more  directly,  however,  a  particular 
application  of  a  broad  principle  of  equity,  extending  to 
all  actual  and  quasi  trustees,  that  a  trustee,  or  person 
clothed  with  a  fiduciary  character,  shall  not  be  permitted 
to  use  his  position  or  functions  so  as  to  obtain  for  himself 
any  advantage  or  profit  inconsistent  with  his  supreme 
duty  to  his  beneficiary.' 

§  1051.  6.  Wrongful  Appropriation  or  Conversion  into 
a  Different  Form  of  Another's  Property. —  In  the  fore- 
going fourth  form  of  constructive  trust  the  fiduciary  per- 


applied  under  every  variety  of  circum- 
stances: Keech  v.  Sand  ford,  Sel.  Cas. 
Ch.  61;  1  Lead.  Cas.  Eq.,  4th  Am.  ed., 
48,  49,  62;  Holt  v.  Holt,  I  Cas.  Ch. 
190;  Manlove  v.  Bale,  2  Vern.  84; 
Rakestraw  v.  Brewer,  2  P.  Wms.  511; 
Pickering  V.  Vowles,  1  Brown  Ch.  197; 
Lee  V.  Vernon,  5  Brown  Pari.  C.  10, 
Hargrave,  arg.;  Alden  v.  Fouracie,  .3 
Swanst.  489;  Cook  v.  CoUingridge, 
Jacob,  607,  619;  Brown  v.  De  Tastet, 
Jacob,  284;  GrifBnv.  Griffin,  1  Schoales 
&  L.  352;  Featherstoiihaugh  v.  Fen- 
wick,  17  Ves.  298,  311 ;  Moody  v.  Mat- 
thews, 7  Ves.  174,  185,  and  note  in 
Sumner's  ed;  Clegg  v.  Fish  wick,  1 
Macn.  &  G.  294;  Clegg  v.  Edmondson, 
8  De  Gex,  M.  &  G.  787;  Clements  v. 
Hall,  2  De  Gex  &  J.  173;  Burton  v. 
VVookey,  6  Madd.  367;  Blissett  v. 
Daniel,  10  Hare,  498,  522,  536;  Gard- 
ner  v.  McCutcheon,  4  Beav.  534;  Lees 
V.  Laforest,  14  Beav.  250;  York  etc. 
K'y  Co.  V.  Hudson,  16  Beav.  485;  Pe- 
rena  v.  Johnson,  3  Smale  &  G.  419; 
Burdon  v.  Barkus,  3  Gifif.  412;  4  De 
Gex,  F.  &  J.  42;  Holridge  v.  Gillespie, 
2  Johns.  Ch.  30;  Van  Home  v.  Fonda, 
5  Johns.  Ch.  3S8,  407;  Davoue  v.  Fan- 
ning, 2  Johns.  Ch.  252,  258;  Phyfe  v. 
Warden,  5  Paige,  268;  28  Am.  Dec. 
430;  Armour  v.  Alexamler,  10  Paige, 
571;  Wood  v.  Perry,  1  Barb.  114,  134; 
Gibbes  v.  Jenkins.  3  Sand.  Ch.  130; 
Dickinson  v.  Codwise,  1  Sand,  Ch. 
214,  226;  Doucrhtery  v.  Van  Nostrand, 
1  HofF.  Ch.  68,  70;  Bennett  v.  Van 
Syckel,  4  Duer,  162;  I'unlop  v.  Rich- 
ards, 2  E.  D.  Smith,  181;  Struthera  v. 


Pearce,  51  N.  Y.  357;  Leach  v.  Leach, 
18  Pick.  68,  76;  Baker  v.  Whiting,  3 
Sum.  475,  495;  Keiley  v.  Greenleaf,  3 
Story,  93,  101;  Huson  v.  Wallace,  1 
Rich.  Eq.  1,  2,  4,  7;  Lacy  v.  Hale,  37 
Pa.  St.  360;  Barrett  v.  Bamber,  81  Pa. 
St.  247;  Winkfield  v.  Brinkman,  21 
Kan.  682;  Jones  v.  Dexter,  130  Mass. 
380;  39  Am.  Rep.  459;  Laflf;in  v.  Naglee, 
9  Cal.  662;  70  Am.  Dec.  678;  Gower  v. 
Andrew,  8  Pac.  L.  J.  617  (the  rule  cor- 
rectly applied  by  the  majority  of  the 
court  to  a  confidential  managing  clerk 
of  a  firm).  [See  also  Davis  v.  Handin, 
108  III.  39;  48  Am.  Rep.  541  (confiden- 
tial  agent).] 

In  the  cases  where  the  rule  was  not 
applied  it  wdl  be  found  that  there 
were  always  some  controlling  facts 
which  prevented  its  operation,  even 
though  the  rule  itself  was  fully  recog- 
nized: See  Acheson  v.  Fair,  3  Dru.  & 
War.  512;  Nesbitt  v.  Tredennick,  1 
Ball  &  B.  29,  48;  Maunsell  v.  O'Brien, 
1  Jones  (Ir.)  176,  184;  Phillips  v. 
Reeder,  IS  N.  J.  Eq.  95;  Musselman'a 
Appeal,  62  Pa.  St.  81;  1  Am.  Rep. 
382;  Van  Dyke  v,  Jackson,  1  E.  D. 
Smith,  419;  Anderson  v.  Lemon,  8 
N.  Y.  236;  4  Sand.  552. 

1  Fox  v.  Mackreth,  2  Brown  Ch. 
400;  2  Cox,  320;  1  Lead.  Cas.  Eq.,  4th 
Am.  ed.,  188,  212,  2.37;  Pooley  v.  Quil- 
ter,  2  De  Gex  &  J.  327;  4  Drew.  184; 
Fosbrooke  v.  Balguy,  1  Mylne  &  K. 
226;  Docker  v.  Somes,  2  Mylne  &  K. 
655.  This  principle  is  discussed  in  the 
following  iiectioo. 


§  1051  EQUITY  JURISPRUDENCE.  1562 

son  appropriates  trust  funds  in  the  purchase  of  property, 
but  the  court  imputes  no  wrongful  intent;  it  assumes 
that  he  was  acting  in  pursuance  of  his  trust.  In  the 
present  case  the  wrongful  intent  necessarily  exists;  the 
intended  violation  of  a  fiduciary  duty  and  of  another's 
beneficial  rights  is  the  essential  element.  A  constructive 
trust  arises  whenever  another's  property  has  been  wrong- 
fully appropriated  and  converted  into  a  different  form. 
If  one  person  having  money  or  any  kind  of  property 
belonging  to  another  in  his  hands  wrongfully  uses  it  for 
the  purchase  of  lands,  taking  the  title  in  his  own  name; 
or  if  a  trustee  or  other  fiduciary  person  wrongfully  con- 
verts the  trust  fund  into  a  different  species  of  property, 
taking  to  himself  the  title;  or  if  an  agent  or  bailee  wrong- 
fully disposes  of  his  principal's  securities,  and  with  the 
proceeds  purchases  other  securities  in  his  own  name, —  in 
these  and  all  similar  cases  equity  impresses  a  constructive 
trust  upon  the  new  form  or  species  of  property,  not  only 
while  it  is  in  the  hands  of  the  original  wrong-doer,  but  as 
long  as  it  can  be  followed  and  identified  in  whosesoever 
hands  it  may  come,  except  into  those  of  a  bona  fide  pur- 
chaser for  value  and  without  notice;  and  the  court  will 
enforce  the  constructive  trust  for  the  benefit  of  the  bene- 
ficial owner  or  original  cestui  que  trust  who  has  thus  been 
defrauded.  As  a  necessary  consequence  of  this  doctrine, 
whenever  property  subject  to  a  trust  is  wrongfully  sold 
and  transferred  to  a  bona  fide  purchaser,  so  that  it  is  freed 
from  the  trust,  the  trust  immediately  attaches  to  the 
price  or  proceeds  in  the  hands  of  the  vendor,  whether 
such  price  be  a  debt  yet  unpaid  due  from  the  purchaser, 
or  a  dififerent  kind  of  property  taken  in  exchange,  or  even  a 
sum  of  money  paid  to  the  vendor,  as  long  as  the  money 
can  be  identified  and  reached  in  his  hands  or  under  his 
control.*     It  is  not  essential  for  the  application  of  this 

'  The  doctrine  was  most  clearly  and  ciple   of  this   court  that  as  between 

tersely   stated   by   Turner,    L.  J.,  in  the  cestui  que  trust  and   trustee,  and 

Pennell  v.  DefiFell,  4  De  Gex,  M.  &  G.  all  parties  claiming  under  the  trustee, 

372,  388:  "lb  is  an  undoubted  prin-  otherwise  than  by  purchase  for  valu- 


1563 


TRUSTS    ARISING    BY    OPERATION    OF    LAW. 


1052 


doctrine  that  an  actual  trust  or  fiduciary  relation  should 
exist  between  the  original  wrong-doer  and  the  beneficial 
owner.  Wherever  one  person  has  wrongfully  taken  the 
property  of  another,  and  converted  it  into  a  new  form,  or 
transferred  it,  the  trust  arises  and  follows  the  property 
or  its  proceeds. 

§  1052.  7.  Wrongful  Acquisition  of  the  Trust  Property 
by  a  Trustee  or  Other  Fiduciary  Person.  —  In  several  of 
the  preceding  subdivisions,  the  trustee,  by  means  of  trust 
funds,  has  acquired  property  from  a  third  person,  which 
thereby  becomes  subject  to  the  original  trust.  The  pres- 
ent species  includes  all  the  various  instances  in  which 


able  consideration  without  notice,  all 
property  belonging  to  a  trust,  however 
much  it  may  be  changed  or  altered  in 
its  nature  or  character,  and  all  the 
fruit  of  such  property,  whether  in  its 
original  or  in  its  altered  state,  con- 
tinues to  be  subject  to  or  affected  by 
the  trust":  Fox  v.  Mackreth,  1  Lead. 
Cas.  Eq.,  188,  212,  237;  Taylor  v. 
Plumer,  3  Maule  &  S.  562,  574,  576; 
Ex  parte  Dumas,  1  Atk.  232,  233; 
Lane  v.  Dighton,  Amb.  409,  411,  413; 
Lench  v.  Lench,  10  Ves.  511,  517; 
Lewis  ▼.  Madocks,  17  Ves.  48,  51,  58; 
Grigg  v.  Cocks,  4  Sim.  438;  Ernest 
V.  Oroysdill,  2  De  Gex,  F.  &  J.  175; 
Barnes  v.  Addy,  L.  R.  9  Ch.  244;  Ex 
parte  Cooke,  L.  R.  4  Ch.  Div.  123; 
Nant-y-Glo  etc.  Co.  v.  Grave,  L.  R.  12 
Ch.  Div.  738;  In  re  Hallett's  Estate, 
L.  R.  13  Ch.  Div.  696;  Rolfe  v.  Greg- 
ory, 4  De  Gex,  J.  &  S.  576;  Mansell 
V.  Mansell,  2  P.  Wms.  678;  Wells  v. 
Robinson,  13  Cal.  133,  140,  141;  La- 
throp  V,  Bampton,  31  Cal.  17;  89  Am. 
Dec.  141;  Schlaeffer  v.  Corson,  52 
Barb.  510;  Swinburne  v.  Swinburne, 
28  N.  Y.  568  (a  most  instructive  case); 
Hastings  v.  Drew,  76  N.  Y.  9,  16; 
Bartlettv.  Drew,  57  N.  Y.  5S7;  Holden 
v.  New  York  etc.  Bank,  72  N.  Y.  286; 
Newton  V.  Porter,  69  N.  Y.  133,  136- 
140;  25  Am.  Rep.  152;  Taylor  v. 
Mosely,  57  Miss.  544;  Burks  v,  Burks, 
7  Baxt.  353;  Broyles  v.  Nowlin,  59 
Tenn,  191;  Tilford  v.  Torrey,  53  Ala. 
120;  Pindall  v.  Trevor,  30  Ark.  249; 
Friedlander  v.  Johnson,  2  Woods, 
675;  McDonough  v.  O'Niel,  113  Mass. 
92;  Tracy  v.  Kelley,  52  Ind.  535; 
Cooksoa  V.  Richardson,  69  111.   137; 


Coles  v.  Allen,  64  Ala.  98  (when  no 
trust  arises);  Dodge  v.  Cole,  97  III. 
338;  37  Am.  Rep.  lil;  Derry  v.  Derry, 
74  Ind.  5G0;  Newton  v.  Taylor,  32 
Ohio  St.  399;  Barrett  v.  Bamber,  81 
Pa.  St.  247;  Veile  v.  Blodgett,  49  Vt. 
270;  Hubbard  v.  Bnrrell,  41  Wis.  365 
(proceeds  charged  with  a  trust  on  sale 
to  a  hona  fide  purchaser);  Michigan 
etc.  R.  R.  V.  Mellen,  44  Mich.  321; 
Murray  v.  Lylburn,  2  Johns.  Ch.  441, 
443;  Boyd  v.  McLean,  1  Johns.  Ch. 
582;  Shaw  v.  Spencer,  100  Mass,  382; 
1  Am.  Rep.  115;  97  Am.  Dec.  107; 
Shelton  v.  Lewis,  27  Ark.  190;  Ma- 
thews V.  Heyward,  2  S.  C.  239;  Thomp- 
son V.  Perkins,  3  Mason,  232;  Duncan 
v.  Jaudon,  15  Wall.  165.  [See  also 
Houghton  v.  Davenport,  74  Me.  590; 
Parks  V.  Parks,  66  Ala.  326;  Atkinson 
V.  Ward,  47  Ark.  533;  Humphreys  v. 
Butler,  51  Ark.  351;  Riehl  v.  Foundry 
Ass'n,  104  Ind.  70;  Munro  v.  Collins, 
95  Mo.  33;  Adams  v.  Lambard,  80  Cal. 
426.] 

In  order  that  this  species  of  trust 
may  arise,  it  is  not  indispensable  that 
the  conventional  relation  of  trustee 
and  cestui  que  trust,  or  even  any  fidu- 
ciary relation,  should  exist  between 
the  original  wrong-doer  and  the  bene- 
ficial owner,  although  such  relation 
generally  exists  in  these  cases.  Where 
securities  had  been  stolen,  and  trans- 
ferred and  sold  by  the  thief,  a  trust 
was  held  impressed  upon  them  and 
on  their  proceeds,  in  the  hands  of  a 
transferee  with  notice:  Newton  v. 
Porter,  69  N.  Y.  133,  140;  25  Am. 
Rei).  152;  Bank  of  America  T.  Pollock, 
4  Edw.  Ch.  216. 


§  1052  EQUITY   JURISPRUDENCE.  1564 

the  trustee  or  other  fiduciary  person  wrongfully  acquires 
the  title  and  beneficial  use  of  the  very  trust  property  it- 
self,—  the  property  in  specie  which  forms  the  subject- 
matter  of  the  trust.  The  doctrine  may  be  stated  in  its 
most  general  form,  that  whenever  a  trustee  or  person 
clothed  with  any  fiduciary  character  takes  advantage  of 
the  relation,  and  by  means  of  it  acquires  the  title  or  use 
of  the  trust  property,  or  makes  a  profit  or  advantage  to 
himself  out  of  the  trust  and  confidence,  then  a  construct- 
ive trust  is  impressed  upon  such  property,  profits,  or 
proceeds  in  his  hands,  in  favor  of  the  original  beneficiary. 
The  following  are  some  of  the  most  important  applica- 
tions of  this  doctrine:  When  a  trustee,  administrator, 
agent,  attorney,  or  other  fiduciary  person,  without  the 
knowledge  or  consent  of  his  beneficiary,  purchases  the 
trust  property  at  a  public  or  private  sale;  or  when,  by 
taking  advantage  of  the  trust  and  confidence  reposed,  and 
of  the  superiority  conferred  upon  him  by  the  relation,  he 
unconscientiously  acquires  title  to  the  trust  property  by 
purchase  or  gift  directly  from  the  beneficiary;  or  when 
he  uses  the  trust  property  for  his  own  benefit,  or  in 
his  own  business,  and  by  means  of  such  use  obtains  ad- 
ditional gains  and  profits,  —  in  these  and  all  similar  cases 
equity  impresses  a  constructive  trust  upon  the  property 
purchased  or  obtained,  and  upon  the  profits  and  acquisi- 
tions so  made,  for  the  benefit  of  the  party  beneficially  en- 
titled.*    This  form  of  constructive  trusts  embraces  many 

'  The  dealings  between   persons   in  Wedderburn,  4  Mylne  &  C.  41;  Great 

fiduciary  relations  have  been  fully  ex-  Luxembourg  R'y  Co.  v.  Magnay,  25 

amiaed   in  the  previous  section   con-  Beav.  586;  Kimber  v.  Barber,  L.  R.  8 

cerning    "constructive   fraud."      The  Ch.  56;  Pooley  v.  Quilter,  2  De  Gex 

cases  there  cited  are  also  authorities  &  J.  327;  4  Drew.  184;  Fosbrooke  v. 

for  and  illustrations  of  the  text,  since  Balguy,   1  Mylne  &  K.  226;    Willett 

the  trust  above  mentioned  arises  from  v.    Blanford,    1    Hare,  253;   Townend 

the  wrongful  dealings  with  trust  prop-  v.  Townend,   1  Giff.  201;  Fawcett  v. 

erty  there  described:  See  cases  cited  Whitehouse,   1  Russ.  &  M.   132,   149; 

ante,  under  §§  957,  963;  {^post,  §§  1075-  Bulkley  v.  Wilford,  2  Clark  &  F.  102, 

1078;]  Fox  V.  Mackreth,  2  Brown  Ch.  177;  Ernest  v.  Croysdill,  2  De  Gex,  F. 

400;  2  Cox,  320;  1  Lead.  Cas.  Eq.,  4th  &  J.  175;  Rolfe  v.  Gregory,  4  De  Gex, 

Am.    ed.,    188,    212,    237;    Morret  v.  J.  &  S.  576;  Heath  v.  Crealock,  L.  R. 

Paske,  2Atk.  52,  54;  Powell  v.  Glover,  18  Eq.  215;  Barnes  v.  Addy,  L.  R.  9 

3  P.  Wms.  252,  note;  Docker  v.  Somes,  Ch.  244;  Ex  parte  Cooke,  L.  R.  4  Ch. 

2  Mylne   &  K.   655;   Wedderburn  v.  Div.  123;  Nant-y-Glo.  etc.  Co.  v.  Grave. 


1565  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §  1053 

particular  instances,  and  the  principle  is  extended  to  all 
abuses  of  confidence,  whereby  the  one  in  whom  the  con- 
fidence is  reposed  obtains  an  advantage. 

§1053.  8.  Trusts  ex  Maleficio. — In  general,  when- 
ever  the  legal  title  to  property,  real  or  personal,  has  been 
obtained  through  actual  fraud,  misrepresentations,  con- 
cealments, or  through  undue  influence,  duress,  taking 
advantage  of  one's  weakness  or  necessities,  or  through 
any  other  similar  means  or  under  any  other  similar  cir- 
cumstances which  render  it  unconscientious  for  the  holder 
of  the  legal  title  to  retain  and  enjoy  the  beneficial  inter- 
est, equity  impresses  a  constructive  trust  on  the  property 
thus  acquired  in  favor  of  the  one  who  is  truly  and  equi- 
tably entitled  to  the  same,  although  he  may  never  perhaps 
have  had  any  legal  estate  therein;  and  a  court  of  equity 
has  jurisdiction  to  reach  the  property  either  in  the  hands 
of  the  original  wrong-doer,  or  in  the  hands  of  any  subse- 
quent holder,  until  a  purchaser  of  it  in  good  faith  and 
without  notice  acquires  a  higher  right,  and  takes  the 
property  relieved  from  the  trust.^  The  forms  and  varie- 
ties of  these  trusts,  which  are  termed  ex  maleficio  or  ex 
delicto,  are  practically  without  limit.  The  principle  is 
applied  wherever  it  is  necessary  for  the  obtaining  of  com- 

L.  R  12  Ch.  Div.  738;  In  re  Hallett's  Pa.  St.  247;  Joneav.  Dexter,  130  Mass. 

Estate,  L.  R.  13  Ch.  Div.  696;  Web-  380;  39  Am.  Rep.  459;  Rea  v,  Copelin, 

ster  V.  King,  33  Cal.  348;  Scott  v.  Um-  47  Mo.  76;  Whitwell  v.   Warner.   20 

barger,  41  Cal.  410;  Guerrero  v.  Balle-  Vt.  425;  Giddings  v.  Eastman,  5  Paige, 

rino,  48  Cal.  118;  Tracy  v.  Colby,  55  561;  Brown  v.   Lynch,    1    Paige,   147; 

Cal.   67;  Tracy  v.  Craig,  55  Cal.    91;  Blauvelt  v.  Ackerman,  20  N.  J.  Eq. 

Davis  V.  Rock  Creek  etc.  Co.,  55  Cal.  141;  Grumley  v.  Webb,  44  Mo.   444; 

359;   36   Am.   Rep.  40;  Swinburne  v.  100  Am.   Dec.  304.     [See  also  Powell 

Swinburne,  28  N.  Y.  568;  Bennett  v.  v.  Powell,  80  Ala.   11;   Wren  v.   Fol- 

Austin,   81    N.    Y.    308;    Hastings   v.  lowell,  52  Ark.  76;  Carrier  v.  Heather, 

Drew,  76  N.  Y.  9;  Holden  v.  New  York  62  Mich.  441;  Weaver  v.   Fisher,  110 

and  Erie  Bank,  72  N.  Y.  286;  Smith  111.  146;  Davis  v.  Hamlin,  108  111.  ,39; 

V.  Frost,  70  N.  Y.  65;  Hubbell  v.  Med-  48  Am.  Rep.  541;  Allen  v.   Jackson, 

bury,  53  N.  Y.  98;  Gardner  v.  Ogden,  122  111.  567;  Valletta  v.  Tedens,  122  111. 

22  N.  Y.  327;  78  Am.  Dec.  192;  Man-  607;  3  Am.  St.  Rep.  502;  Byington  v. 

ning  V.  Hayden,  5  Saw.   360;  Broylea  Moore,  62  Iowa,  470;  Rose  v.  Hayden, 

V.  Nowlin,  59  Tenn.   191;    Pindall  v.  35  Kan.  106;  57  Am.  Rep.  145;  Bryan 

Trevor,  30  Ark.  249;  Cookson  v.  Rich-  v.  McNaughton,  38  Kan.  98;  and  see 

ardson,  69111.  137;Reickhoffv.  Brecht,  cases  cited  at  end  of  note,  §  1056.] 

51  Iowa,  633;  Treadwell  v.  McKeon,  »  [Quoted  by  Mr.  Chief  Justice  Ful- 

7  Baxt.   201;   Newton   v.   Taylor,   32  ler  in  Moore  v.  Crawford,  130  U.  S. 

Ohio  St.  399;  Barrett  v.  Bamber,  81  122,  128.] 


§  1054  EQUITY   JURISPRUDENCE.  1566 

plete  justice,  although  the  law  may  also  give  the  remedy 
of  damages  against  the  wrong-doer.^  While  these  in- 
stances are  so  many  and  various,  there  are  certain  spe- 
cial forms  of  frequent  occurrence  and  great  importance 
which  require  particular  mention. 

§  1054.  (1)  A  Devise  or  Bequest  Procured  by  Fraud. 
—  Whenever  a  person  procures  a  devise  or  bequest  to  be 
made  directly  to  himself,  —  and  thereby  preventing  per- 
haps an  intended  testamentary  gift  to  another, — through 
false  and  fraudulent  representations,  assurances,  or  prom- 
ises that  he  will  carry  out  the  original  and  true  purpose 
of  the  testator,  and  will  apply  the  devise  or  bequest  to  the 
benefit  of  the  third  person  who  is  the  real  object,  and 
who  would  otherwise  have  been  the  actual  recipient  of 
the  testator's  bounty,  and  after  the  testator's  death  he  re- 
fuses to  comply  with  his  former  assurances  or  promises, 
but  claims  to  hold  the  property  in  his  own  right  and  for 
his  own  exclusive  benefit,  —  in  such  case  equity  will  en- 
force the  obligation  by  impressing  a  trust  upon  the  prop- 
erty in  favor  of  the  one  who  has  been  defrauded  of  the 

*  See  ante,  cases  cited  under  §§  946-  Whitney,  6  Hun,  16;  Baier  v.  Berbe- 

951,  which  furnish  many  examples  of  rich,  6  Mo.   App.  537  (a  combination 

these  trusts;  Dyer  v.   Dyer,   1   Lead,  to  prevent  bidding  at  a  public  sale  of 

Cas.  Eq.,  4th  Am.  ed.,   314,  350-364,  land  renders  the  purchaser  a  trustee); 

note  of  Am.  ed. :  conveyances  obtained  Beach  v.   Dyer,  93  111.  295  (no  trust 

from  persons  of  weak  mind,  by  undue  against   the   grantee   in  a  fraudulent 

influence,  etc.:  Addison  v.  Dawson,  2  conveyance  of  land,  unless  he  was  a 

Vern.  678;  Ex  parte  Roberts,  3  Atk.  party  to  the  fraud);  Huxley  v.  Rice,  40 

308,  310  (lunacy);   Att'y-Gen.   v.   So-  Mich.    73    (trust   from  actual  fraud); 

thon,  2  Vern.  497;  Gould  v.  Okeden,  Troll  v.  Carter,  15  W.  Va.567;  Phelps 

4  Brown  Pari.  C.   198;  Price  v.   Ber-  v.  Jackson,  31  Ark.  272;  Hendrix  v. 

rington,  7  Hare,  .394;  3  Macn.  &  G.  Nunn,  46  Tex.  141;  Veile  v.  Blodgett, 

486;  Harvey  v.  Mount,  8  Beav.  439;  49  Vt.  270;  Newell  v.  Newell,  14  Kan. 

deeds  or  wills  fraudulently  destroyed,  202;  Jenkins  v.  Doolittle,  69  111.  415; 

in  order  to  deprive  the  owner  of  his  Greenwood's  Appeal,  92  Pa.   St.    181 

title:  Tucker  v.  Phipps,  3  Atk.  359,  (extent    of    such    trustee's   liability); 

360;  Downes  v.  Jennings,  32  Beav.  290;  Barnes  v.  Taylor,  30  N.  J.  Eq.  7  (ditto). 

Bailey  v.  Stiles,  2  N.  J.   Eq.  220;  see  [See  also  Jones  v.  Van  Doren,  130  U. 

ante,  §  919;   owners  conveying  away  S.  684;  Piper  v.  Hoard,  107  N.  Y.  73; 

their  property,  through  mistake  or  ig-  1  Am.  St.  Rep.  789;  Christy  v.  Sill, 

norance  of   their  rights:  Bingham  v.  95  Pa.  St.  380;  Bailey's  Appeal,  96  Pa. 

Bingham,   1   Ves.   Sr.   126;  Naylor  v.  St.  253;  Hack  v.  Norris,  46  Mich.  587 

Winch,  1  Sim.  &  St.  555,  564;  Hollins-  {vendees  of  iioncompos  mentis);  Cnlhert' 

head  v.  Simms,  51   Cal.  158;  Mercier  son  v.  Young,  50  Mich.  190;  Winger- 

V.    Hemme,    50   Cal.    606;    Dewey   v.  ter  v.  Wingerter,  71  Cal.  105;  Coggs- 

Moyer,  72  N.  Y.  70,  76;  Hammond  v.  well  v.  Griffith,  23  Neb.  334.] 
Peonock,   61   N.    Y.    145;   Fulton  v. 


1567 


TRUSTS   ARISING   BY    OPERATION    OF    LAW.      §  1054 


testator's  intended  gift,  and  by  treating  the  actual  devisee 
or  legatee  as -a  trustee  holding  the  mere  legal  title,  and  by 
compelling  him  to  carry  the  trust  into  effect  through  a 
conveyance  to  the  one  who  is  beneficially  interested.  It 
is  not  necessary  that  the  representations,  assurances,  or 
promises  of  the  actual  devisee  or  legatee  should  be  in 
writing;  they  may  be  entirely  verbal.  There  are  a  few 
cases  which  seem  to  hold  that  a  trust  will  arise  under 
these  circumstances  from  a  viere  verbal  promise  of  the 
devisee  or  legatee  to  hold  the  property  for  the  benefit  of 
another  person.  This  position,  however,  is  clearly  op- 
posed to  settled  principle.  The  only  ground  upon  which 
such  a  trust  can  be  rested,  and  is  rested  by  the  over- 
whelming weight  of  authority,  is  actual  intentional  fraud.* 


'  McCormick  v.  Grogan,  L.  R.  4 
H.  L.  82,  97,  per  Lord  Westbury 
(see  ante,  vol.  1,  §  431);  Pod  more  t. 
Gunning,  7  Sim.  644;  5  Sim.  485.  In 
this  case  the  vice-chancellor  said,  as 
the  ground  of  his  decision:  "I  have 
always  understood  that  the  court 
would  interfere  to  prevent  the  obtain- 
ing of  an  estate  by  fraud,  notwith- 
standing the  statute  of  frauds."  See 
also  Sellack  v.  Harris,  5  Vin.  Abr.  521; 
Chamberlaine  V.  Chamberlaine,  Freeni. 
Ch.  52;  Devenish  v.  Baines,  Prec.  Ch. 
3;  Thynn  v.  Thynn,  1  Vern.  296;  Old- 
ham  V.  Litchfield,  2  Vern.  506;  Drake- 
ford  V.  Wilks,  3  Atk.  539;  Walker  v. 
Walker,  2  Atk.  98;  Reach  v.  Kenni- 
gate,  Amb.  67;  1  Ves.  Sr.  123;  Muck- 
leston  V.  Brown,  6  Ves.  52;  Stickland 
V.  Aldridge,  9  Ves.  516;  Chamberlain 
V.  Agar,  2  Ves.  &  B.  259;  Seagrave  v. 
Kirwan,  1  Beat.  157;  Dixon  v.  Olmius, 
1  Cox,  414;  Bulkley  v.  Wilford,  8 
Bligh,  N.  S.,  Ill;  Chester  v.  Urwick, 
23Beav.  407;  Middleton  v.  Middleton, 
1  Jacob  &  W.  94,  96;  Church  v.  Ru- 
land,  64  Pa.  St.  432;  Hoge  v.  Hoge,  1 
Watts,  163,  213;  26  Am.  Dec.  52; 
Dowd  v.  Tucker,  41  Conn.  197;  Wd- 
liams  v.  Vreeland,  29  N.  J.  Eq.  417. 
In  this  last  case  the  point  was  directly 
decided  that  a  trust  arises  from  such 
a  verbal  promise  made  to  the  testator. 
The  chancellor  said  (p.  419):  "It  is 
fraud  for  V.  to  have  induced  the  tes- 
tator to  make  a  bequest  to  him,  includ- 
ing money  intended  by  the  former  for 


the  complainants,  at  his  suggestion 
and  on  his  promise  to  pay  them  that 
money,  after  the  testator's  decease, 
out  of  the  legacy  to  him,  and  then  af- 
ter receiving  the  entire  legacy,  to  re- 
fuse to  pay  them  the  money  which  he 
had  so  promised  to  pay."  But,  per 
contra,  in  Bedilian  v.  Seaton,  3  Wall. 
Jr.  279,  it  seems  to  be  held  not  only 
that  no  trust  will  arise  from  a.  mere 
verbal  promise  to  the  testator,  how- 
ever solemn,  but  none  will  arise  from 
a  fraudulent  promise,  —  only  a  contract 
which  equity  will  enforce.  See  also 
ante,  cases  cited  under  §  919;  1  Lead. 
Cas.  Eq.,  4th  Am.  ed.,  350;  [Socher's 
Appeal,  104  Pa.  St.  609;  Williams  v. 
Vreeland,  32  N.  J.  Eq.  734,  and  cases 
collected  in  the  reporter's  note;  Gil- 
patrick  v.  Glidden,  81  Me.  137;  10 
Am.  St.  Rep.  245;  Shields  v.  Mc- 
Auley,  37  Fed.  Rep.  302;  Williams  v. 
Fitch,  18  N.  Y.  546.  The  majority  of 
the  recent  decisions  do  not  insist  on 
an  actual  fraudulent  intention  on  the 
part  of  the  legatee  or  devisee  as  neces- 
sary to  the  creation  of  a  trust  of  this 
nature.  In  the  im2:)ortant  case  of 
O'Hara  v.  Dudley,  95  N.  Y.  403,  47 
Am.  Rep.  53,  the  trial  court  found  as 
a  fact  that  the  legatees  had  made  no 
express  promise  to  obtain  the  bequest, 
and  had  practiced  no  fraud;  the  court 
say  (p.  412):  "  This  finding  is  assailed, 
but  unsuccessfully  so  far  as  it  frees 
the  legatees  from  a  charge  of  actual 
fraud.     In  that  respect  we  agree  that 


1055 


EQUITY   JURISPRUDENCE. 


156S 


§  1055.  (2)  Purchase  upon  a  Fraudulent  Verbal  Prom- 
ise.—  A  second  well-settled  and  even  common  form  of 
trusts  ex  maleficio  occurs  whenever  a  person  acquires  the 
legal  title  to  land  or  other  property  by  means  of  an  in- 
tentionally false  and  fraudulent  verbal  promise  to  hold 
the  same  for  a  certain  specified  purpose, —  as,  for  example, 
a  promise  to  convey  the  land  to  a  designated  individual, 
or  to  reconvey  it  to  the  grantor,  and  the  like,  —  and  hav- 
ing thus  fraudulently  obtained  the  title,  he  retains,  uses, 
and  claims  the  property  as  absolutely  his  own,  so  that 
the  whole  transaction  by  means  of  which  the  ownership 
is  obtained  is  in  fact  a  scheme  tJf  actual  deceit.  Equity 
regards  such  a  person  as  holding  the  property  charged 
with  a  constructive  trust,  and  will  compel  him  to  fulfill 
the  trust  by  conveying  according  to  his  engagement.' 


there  was  no  evil  or  selfish  intention 
on  their  part";  and  further,  "Where, 
in  such  case,  the  legatee,  even  by  silent 
acquiescence,  encourages  the  testatrix 
to  make  a  bequest  to  him  to  be  by  him 
applied  for  the  benefit  of  others,  it  has 
all  the  force  and  effect  of  an  express 
promise  ";  citing  Wallgrave  v.  Tebbs, 
2  Kay  &  J.  321;  Schultz's  Appeal,  80 
Pa.  St.  405.  The  whole  subject  un- 
derwent an  exhaustive  discussion  in 
In  re  Fleetwood,  L.  R.  15  Ch.  Div. 
694,  and  it  was  held  that  no  actual  or 
personal  fraud  on  the  part  of  the  lega- 
tee was  necessary  to  give  the  court 
jurisdiction  to  enforce  the  trust.  See 
also  Curdy  v.  Barton,  79  Cal.  420;  12 
Am.  St.  Rep.  157;  In  re  Keleman,  12(5 
N.  Y.  73.  The  object  of  the  trust 
must,  however,  be  communicated  to 
the  legatee  or  devisee  in  the  testator's 
lifetime;  otherwise  there  cannot  be 
that  acquiescence  or  implied  promise 
on  the  part  of  the  former  which  is 
necessary  to  raise  the  trust:  See  In  re 
Boyes,  L.  R.  26  Ch.  Div.  531.  In 
Oliffe  V.  Wells,  130  Mass.  221,  the 
distinction  was  made  that  where  the 
will  shows  on  its  face  that  the  devise 
or  bequest  is  in  trust,  but  the  purposes 
of  the  trust  are  not  stated,  then  the 
equitable  estate  results  to  the  heirs  at 
law  or  next  of  kin  of  the  testator,  aud 
cannot  be  divested  by  anything  short 
of  a  testamentary  disposition.  This 
distinction  seems  to  be  entirely  unsup- 


ported by  authority;  indeed,  in  many  of 
the  cases  cited  in  this  note  the  devise 
or  bequest  was  expressed  to  be  in  trnst, 
and  not  absolute:  See  Cagney  v. 
O'Brien,  83  111.  72;  Podmore  v.  Gun- 
ning, 7  Sim.  644;  In  re  Fleetwood,  L. 
R.  15  Ch.  Div.  594;  Riordan  v.  Banon. 
10  Ir.  Eq.  409;  Curdy  v.  Berton,  79 
Cal.  420;  12  Am.  St.  Rep.  157.] 

'  The  trust  in  such  cases  arises 
wholly  from  the  fraud;  the  statute  of 
frauds  requiring  a  written  declaration 
of  trust  does  not  apply,  since  trusts 
ex  mab'Jicio  are  excepted  from  its  oper- 
ation: Hunt  V.  Roberts,  40  Me.  187; 
Hodges  V.  Howard,  5  R.  I.  149;  Fraser 
V.  Child,  4  E.  D.  Smith,  153;  Hoge  v. 
Hoae,  1  Watts,  163,  214;  26  Am.  Dec. 
52;  Cousins  v.  Wall,  3  Jones  Eq.  43; 
Cameron  v.  Ward,  8  Ga.  245;  Jones 
V.  McDougal,  .S2  Miss.  179;  Martin  v. 
Martin,  16  B.  Mon.  8;  Arnold  v.  Cord, 
16  Ind.  177;  Laing  v.  McKee,  13  Mich. 
124;  87  Am.  Dec.  738;  Nelson  v.  Wor- 
rall,  20  Iowa,  469;  Coyle  v.  Davis,  20 
W^is.  564;  Hidden  v.  Jordan,  21  Cal. 
92,  99-102;  Sandfoss  v.  Jones,  35  Cal. 
481,  489;  Coyote  etc.  Co.  v.  Ruble,  8 
Or.  284;  Troll  v.  Carter,  15  W.  Va. 
567.  [See  also  Fischbeck  v.  Gross,  112 
III.  208;  Heuschel  v.  Mamero,  120 
III.  660;  Nordholt  v.  Nordholt,  87 
Cal.  552;  22  Am.  St.  Rep.  268;  Brison 
V.  Brison,  75  Cal.  525;  7  Am.  St.  Rep. 
189;  Manning  v.  Pippen,  86  Ala.  357; 
11    Am.  St.    Rep.  46  (conveyance  ob« 


1569  TRUSTS    ARISING   BY    OPERATION    OF   LAW.      §  1056 


§  1056.     (3)  No  Trust  from  a  Mere  Verbal  Promise.— 

The  foregoing  cases  should  be  carefully  distinguished 
from  those  in  which  there  is  a  mere  verbal  promise  to 
purchase  and  convey  land.  In  order  that  the  doctrine  of 
trusts  ex  maleficio  with  respect  to  laud  may  be  enforced 
under  any  circumstances,  there  must  be  something  more 
than  a  mere  verbal  promise,  however  unequivocal,  other- 
wise the  statute  of  frauds  would  be  virtually  abrogated; 
there  must  be  an  element  of  positive  fraud  accompanying 
the  promise,  and  by  means  of  which  the  acquisition  of 
the  legal  title  is  wrongfully  consummated.  Equity  does 
not  pretend  to  enforce  verbal  promises  in  the  face  of  the 
statute;  it  endeavors  to  prevent  and  punish  fraud,  by 
taking  from  the  wrong-doer  the  fruits  of  his  deceit,  and 
it  accomplishes  this  object  by  its  beneficial  and  far-reach- 
ing doctrine  of  constructive  trusts.* 


tained  by  fraudulent  promise  to  make 
a  will  in  grantor's  favor).] 

The  doctrine  is  often  used  with 
great  efficacy  to  prevent  the  triumph 
of  fraud,  and  to  protect  persons  under 
necessities,  in  cases  where,  at  execution 
sale,  or  mortgage  foreclosure,  or  other 
compulsory  public  sale,  a  party  buys 
in  the  land  under  a  prior  fraudulent 
promise  made  to  the  owner  that  the 
purchaser  will  take  the  title,  hold  the 
property  for  the  benefit  of  such  owner, 
and  will  reconvey  to  him  on  being 
repaid  the  amount  advanced  for  the 
purchase  price;  and  having  thus  by  a 
fraudulent  contrivance  cut  oflf  compe- 
tition, and  prevented  the  owner  from 
making  other  arrangements  to  protect 
his  property,  and  having  obtained  the 
property  perhaps  for  much  less  than 
its  real  value,  he  refuses  to  abide  by 
his  verbal  promise,  and  retains  the 
land  or  other  property  as  absolutely 
his  own.  Equity  will  relieve  the  de- 
frauded owner  by  impressing  on  the 
property  a  trust  ex  maleficio,  and  by 
treating  the  purchaser  as  a  trustee  in 
iAvitum.  This  application  of  the  doc- 
trine was  explained  and  the  authori- 
ties were  examined  in  Ryan  v.  Dox, 
34  N.  Y.  307;  90  Am.  Dec.  696;  and 
Wheeler  v.  Reynolds,  66  N.  Y.  227. 
See  also  Dodd  v.  Wakeman,  26  N.  J. 
Eq.  484;  Walker  v.  Hill's  Ex'rs,  22 
2  Eq.  Jur.  —  99 


N.  J.  Eq.  519;  Merritt  ▼.  Brown,  21 
N.  J.  Eq.  401,  404;  Farnham  v.  Clem- 
ents, 51  Me.  426;  McCulloch  v.  Cow- 
her,  5  Watts  &  S.  427,  430;  Kisler  v. 
Kisler,  2  Watts,  323;  27  Am.  Deo. 
308;  Schmidt  v.  Gatewood,  2  Rich. 
Eq.  162;  Green  v.  Ball,  4  Bush,  586; 
Moore  v.  Tisdale,  5  B.  Mon.  352;  Rose 
V.  Bates,  12  Mo.  30;  Wolford  v.  Her- 
ringtou,  86  Pa.  St.  39;  1  Lead.  Cas. 
Eq.,  4th  Am.  ed.,  350-364;  [also  Cow- 
perthwaite  v.  First  Nat.  Bank,  102  Pa. 
St.  397;  Kimmel  v.  Smith,  117  Pa. 
St.  183;  Salsbury  v.  Black,  119  Pa.  St. 
207;  4  Am.  St.  Rep.  631;  Tankard  v. 
Tankard,  84  N.  C.  286;  McNair  v. 
Pope,  100  N.  C.  404;  Fishback  v.  Green^ 
87  Ky.  107;  Merrett  v.  Poulter,  96. 
Mo,  237;  and  see  Lamar  v.  Wright, 
31  S.  C.  60;]  as  to  enforcing  such  a 
verbal  promise  free  from  fraud,  where 
the  statute  of  frauds  is  not  pleaded 
as  a  defense,  see  Combs  v.  Little,  4 
N.  J.  Eq.  310;  40  Am.  Dec.  207;  Mar- 
latt  V,  Warwick,  18  N.  J.  Eq.  108;. 
19  N.  J.  Eq.  439;  Merritt  v.  Brown,. 
21  N.  J.  Eq.  401,  404. 

*  Leman  v.  Whitley,  4  Russ.  423; 
Levy  V.  Brush,  45  N.  Y.  589;  Wheeler 
V.  Reynolds,  66  N.  Y.  227;  Payne  v. 
Patterson,  77  Pa.  St.  134;  Bennett  v. 
Dollar  Sav.  Bank,  87  Pa.  St.  382; 
Hon  V.  Hon,  70  Ind.  135;  Gibson  v. 
Decius,  82  111.  304;  Farnham  v,  Clem- 


§§  1057,  1058         EQUITY   JURISPRUDENCE. 


1570 


§  1057.  (4)  Trusts  in  Favor  of  Creditors. — In  carrying 
out  the  general  principle  of  trusts  for  the  purpose  of  work- 
ing ultimate  justice,  and  reaching  property  where  the 
legal  title  has  been  parted  with,  and  is  beyond  the  scope 
of  legal  process,  a  constructive  trust  is  said  to  arise  in 
favor  of  judgment  creditors  with  respect  to  the  property  of 
their  debtors,  which  has  been  transferred  with  the  intent 
to  defraud  the  creditors  of  their  rights,  or  of  which  the 
legal  title  is  vested  in  third  persons  with  a  like  fraudulent 
intent,  or  which  is  of  such  a  nature  that  it  cannot  be 
taken  by  execution  upon  judgments  in  legal  actions.' 

§  1058,  Rights  and  Remedies  of  the  Beneficiary. — The 
essential  nature  of  constructive  trusts  has  been  explained 
in  a  former  paragraph.'  Equity  regards  the  cestui  que 
trust,  in  all  instances  except  that  last  mentioned  in  favor 

eats,  51  Me.  426;  Pattison  v.  Horn,  1 
Grant  Cas.  301;  Hogg  v.  Wilkins,  1 
Grant  Cas.  67;  Barnet  v.  Dougherty, 
32  Pa,  St.  371;  Campbell  v.  Campbell, 
2  Jones  Eq.  364;  Chainbliss  v.  Smith, 
30  Ala.  366;  Whiting  v.  Gould,  2  Wis. 
552;  1  Lead.  Cas.  Eq.,  4th  Am.  ed., 
355-364.  [See  also  Salisbury  v.  Clarke, 
(U  Vt.  453;  Slocum  v,  Wooley,  43 
N.  J.  Eq.  453;  Salter  v.  Bird,  108  Pa. 
St.  436;  Salsbury  v.  Black,  119  Pa. 
St.  200;  4  Am.  St.  Rep.  631;  Watson 
V.  Young,  30  S.  C.  144;  Moseley  v. 
Moseley,  86  Ala.  289;  Bland  v.  Talley, 
50  Ark.  76;  McClain  v,  McClain,  57 
Iowa,  167;  Bohm  v.  Bohm,  9  Col.  100; 
Barr  v.  O'Donnell,  76  Cal.  469;  9  Am. 
St.  Rep.  242;  Feeney  v.  Howard,  79 
Cal.  525;  12  Am.  St.  Rep.  162.  If, 
however,  the  parties  stood  in  a  relation 
of  confidence  with  each  other,  the  fact 
tliat,  at  the  time  of  the  conveyance 
and  promise  to  reconvey,  there  was 
no  fraudulent  intent  on  the  part  of 
the  grantee  is  immaterial;  a  construct- 
ive trust  arises:  See  Wood  v.  Rabe, 
96  N.  Y.  414;  48  Am.  Rep.  640  (mother 
and  son);  Brison  v.  Brison,  75  Cal. 
525;  7  Am.  St.  Rep.  189;  90  Cal. 
323  (wife  and  husband);  Alaniz  v.  Cas- 
enave,  91  Cal.  41;  Border  v.  Conklin, 
77  Cal.  331  (attorney  and  client);  Bart- 
lett  V.  Bartlett,  15  Neb.  593  (wife  and 
husband);  Butler  v.  Hyland,  89  Cal. 
575  (conveyance  to  de  facto  guardian); 
Gruhn   v.   Richardson,    128    111.   178; 


compare  Barr  v.  O'Donnell,  76  Cal. 
469;  9  Am.  St.  Rep.  242  (relation  be- 
tween  tenants  iu  common  not  confi- 
dential).] 

^  The  trust  is,  in  reality,  one  in  name 
alone;  the  creditor's  right  to  reach  the 
debtor's  property  is  in  no  true  sense 
an  interest  in  that  property;  it  is,  at 
most,  only  an  equitable  lien  on  the 
property.  Since  the  creditor's  right  to 
pursue  his  debtor's  property  under  the 
circumstances  mentioned  is  constantly 
spoken  of  by  judges  and  text-writers 
as  based  upon  a  trust  afi"ecting  such 
property,  I  have  simply  enumerated 
the  case  among  the  different  species  of 
constructive  trusts.  The  examination 
of  the  doctrine  is  postponed  until  the 
subject  of  "  creditors'  suits "  and 
other  similar  remedies  is  reached:  See 
Dewev  v.  Moyer,  72  N.  Y.  70,  76; 
Bliss  v.  Matteson,  45  N.  Y.  22,  24; 
Savage  v.  Murphy,  34  N.  Y.  508;  90 
Am.  Dec.  733;  8  Bosw.  75;  King  v. 
Wilcox,  11  Paige,  589;  Loomis  v.  Tifft, 
16  Barb.  541,  543;  Mead  v.  Gregg,  12 
Barb.  653;  Day  v.  Cooley,  118  Mass. 
524;  Partridge  v.  Messer,  14  Gray,  ISO; 
Case  V.  Gerrish,  15  Pick.  49,  50;  Mann 
V.  Darlington,  15  Pa.  St.  310;  Jones  v. 
Reeder,  22  Ind.  Ill;  Kahn  v.  Gum- 
berts,  9  Ind.  430;  and  see  ante,  §§  972, 
973;  [see  also  Kitchell  v.  Jackson,  71 
Ala.  556;  Rieg  v.  Burnhain,  55  Mich, 
39;  Mason  v.  Pier.son,  69  Wis.  585.] 

^  See  ante,  §  1044;  [also  §  375.] 


1571  TRUSTS    ARISING    BY    OPERATION    OF    LAW.       §  1058 

of  creditors,  although  without  any  legal  title,  and  perhaps 
without  any  written  evidence  of  interest,  as  the  real 
owner,  and  entitled  to  all  the  rights  and  consequences  of 
such  ownership.  Numerous  important  questions  con- 
cerning the  conduct  of  trustees,  their  relations  with  the 
trust  property  and  with  the  beneficiaries,  which  arise 
from  express  trusts,  can  have  no  existence  in  connection 
with  constructive  trusts.  Every  act  of  the  trustee  in 
holding,  managing,  investing,  or  otherwise  dealing  with 
the  trust  property  as  though  he  could  retain  it,  is  itself  a 
violation  of  his  paramount  obligation  to  the  beneficiary. 
If  the  trustee  refuses  or  delays  to  convey  the  property  to 
its  beneficial  owner,  and  retains  it,  derives  benefit  from 
its  use,  and  appropriates  its  rents,  profits,  and  income,  he 
must  account  for  all  that  he  thus  receives,  and  pay  over 
the  amount  found  to  be  due  to  the  cestui  que  trust,  as  well 
as  convey  to  him  the  corpus  of  the  trust  fund.  The  bene- 
ficiary, therefore,  being  the  true  owner,  may  always,  by 
means  of  an  equitable  suit,  compel  the  trustee  to  con- 
vey or  assign  the  corpus  of  the  trust  property,  and  to 
account  for  and  pay  over  the  rents,  profits,  issues,  and 
income  which  he  has  actually  received,  or,  in  general, 
which  he  might  with  the  exercise  of  reasonable  care  and 
diligence  have  received.*  In  such  a  suit  the  plaintiff 
is  also  entitled  to  any  additional  or  auxiliary  remedy, 
such  as  injunction,  cancellation,  accounting,  which  may 
be  necessary  to  render  his  final  relief  fully  eflBcient. 
No  change  in  the  form  of  the  trust  property,  effected 
by  the  trustee,  will  impede  the  rights  of  the  beneficial 
owner  to  reach  it  and  to  compel  its  transfer,  provided  it 
can  be  identified  as  a  distinct  fund,  and  is  not  so  mingled 
up  with  other  moneys  or  property  that  it  can  no  longer 
be  specifically  separated.  If  the  trust  property  has  been 
transferred  to  a  bona  fide  purchaser  for  value  without 

'  There    are    instances,    where   the  him  with  proceeds  or  profits  which  ho 

trustee   has   acted   in   good   faith,  in  might   have   received,  nor  with  com- 

which  a  court  of   equity  would  only  pound   interest,    etc:   See   Barnes  v. 

hold  him  accountable  for  what  lie  had  Taylor,  30  N.  J.  Eq.  7;  Greenwood's 

oc^ua^/^  received,  and  would  not  charge  Appeal,  92  Pa.  St.  181. 


§  1058  EQUITY  JURISPRUDENCE.  1572 

notice,  or  has  lost  its  identity,  the  heneficial  owner  must, 
and  under  other  circumstances  he  may,  resort  to  the  per- 
sonal liability  of  the  wrong-doing  trustee.*  The  existence 
of  a  constructive  trust,  as  of  a  resulting  one,  must  be 
proved  by  clear,  unequivocal  evidence.' 


SECTION  VI. 

POWERS,    DUTIES,   AND   LIABILITIES    OF   EXPRESS   TRUSTEES. 

ANALYSIS. 

§  1059.     Divisions. 

§  1060.     First.     Powers  and  modes  of  acting. 
§§  1061-1083.     Second.     Duties  and  liabilities. 
§§  1062-1065.     I.   To  carry  the  trust  into  execution. 

§  1062.     1.  The  duty  to  conform  strictly  to  the  directions  of  the  trust. 

§  1063.     2.  The  duty  to  account. 

§  1064.     3.  The  duty  to  obey  directions  of  the  court. 

§  1065.     4.  The  duty  to  restore  the  trust  property  at  the  end  of  th« 

trust. 
§§  1066-1074.     II.    To  use  care  and  diligence. 

§  1067.     1.  The  duty  of  protecting  the  trust  property. 

§  1068.     2.  The  duty  not  to  delegate  his  authority. 

§  1069.     3.  The  duty  not  to  surrender  entire  control  to  a  co-trastee. 

§  1070.     4.  The  amount  of  care  and  diligence  required. 

§  1071.     5.  The  duty  as  to  investments. 

§  1072.     The  necessity  of  making  investments. 

§  1073.     Kinds  of  investments:  When  particular  securities  are  expressly 

authorized. 
§  1074.     The  same:  When  no  directions  are  given. 
§§  1075-1078.     III.  To  act  with  good  faith. 

§  1075.     1.  The  duty  not  to  deal  with  the  trust  property  for  hts  own 

advantage. 
§  1076.     2.  The  duty  not  to  mingle  trust  funds  with  his  own. 
§  1077.     3.  The  duty  not  to  accept  any  position,  or  enter  into  any  re- 

lation,  or  do  any  act  inconsistent  with  the  interests  of  the 

beneficiary. 
§  1078.    4  The  duty  not  to  sell  trust  property  to  himself  nor  to  buy 

from  himself. 
§§  1079-1083.     IV.    Breach  of  trust  and  liability  therefor, 
§  1080.     Nature  and  extent  of  the  liability. 
§  1081.     Liability  among  co-trustees. 

'  Lathrop  v.  Bampton,  31  CaL   17;  De  Gex,  J.  &  S.  576;  Manning  ▼.  Hay- 

89  Am.  Dec.  141.  den,  5  Saw.  360;  North  Car.  R.  R.  v. 

'  As  to  delay  in  enforcing  the  bene-  Drew, 3 Woods,  691{acquiescence);Ger- 

ficiary's  right,  see  Rolfe  v.  Gregory,  4  man  Am.  Sem.  v.  Kiefer,  43  Mich.  105.- 


1573  POWERS    OF    EXPRESS    TRUSTEES.       §§  1059,  1060 

f  1082.  Liability  for  co-trustees. 

S  1083.  The  beneficiary  acquiescing,  or  a  party  to  the  breach  of  trask. 

§  1084.  Third.     The  trustee's  compensation  and  allowances. 

§  1085.  Allowances  for  expenses  and  outlays;  lien  therefor. 

§  1086.  Fourth.     Removal  and  appointment  of  trustees. 

§  1087.  Appointment  of  new  trustees. 

§  1059.  Divisions. — The  duties  and  liabilities  of  the 
trustees  and  corresponding  rights  of  the  beneficiaries  in 
trusts  arising  by  operation  of  law  have  been  explained  in 
the  preceding  section.  The  discussions  of  the  present 
section  refer  primarily  and  mainly  to  the  powers,  duties, 
and  liabilities  of  the  trustees  in  express  trusts  of  all 
kinds  and  for  all  purposes,  and  the  statement  of  their 
duties  and  liabilities  necessarily  includes  the  correlative 
rights  and  remedies  of  the  cestuis  que  trustent;  some  of 
the  conclusions  may,  however,  apply  to  the  trustees  in 
resulting  and  constructive  trusts.  The  entire  subject 
embraces  the  following  subdivisions:  1.  The  trustee's 
powers  and  modes  of  acting;  2.  His  duties  and  liabilities; 
3.  His  compensation  and  allowances;  4.  Removal  and 
appointment  of  trustees. 

§  1060.  First.  Powers  and  Modes  of  Acting.  —  Al- 
though an  acceptance  by  the  trustee  is  not  required  in 
order  to  assure  the  interest  and  rights  of  the  beneficiary, 
it  is  essential  to  the  existence  of  any  power  or  liability  of 
the  trustee  himself;  both  his  powers  and  his  liabilities 
originate  upon  his  acceptance.^  The  acceptance  may  be 
express  by  executing  an  instrument  in  writing,  or  implied 
from  acts  done  by  the  trustee  in  carrying  the  trust  into 
effect  or  in  dealing  with  the  trust  property.^  When  prop- 
erty is  given  upon  trust  to  two  or  more  trustees,  they  be- 
come joint  owners,  and,  in  general,  all  who  have  accepted 

»  See  ante,    %   1007;    Ainsworth   v.  De  Gex,  F.  &  J.  58;  Youdo  v.  Cloud, 

Backus,  5  Hun,  414;  Thorne  v.  Deas,  L.  R.  18  Eq.  634.     [See  also  Girard  v. 

4  Johns.  84;  Smedes  v.  Bank  of  Utica,  Futterer,    84   Ala.    323;    Kennedy  v. 

20  Johns.  372.  Winn,  80  Ala,  165.     Executor,  by  ac- 

'  Urch  V.  Walker,  SMylne  *  C.  702;  cepting  that  office,  accepts  the  trusts 

Crewe   v.    Dicken,    4   Ves.    97;  Arm-  vested  in  him  as  such:  Earle  v.  Earle, 

strong  V.  Morrill,  14  Wall.  120,   139;  93  N.  Y.  104.] 
aee  Life  Ass'n  of  Scotland  v.  Siddal,  3 


§  1061  EQUITY   JURISPRUDENCE.  1574 

must  unite  in  conveyances  and  similar  solemn  and  im- 
portant acts.^  It  results  from  the  joint  tenancy  of  trustees 
that  when  one  dies  or  resigns,  all  the  estate  and  powers 
remain  in  the  survivors  or  survivor;  and  this  right  of 
survivorship  will  not  be  affected  merely  because  there  is 
a  power  of  appointing  new  trustees  in  the  place  of  those 
dying  or  ceasing  to  act;  it  will  operate  until  the  new  trus- 
tees are  appointed.''  Upon  tke  death  of  a  single  trustee 
or  a  last  survivor,  the  trust  may  devolve  upon  his  heir  or 
administrator  until  a  new  trustee  is  appointed.' 

§  1061.  Second.  Duties  and  Liabilities.  —  In  this 
subdivision  I  shall  state  the  general  duties  of  express  trus- 
tees, the  violations  of  them  which  constitute  a  breach  of 
trust,  and  the  nature  and  extent  of  the  liabilities  incurred 
thereby.  The  doctrines  to  be  examined  are  those  which 
courts  of  equity  apply  in  controlling  the  conduct  of  all 
classes  of  persons  who  are  clothed  with  fiduciary  relations 
towards  property  in  which  others  are  beneficially  inter- 
ested, including  trustees  proper,  executors  and  adminis- 
trators, guardians  of  infants  or  of  persons  non  compotes 
mentis,  directors  or  managers  of  corporations,  and  other 
quasi  trustees.*    All  the  various  duties  of  actual  and  quasi 

'  This  assumes,  of  course,  that  there  15  R.  I.  60;  Long  v.  Long,  62  Md.  33; 

is  no  express  provision  to  the  contrary  Golder  v.  Bressler,  105  111.  419.] 
in  the  instrument  creating  the  trust:         '  Robson   v.    Flight,  4   De  Gex,  J. 

Learned  v.  Welton,  40  Cal.  349;  Saun-  &  S.  608  (the  heir  at  law  in  such  case 

dera  v.  Schmselzle,  49  Cal.  59,  67;  Bos-  cannot   exercise   discretionary  powers 

tonv.  Robbins,  126  Mass.  384;  In  re  given  to  the  trustee,  although  he  holds 

Bernstein,  3  Redf.  20;  Crane  v.  Hearn,  the  estate  subject  to  the  trust);  San- 

26  N.  J.  Eq.  378;  Lee  V.  Sankey,  L.  R.  der   v.   Heath  field,   L.   R.   19  Eq.  21; 

15  Eq.  204;  Charlton  v.  Earl  of  Dur-  Rackham  v.    Siddall,  1   Macn.   &   G. 

ham,  L.  R.  4  Ch.  433  (but  a  receipt  by  607;  Lord  v.  Wightwick.  4  De  Gex,  M. 

one   of  two   executors   who   are  also  &   G.  803;  Russell  v.  Peyton,   4   111. 

trustees   is  operative   and   suflBcient);  App.  473;  and  see  Clark  v.  Tainter,  7 

[Wilder  v.  Ranney,  95  N.  Y.  7;  Ham  Cush.    567;    Treadwell    v.    Cordis,   5 

V.    Ham,    58   N.    H.    70;  Crowley   v.  Gray,  341,  359;  Warden  v.  Richards, 

Hicks,  72  Wis.  539;  see  Bailey's  Pe-  11  Gray,  277;  Dunning  v.  Ocean  Nat. 

tition,   15  R.  L    60;    Franklin    Insti-  Bank,  6  Lans.  296;  Evans  v.  Chew,  71 

tute  V.  People's  Sav.  Bank,  14  R.  I.  Pa.  St.  47;  Waters  v.  Margerum,  60 

632.]  Pa.  St.  39;  Gray  v.  Henderson,  71  Pa. 

»  Lane  v.  Debenham,  II  Hare,  188;  St.  368. 
Warburton  v.    Sandys,   14   Sim.  622;         *  These   doctrines   are  embodied  in 

In  re  Waddell's  Contract,  L.  R.  2  Ch.  the  proposed  Civil  Code  of  New  York, 

Div.    172;    In  re   Cookes's    Contract,  sees.  1177-1188,  1196-1201,  1202-1207, 

L.   R.  4  Ch.  Div.    454;    Saunders   v,  and     in     the     Civil     Code     of     Cali- 

Schmffilzle,  49  Cal.  59,  67;  In  re  Bern-  fornia,    sees.    2228-2239,     2258-2263, 

stein,  3  Redf.  20;  [Bailey's  Petition,  2267-2269,   2273-2275. 


1575  POWERS    OF    EXPRESS    TRUSTEES.  §  10G2 

trustees  may  be  grouped  under  three  general  heads:  1.  To 
carry  out  the  trust;  2.  To  use  care  and  diligence;  3.  To 
act  with  good  faith;  and  each  of  these  contains  several 
more  specific  obligations. 

§1062.  I.  ToCarry  the  Trust  into  Execution.  — 1.  The 
Duty  to  Conform  Strictly  to  the  Directions  of  the  Trust. 
—  Under  the  general  obligation  of  carrying  the  trust  into 
execution,  trustees  and  all  fiduciary  persons  are  bound, 
in  the  first  place,  to  conform  strictly  to  the  directions  of 
the  trust.  This  is  in  fact  the  corner-stone  upon  which  all 
other  duties  rest,  the  source  from  which  all  other  duties 
take  their  origin.  The  trust  itself,  whatever  it  be,  consti- 
tutes the  charter  of  the  trustee's  powers  and  duties;  from 
it  he  derives  the  rule  of  his  conduct;  it  prescribes  the 
extent  and  limits  of  his  authority;  it  furnishes  the  meas- 
ure of  his  obligations.  If  tlie  trust  is  express,  created 
by  deed  or  will,  then  the  provisions  of  the  instrument 
must  be  followed  and  obeyed.  If  the  fiduciary  relation 
is  established  by  law  and  regulated  by  settled  legal  rules, 
then  these  legal  rules  must  constantly  guide  and  restrain 
the  conduct  of  the  one  who  occupies  the  relation.  In 
this  manner  the  acts,  powers,  duties,  and  liabilities  of  ex- 
ecutors, administrators,  guardians,  and  corporation  direc- 
tors are  governed  by  a  fixed  system  of  legal  rules  which 
constitute  their  instrument  or  declaration  of  trust.*  A 
trustee  can  use  the  property  only  for  the  purposes  con- 
templated in  the  trust,  and  must  conform  to  the  provis- 
ions of  the  trust  in  their  true  spirit,  intent,  and  meaning, 
and  not  merely  in  their  letter.  If,  therefore,  through  non- 
feasance, he  omits  to  carry  the  trust  into  execution,  or 
through  misfeasance  he  disobeys  the  directions  of  the 
trust,  he  renders  himself  in  some  manner  liable  to  the 
beneficiary  whose  rights  have  been  thus  violated.^     Trus- 

'  In  the  case  of   corporation  direc-  vey  tlie  property  and  pay  over  all  its 

tors  and  officers,  the  charters  and  by-  profits   to  the   beneficiary  is   marked 

laws   are   the   primary  source  of   tlie  out  by  the  law. 

fiduciary  power  and   duty.     Even   if  *  As   an    illustration    merely,   in    a 

the  trust  is  a   pure  resulting  or  con-  trust  to  sell,  the  trustee  must  not  sell 

structive  one,  the  simple  duty  to  con-  except  for  a  proper  object,  and  uiusb 


§  1062 


EQUITY    JURISPRUDENCE. 


1576 


tees,  in  carrying  the  trust  into  execution,  are  not  confined 
to  the  very  letter  of  the  provisions.  They  have  authority 
to  adopt  measures  and  to  do  acts  which,  though  not  spe- 
cified in  the  instrument,  are  implied  in  its  general  direc- 
tions, and  are  reasonable  and  proper  means  for  making 
them  effectual.  This  implied  discretion  in  the  choice  of 
measures  and  acts  is  subject  to  the  control  of  a  court  of 
equity,  and  must  be  exercised  in  a  reasonable  manner.* 


protect  the  interests  of  all  the  cestuia 
que  trustent  in  selling,  by  obtaining,  as 
far  as  may  be  reasonable,  the  full 
value,  or  the  best  possible  price,  etc. : 
Mortlock  V.  Buller,  10  Ves.  292,  308; 
Wilkina  v.  Fry,  1  Mer.  244,  268;  Ord 
V.  Noel,  5  Madd.  438;  Adair  v.  Brim- 
mer, 74  N.  Y.  539;  Penny  v.  Cook, 
19  Iowa,  538.  [See  also  Huse  v.  Den, 
85  Cal.  390;  20  Am.  St.  Rep.  232.] 
The  following  cases  are  given  only  as 
illustrations  of  the  doctrine,  since  its 
application  must  necessarily  depend 
upon  the  circumstances  of  each  case: 
Stroughill  V.  Anstey,  1  De  Gex,  M.  & 
G-.  635;  Boulton  v.  Beard,  3  De  Gex, 
M.  &  G.  608;  Lord  v.  Wightwick,  4 
De  Gex,  M.  k  G.  803;  In  re  Wood- 
burn's  Will,  1  De  Gex  &  J.  333; 
Brunskill  v.  Caird,  L.  R.  16  Eq.  493; 
Carlyon  v.  Truscott,  L.  R.  20  Eq.  348; 
Thompson  v.  Hudson,  L.  R.  2Ch.  255; 
Talbot  v.  Marshfield,  L.  R.  3  Ch.  622; 
Dance  v.  Goldingham,  L.  R.  8  Ch. 
902;  Tolson  v.  Sheard,  L.  R.  5  Ch. 
Div.  19;  Avery  v.  Griffin,  L.  R.  6  Eq. 
606;  Vyse  v.  Foster,  L.  R.  8  Ch.  309; 
O'Halloran  v.  Fitzgerald,  71  111.  53; 
Roberts  v.  Moseley,  64  Mo.  507;  Vose 
V.  Trustees  etc.,  2  Woods,  647;  Hill 
v.  Den,  54  Cal.  6;  lies  v.  Martin,  69 
Ind.  114;  Bowman  v.  Pinkham,  71 
Me.  295;  In  re  Lewis,  81  N.  Y.  421; 
James  v.  Cowing,  82  N.  Y.  449;  Sharp 
V.  Goodwin,  51  Cal.  219  (if  trustees 
for  creditors  sell  and  transfer  the  prop- 
erty to  a  third  person  who  has  notice 
of  the  trust,  but  pays  value,  and  he 
converts  the  property  into  money  and 
pays  off  all  the  creditors,  then  they 
have  no  cause  of  action  against  the 
original  trustees),  [See  also  Reed  v. 
Stauflfer,  56  Md.  236;  Boisseau  v. 
Boisseau,  79  Va.  73;  52  Am.  Rep.  616; 
Berrien  v.  Thomas.  65  Ga.  61;  Jones 
V.  McPhillips,  82  Ala.  102;  Baker  v. 
Ducker,  79  Cal.  305  (when  property 


is  held  by  a  religious  society  in  trust 
for  its  members,  none  of  the  members, 
though  they  constitute  a  majority, 
have  any  right  or  power  to  divert  the 
property  to  the  use  of  another  and 
dififerent  church  orgnization).  That 
a  power  to  sell  does  not  generally 
imply  a  power  to  pledge  or  mortgage, 
see  Loring  v.  Brodie,  134  Mass.  453; 
Wilson  V.  Md.  Life  Ins.  Co.,  60  Md. 
150;  Willis  v.  Smith,  66  Tex.  31;  but 
see  Waterman  v.  Baldwin,  68  Iowa, 
255.] 

'  The  following  are  examples,  and 
individual  cases  can  only  be  cited  as 
examples  upon  such  a  proposition: 
Kekewich  v.  Marker,  3  Macn.  &  G. 
310;  Barnett  v.  Sheffield,  1  De  Gex, 
M.  <fe  G.  371;  Manser  v.  Dix,  8  De 
Gex,  M.  &  G.  703;  Tait  v.  Lathbury, 
L.  R.  1  Eq.  174;  In  re  Peyton's  Trust, 
L.  R.  7  Eq.  463;  In  re  Chawner's  Will, 
L.  R.  8  Eq.  569;  Messeena  v.  Carr,  L. 
R.  9  Eq.  260;  In  re  Lord  Hotham's 
Trusts,  L,  R.  12  Eq.  76;  In  re  Shaw's 
Trusts,  L.  R.  12  Eq.  124;  Armstrong 
V,  Armstrong,  L.  R.  18  Eq.  541;  Hay- 
ward  V,  Pile,  L.  R.  5  Ch.  214;  Astley 
V.  Earl  of  Essex,  L.  R.  6  Ch.  898; 
Austin  V.  Austin,  L.  R.  4  Ch.  Div. 
233;  Leeming  v.  Lady  Murray,  L.  R. 
13  Ch.  Div.  123;  Hayes  v.  Oatley,  L. 
R.  14  Eq.  1;  Goddard  v.  Brown,  12 
R.  L  31;  Aldrich  v.  Aldrich,  12  R.  L 
141;  Luigi  v.  Luchesi.  12  Nev.  306; 
Phelps  V.  Harris,  51  Miss.  789;  Ram- 
melsberg  v.  Mitchell,  29  Ohio  St.  22; 
Valletta  v.  Bennett,  69  111.  632;  Za- 
briskie's  Ex'rs  v.  Wetniore,  26  N.  J. 
Eq.  18;  Macon  etc.  R.  R.  v.  Georgia 
etc.  R.  R.,  63  Ga.  103;  Starr  v.  Moul- 
ton,  97  111.  525.  [See  also  Moulton  \ . 
Holmes,  57  Cal.  337.  A  direction 
in  a  will  appointing  a  particular  per- 
son solicitor  or  agent  to  the  trustees 
imposes  no  duty  on  the  trustees  to 
continue  such  person  their  solicitor  or 


1577 


POWERS   OP   BXPRESS   TRUSTEES. 


§  1063 


It  follows  from  their  general  duty  that  trustees  cannot 
set  up  the  adverse  title  of  a  stranger  against  their  cestuia 
que  trustent,  and  much  less  buy  up  and  hold  such  adverse 
title  for  their  own  benefit.' 

§  1063.  2.  The  Duty  to  Account.  —  As  a  branch  of  the 
general  obligation  of  carrying  the  trust  into  execution,  a 
trustee  is  also  bound  to  account  for  all  the  trust  property. 
He  must  not  only  render  a  full  account  of  his  conduct  at 
the  time  of  final  settlement,  but  it  is  one  of  his  most  im- 
perative duties  to  keep  regular  and  accurate  accounts  dur- 
ing the  whole  course  of  the  trust  of  all  property  coming 
into,  passing  out  of,  or  remaining  in  his  hands.  These 
accounts  must  clearly  distinguish  between  the  trust  prop- 
erty and  his  own  individual  assets;  for  the  two  should 
never  be  mingled  in  the  accounts  nor  in  use;  they  should 
show  all  receipts  and  payments,  and  should  at  all  times 


agent:  Foster  v.  Elsley,  19  Ch.  Div. 
518;  citing  Finden  v.  Stephens,  2  Phill. 
Ch.  142;  Shaw  v.  Lawless,  5  Clark  & 
P.  129.] 

Whenever  the  instrument  of  trust 
expressly  confers  upon  trustees  a  dis- 
cretion as  to  acts  and  measures  in  car- 
rying out  the  general  object  of  the 
trust,  a  court  of  equity  will  not  gen- 
erally interfere  to  control  such  discre- 
tion, except  to  prevent  its  abuse  or 
unreasonable  exercise  to  the  actual  or 
probable  prejudice  of  the  beneficiaries: 
In  re  Beloved  Wilkes's  Charity,  3 
Macn.  &  G.  440;  Brophy  v.  Bellamy, 
L.  R.  8  Ch.  798;  In  re  Hodges,  L.  R. 
7  Ch.  Div.  754;  Tabor  v,  Bro^oks,  L.  R. 

10  Ch.  Div.  273;  Thomas  v.  Dering, 
1  Keen,  729;  Sillibourue  v,  Newport, 
1  Kay  &  J.  602;  In  re  Coe's  Trust. 
4  Kay  &  J.  199;  Walker  v.  Walker,  5 
Madd.  424;  Bankes  v.  Le  Despencer, 

11  Sim.  508,  527;  Cowley  v.  Hartston- 
age,  1  Dow,  361,  378;  Potter  v.  Chap- 
man, Amb.  9S;  Wain  v.  Earl  of  Eg- 
mont,  3  Mylne  &  K.  445;  Costabadie 
V.  Costabadie;  6  Hare,  410,  414;  Att'y- 
Gen.  V.  Mosely,  2  De  Gex  &  S.  .398; 
Prendergast  v.  Prendei-gast,  3  H.  L. 
Cas.  195;  Goddard  v.  Brown,  12  R.  I. 
31;  Aldrich  v.  Aldrich.  12  R.  I.  141; 
Haydel  v.  Hurck,  5   Mo.    App.    267; 


Starr  v.  Moulton,  97  111.  525;  Morton 
V.  Southgate,  28  Me.  41;  Littlefieldv. 
Cole,  33  Me.  552;  Hawes  Place  Cong. 
Soc.  V.  Trustees  etc.,  5  Cush.  454; 
Leavitt  V.  Beirne,  21  Conn.  1;  Arnold 
V.  Gilbert,  3  Sand.  Ch.  531;  Mason  v. 
Mason's  Ex'rs,  4  Sand.  Ch.  623;  Pul- 
press  V.  African  Ch..  48  Pa.  St.  204; 
Cochran  v.  Paris,  11  Gratt.  .348,  356. 
[See  also  Haight  v.  Brisbin,  96  N.  Y. 
135;  Garvey  v.  Garvey,  150  Mass.  185; 
Veazie  v.  Forsyth,  76  Me.  172;  Bacon 
V.  Bacon,  55  Vt.  243;  Read  v.  Patter- 
son, 44  N.  J.  Eq.  211;  6  Am.  St.  Rep. 
877;  Pole  v.  Pietsch,  61  Md.  570; 
Zimmerman  v.  Fraley,  70  Md.  561  (a 
trustee  substituted  by  the  court  for 
one  who  had  discretion  is  not  thereby 
clothed  with  discretion);  Wayland  v. 
Crank's  Ex'r,  79  Va.  602;  Faulk  v. 
Dashiel,  62  Tex.  642;  50  Am.  Rep. 
542;  Bull  v.  Cromie,  81  Ky.  646.] 

*  Newsome  v.  Flowers,  30  Beav. 
461;  O'Halloran  v.  Fitzgerald,  71  111. 
53;  Roberts  v.  Moseley,  64  Mo.  507; 
Morrow  v.  Saline  Co.  Comm'rs,  21 
Kan.  484;  and  see  Neale  v.  Davis,  5 
De  Gex,  M.  &  G.  258,  263.  [See  also 
Neyland  v.  Bendy,  69  Tex.  711; 
Baker  v.  Springfield  etc.  R'y  Co.,  86 
Mo.  75.] 


§  1064  EQUITY   JURISPRUDENCE.  1578 

be  open  to  the  inspection,  and  produced  at  the  demand  of 
the  beneficiary.* 

§  1064.  3.  The  Duty  to  Obey  Directions  of  the  Court. 
— Wherever  there  is  any  bona  fide  doubt  as  to  the  true 
meaning  and  intent  of  provisions  of  the  instrument  cre- 
ating the  trust,  or  as  to  the  particular  course  which  he 
ought  to  pursue,  the  trustee  is  always  entitled  to  maintain 
a  suit  in  equity,  at  the  expense  of  the  trust  estate,  and 
obtain  a  judicial  construction  of  the  instrument,  and 
directions  as  to  his  own  conduct.  Such  directions  he 
must,  of  course,  faithfully  obey,  and  if  he  does  so,  he  will 
be  relieved  from  all  responsibility  therefor.  Wherever 
any  suit  or  proceeding  is  instituted  by  the  beneficiary  or 
other  person  interested,  and  the  court  by  its  decree  or 
order  therein  directs  anything  to  be  done  or  omitted  by 
the  trustee,  such  directions  are  imperative,  and  must  be 
implicitly  obeyed.  A  refusal  or  neglect  to  obey  may 
render  the  trustee  liable  to  summary  punishment,  as  for  a 
contempt,  by  fine  and  imprisonment.' 

*  A  failure  to  keep  full  or  accurate  lowed  the  cfstui  que  trust  on  the  trust 

accounts      raises      all    presumptions  funds;  but  if  the  omission  is  willful, 

against  the  trustee;   it   may   subject  compound  interest  is  allowed:  Adams 

him  to  pecuniary  loss   by  rendering  v.  Lambard,   80  Cal.  426;  Lathrop  v. 

him  liable  to  pay  interest,  or  charge-  Smalley,    23  N.   J.  Eq.  192;  State  v. 

able  with  moneys  received  and  not  Howarth,  48  Conn.   207.     As  to  ac- 

duly  accounted  for:  See  Pearse  v.  counting  by  ^wcwi  trustees,  see  §  1421.] 
Green,  1  Jacob  &  W.  135;  Freeman  v.         *  Several  of  these  cases  are  exam- 

Fairlee,  3  Mer.  40,  42;  White  v.  Lady  pies  of  such  applications,  or  of  when 

Lincoln,  8  Ves.  363;  Lord  Chedworth  applications  are  or  are  not  necessary: 

V.    Edwards,   8  Ves.   46;    Lupton  v.  In  re  Shaw's  Trusts,  L.  R.  12  Eq.  124; 

White,    15  Ves,    432,    440;   Ottley  v.  In  re  Strutt's  Trusts,  L.  R.   16  Eq. 

Gilby,  8  Beav.  602;  Horton  v.  Broc  629;  In  re  Potts's  Estate,  L.  R.  16  Eq. 

klehurst,   29  Beav,  504;  McDonnell  v.  631,  note;  In  re  T ,  L.  R.  15  Oh. 

White,  11  H.  L.  Cas,  570;  Cramer  v.  Div.  78;  Middleton  v.  Chichester, 
Bird,  L.  R.  6  Eq.  143;  Talbot  v.  Marsh-  L.  R.  6  Ch.  152;  Evans  v.  Bear,  L.  R. 
field,  L.  R.  3  Ch.  622;  Clark  v.  Moody,  10  Ch.  76;  lies  v.  Martin,  69  Ind.  114; 
17  Mass.  145,  148;  Cooley  v.  Betts,  James  v.  Cowing,  82  N.  Y.  449;  Wil- 
24  Wend.  203;  Lockwood  v.  Thome,  liams  v.  Dwinelle,  51  Cal.  442,  446. 
11  N.  Y.  170;  62  Am.  Dec.  81;  Hart  [See  also  Greeley  v.  Nashua,  62  N.  H. 
V.  Ten  Eyck,  2  Johns.  Ch.  62,  108;  166;  Fairbanks  v.  Belknap,  136  Mass. 
Miller  v.  Simon  ton,  5  S.  C.  20.  [See  181;  Floyd  v.  Forbes,  71  Cal.  588.] 
also  McCarthy  v.  McCarthy,  74  Ala.  Among  the  instances  where  a  suit 
546;  Alexander  v.  Steele,  84  Ala.  332;  for  a  judicial  construction  is  proper 
Topping  v.  Windley,  99  N.  C.  4.  As  is  that  of  a  will  creating  trusts,  or 
a  general  rule,  where  the  omission  of  giving  property  in  trust:  See  ante,  vol. 
the  trustee  to  account  is  due  to  mere  1,  §  352,  note  1.  This  particular  sub- 
negligence,  without  any  actual  intent  ject  is  more  fully  examined  in  a  subse- 
to  defraud,  simple  interest  alone  is  al-  quent  section:  [See  §§  1155-1157.] 


1579  POWERS    OF    EXPRESS    TRUSTEES.       §§  1065-1067 

§  1065.  4.  The  Duty  to  Restore  the  Trust  Property  at 
the  End  of  the  Trust.  —  Finally,  when  the  trust  is  ended, 
and  the  authority  of  the  trustee  as  such  ceases,  it  is  his 
duty  to  restore  the  property  to  the  persons  who  are  then 
entitled  to  it  either  by  the  terms  of  the  instrument  or  by 
operation  of  legal  rules.  To  accomplish  this  object,  he  is 
bound  to  make  such  conveyances  as  the  parties  may  re- 
quire, in  order  to  vest  the  title  in  them.* 

§  1066.  II.  To  Use  Care  and  Diligence.  —  The  second 
branch  of  the  trustee's  obligation  is  to  use  care  and  dili- 
gence in  the  discharge  of  his  functions.  This  duty  is 
very  comprehensive;  it  extends  through  the  entire  range 
of  his  conduct;  it  is  entirely  independent  of  the  question 
of  good  faith,  for  he  will  be  liable  for  its  failure  even  when 
no  wrongful  intent  nor  violation  of  good  faith  is  charged 
upon  him.  He  may  be  liable  for  its  neglect  by  being 
held  answerable  for  property  actually  lost  through  want 
of  care  or  prudence,  and  also  for  moneys  which  he  might 
have  received  if  he  had  exercised  due  care,  prudence,  and 
judgment  in  his  investments  and  other  dealings  with  the 
trust  estate.  This  head  embraces  the  protection  of  trust 
property,  the  delegation  of  authority  to  third  persons  and 
to  co-trustees,  the  amount  of  care  and  diligence  requisite, 
and  the  important  subject  of  making  investments,  which 
will  be  considered  in  the  order  here  indicated. 

§  1067.  1.  The  Duty  of  Protecting  the  Trust  Property. 
—  The  trustee  is  bound  to  protect  the  trust  property  in 
every  reasonable  manner  during  the  continuance  of  the 
.trust.'     He    must    therefore   with  due    diligence  obtain 

'  The  trustee  may,  nnder  some  cir-  Lyons,  118  Mass.  92  (a  lease  executed 

cumstances,  demand  a  release  of  the  by  trustees  in  ignorance  of   the    fact 

trust  from  those  to  whom  he  transfers  that  the  cestui  que  trust  had  died,  and 

the  estate:  King  v.  Mullins,   1  Drew,  the  trust  thereby  ended,  is  voidable 

308;  Goodsoa  v.  Ellison,  3  Russ.  583;  only).    [See  also  Aubert'a  Appeal,  109 

Hampshire  v.  Bradley,  2  Coll.    C.  0.  Pa.  St.  447.] 

34;Whitmarsh  V,  Robertson,  1  Yonnge  '  The  following  cases  are  cited  sim- 

&  C.  715;  Holford  v.  Phipps,  3  Beav.  ply  as  illustrations  of  this  duty,  and 

434;  Yeates  v.  Roberts,  7  De  Gex,  M.  as  examples  of  acts  which  have  been 

&   Gr.    227;    3  Drew.    170;  Cramer  v.  held  to  be  or  not  to  be  violations  of  it: 

Bird,  L.  R.  6  Eq.   143;  Stokes's  Ap-  Wiles  v.  Gresham,  5  De  Gex,  M.  &  G. 

peals,    80   Pa.    St.    337;    Pennock   v.  770;  Lloyd  v.  Attwood,  3  De  Gex  &  J. 


§1067 


EQUITY   JURISPRUDENCE. 


1580 


possession  of  the  trust  property,  and  must  then  retain  it 
securely  under  his  own  control.  He  cannot  divest  him- 
self of  the  trust  by  conveying  or  assigning  the  property 
away  to  third  persons,  unless  the  trust  itself  is  for  the 
very  purpose  of  a  sale  or  other  disposition;  and  even  then 
he  can  only  dispose  of  the  property  in  pursuance  of  the 
trust,  and  to  carry  out  its  objects.*  As  a  mode  of  obtain- 
ing secure  possession,  the  trustee  must  with  all  reasonable 
diligence  collect  debts  and  demands,  and  the  amounts 
due  on  choses  in  action,  when  required  to  do  so  by  the 
terms  of  the  trust  instrument,  or  by  the  nature  and  ob- 
jects of  the  trust,  and  he  is  liable  for  losses  resulting  from 
his  neglect  or  unreasonable  delay  in  this  matter.-  Trust 
moneys  may  be  deposited  for  a  reasonable  time  in  a  bank 


614;  Harper  v.  Hayes,  2  De  Gex,  F.  & 
J.  542;  Case  v.  James,  3  De  Gex,  F.  & 
J.  256;  Turquand  v.  Marshall,  L.  R. 
6  Eq.  112;  Taylor  v.  Cartwright,  L.  R. 

14  Eq.  167;  Ex  parte  Dressier,  L.  R. 
9  Ch.  Div.  252;  Butler  v.  Carter,  L. 
R.  5  Eq.  270;  Talbot  v.  Marshfield, 
L.  R.  3  Ch.  622;  Dance  v.  Goldingham, 
L.  R.  8  Ch.  902;  Tolson  v.  Sheard,  L. 
R.  5  Ch.  Div.   19;  In  re  T ,  L.  R. 

15  Ch.  Div.  78;  Ex  parte  Culley,  L.  R. 
9  Ch.  Div.  307;  Goddard  v.  Brown,  12 
R.  I.  31;  Pool  v.  Dial,  10  S.  C.  440; 
Vose  V.  Trustees  etc.,  2  Woods,  647; 
Carpenter  v.  Carpenter,  12  R.  I.  544; 
34  Am.  Rep.  716;  Gilmore  v.  Tuttle, 
32  N.  J.  Eq.  611;  [Tuttle  v.  Gilmore, 
36  N.  J.  Eq.  617;]  Russell  v.  Peyton, 
4  IlL  App.  473;  Morrow  v.  Saline  Co. 
Comm'rs,  21  Kan.  484;  Adair  v.  Brim- 
mer, 74  N.  Y.  539;  Foscue  v.  Lyon, 
55  Ala.  440;  Wasson  v.  Garrett,  58 
Tenn.  477;  Mansfield  v.  Alwood,  84 
111.  497;  Sharp  v.  Goodwin,  51  Cal. 
219;  Gettins  v.  Scudder,  71  111.  86. 
[See  also  Tarver  v.  Torrance,  81  Ga. 
261;  12  Am.  St.  Rep.  311  (liable  for 
loss  of  trust  funds  stolen  from  his  per- 
son). The  court  will  not  authorize  the 
trust  fund  to  be  carried  beyond  its 
jurisdiction  without  requiring  security 
for  its  protection:  Cochran  v.  Fellans, 
20  S.  C.  2.37;  McCullough  v.  McCul- 
lough,  44  N.  J.  Eq.  313,  and  reporter's 
note  on  foreign  investment  of  trust 
funds.] 

^  The   trustee   is,  of    course,  liable 


for  any  loss  occasioned  by  his  undue 
neglect  to  obtain  possession  of  the 
property  or  to  retain  it  securely:  See 
Salway  v.  Salway,  2  Russ.  &  M.  215; 
Butler  V.  Carter,  L.  R.  5  Eq.  276; 
Youde  v.  Cloud,  L.  R.  18  Eq.  634;  Ex 
parte  Ogle,  L.  R.  8  Ch.  711. 

*  The  trustee's  duties  and  liabilities 
concerning  investments,  and  his  per- 
mitting funds  to  remain  invested  in 
certain  kinds  of  securities,  are  stated 
in  subsequent  paragraphs:  §§  1071- 
1074.  The  nature  of  the  trust  will 
generally  determine  whether  notes, 
stocks,  and  other  things  in  action 
should  be  converted  into  money.  If 
the  trust  instrument,  in  terms,  gives  to 
a  benericiary  the  income  arising  from 
certain  specified  choses  in  action,  the 
form  of  the  investment  would  thus  be 
declared,  and  no  duty  would  generally 
arise  to  convert  such  securities  into 
money:  See  Wiles  v.  Gresham,  2  Drew. 
258;  5  De  Gex,  M.  &  G.  770;  Grove 
v.  Price,  26  Beav.  103;  Sculthorpe  v. 
Tipper,  L.  R.  13  Eq.  232;  Ex  parte 
Ogle,  L.  R.  8  Ch.  711;  Bacot  v.  Hey- 
ward,  5  S.  C.  441  (compromising  a 
debt);  Mansfield  v.  Alwood,  84  111.  497 
(collecting  rents  and  profits);  Dockery 
V.  French,  73  N.  C.  420  (receiving  pay- 
ments in  confederate  money);  Moore  v. 
Mitchell,  2  Woods,  483  (ditto).  [See 
also  Billing  v.  Brogden,  38  Ch.  Div. 
546;  Leonard's  Appeal,  95  Pa.  St.  196; 
Mill's  Adm'r  v.  Talley's  Adm'r,  83  Va. 
361.] 


1581  POWERS    OF    EXPRESS    TRUSTEES.  §   lOGS 

having  good  credit,  if  the  deposit  is  made  to  tlie  credit  of 
the  trust  estate,  and  not  in  the  trustee's  individual  name 
and  account;  and  the  trustee  does  not  become  liable  for  a 
loss  occasioned  by  a  failure  of  the  bank  under  these  cir- 
cumstances.' He  is  liable,  however,  for  a  loss  resulting 
from  a  failure  of  the  bank  or  of  a  broker,  when  funds 
which  ought  to  have  been  invested  are  left  remaining  on 
deposit,  or  when  the  deposit  is  in  the  trustee's  individual 
account  mingled  with  his  own  funds.^  For  wrongful  pay- 
ments made  to  third  persons,  or  to  a  cestui  que  trust,  the 
trustee  is  generally  chargeable.' 

§  1068.  2.  The  Duty  not  to  Delegate  his  Authority.  — 
The  office  of  a  trustee  is  one  of  personal  confidence,  and 
cannot  be  delegated.  A  trustee,  therefore,  unless  expressly 
authorized  by  the  instrument  of  trust,  cannot  delegate,  or 
transfer,  or  intrust,  in  whole  or  in  part,  his  powers  of 
discretion  and  management  to  any  associate,  subordinate, 
or  assistant  who  takes  his  place  and  assumes  his  respon- 
sibility. If  he  does  so,  he  remains  liable  to  the  beneficiary, 
and  is  chargeable  for  all  acts  and  omissions  of  his  dele- 

*  Rowth    V.    Howell,    3    Vea.    565;  care   and   prudence,  turns  out   to  be 

Swinfen   v.    Swinfen,    29   Beav.    211;  wrong,  the  trustee  may  not  be  obliged 

Pennell  v.  DefFell,  4  De  Gex,  M.  &  G.  to   make   the    amount    good    for   the 

872;  Carpenter  v.  Carpenter,  12  R.  I.  benefit  of  the  estate.     The  following 

644;  34  Am.  Rep.  716  (bonds  placed  in  cases  are  mere  examples:  Forshaw  v. 

a  bank  as  a  special  deposit  and  stolen);  Higginson,  8  De  Gex,  M.   &  G.  827; 

Crane  V.  Moses,  13  S.  C.  561.     [See  also  Aveline  v.  Melhuish,  2  De  Gex,  J.  & 

Jacobus  V.  Jacobus,  37  N.  J.  Eq.  17.]  S.  288;  Darke  v.  Williamson,  25  Beav. 

'  Challen  v.  Shippam,  4  Hare,  555;  622;  Ward  v.  Ward,  2  H.  L.  Cas.  777, 

Johnson  V.   Newton,    11    Hare,    160;  784;  Gunnell  v.  Whitear,  L.  R.  lOEq. 

Swinfen   v.    Swinfen,    29   Beav.    211;  664;  Hayes  v.  Oatley,  L.  R.  14  Eq.  1; 

Rehden    v.    Wesley,    29    Beav.    213;  Taylor  v.  Cartwright,L.  R.  14  Eq.  167; 

Matthews  v.  Brise,  6  Beav.  239;  Moyle  Ex  parte  Ogle,  ]...  R.  8  Ch.  711;  la  re 

V.  Moyle,  2  Russ.  &  M.  710;  Salwav  Englefield  etc.  Co.,  L.  R.   8  Ch.  Div. 

V.   Salway,  2   Russ.  &  M.  215.     [See  388;  In  re  Cull's  Trusts,  L.  R.  20  Eq. 

also  Collins  v.  Gooch,  97  N.  C.  186;  2  561 ;  Talbot  v.  Marshfield.  L.  R.  3  Ch. 

Am.  St.  Rep.  284;  Summers  v.  Rey-  622;  Haydel  v.   Hurck,   5  Mo.    App. 

nolds,  95  N.  C.  404;  Williams  v.  Wil-  267;  Singleton  v.   Lowndes,    9   S.   C. 

liams,  55  Wis.  300;  42  Am.  Rep.  708;  465;  Wasson  v.  Garrett,  58Tenn.477; 

Naltner  v.  Dolan,    108   Ind.    504;   58  Draper  v.    Stone,  71   Me.    175.     [See 

Am.  Rep.  61  (deposit  in  trustee's  in-  also  Kimball  v.  Norton,  59  N.  H.  1; 

dividual   account).l     As   to   mingling  47  Am.  Rep.  171  (astipulation  between 

trust  funds  with   bis   own,  see  post,  a  savings  bank  and  a  depositor  that 

§  1076.  his  deposit  may  be  paid  to  any  one  pre- 

'  Each  case  must,  to  a  great  extent,  senting  his  book  does  not  relieve  the 

stand    upon    its   own   circumstances,  bank  from  the  duty  of  exercising  rea- 

Where  a  payment  made  in  good  faith,  sonable  care);  Judy  v.    Farmers    etc. 

and  with  the   exercise  of  reasonable  Bank,  81  Mo.  404  (bank  deposit).] 


§  1069  EQUITY    JUllISPRUDENCE.  1582 

gate,  and  with  all  losses,  whether  occasioned  by  the  latter's 
fraud,  neglect,  want  of  good  faith,  or  other  cause.*  This 
rule  does  not  prohibit  a  trustee  from  employing  agents. 
He  may  act  through  agents  in  his  administrative  oper- 
ations whenever  such  a  mode  of  dealing  is  in  accordance 
with  the  ordinary  course  of  business.* 

§  1069.  3.  The  Duty  not  to  Surrender  Entire  Control  to 
a  Co-trustee.  —  As  a  trustee  cannot  delegate  his  authority 
to  a  subordinate,  so  on  the  same  principle  he  cannot  idly 
yield  or  surrender  the  entire  control  of  the  trust  property 
and  exercise  of  the  trust  functions  to  his  co-trustees,  when 
he  is  associated  in  the  trust  with  others.  A  trustee  is 
not  liable  under  all  circumstances  for  every  act  or  default 
of  his  co-trustees;  but  still,  in  general,  where  there  are 
several  trustees,  the  beneficiary  is  entitled  to  that  security 
and  protection  which  result  from  the  care,  oversight,  and 
co-operation  of  all  the  trustees.  If,  therefore,  a  trustee 
virtually  abandons  his  active  functions,  neglects  to  inter- 
pose in  the  management,  and  leaves  the  whole  control  to 
his  co-trustees,  he  will  be  liable  for  losses  occasioned  by 
their  wrongful  acts  or  neglects.' 

'  Ex  parte  Rigley,  19  Ves.  463;  direct  clerks  who  collect  sums  to  de- 
Adams  V.  Clifton,  1  Russ.  297;  Sahray  posit  them  therein;  he  can  remit 
V.  Sal  way,  4  Russ.  60;  2  Russ.  &  M.  moneys  by  bills  drawn  on  and  by  re- 
215;  Eaves  v.  Hickson,  30  Beav,  136;  sponsible  parties,  etc.  If  he  act  in 
Turner  v,  Corney,  5  Beav.  515,  517;  such  manner  according  to  the  cus- 
Ghost  V.  Waller,  9  Beav.  497;  Griffiths  tomary  modes  of  doing  business,  in 
V.  Porter,  25  Beav.  236;  Rowland  v.  good  faith  and  with  reasonable  pru- 
Witherden,  3  Macn.  &  G.  568;  Bostock  deuce,  he  will  not  be  responsible  for 
V.  Floyer,  L.  R.  1  Eq.  26;  Berger  v.  the  loss  of  trust  funds  occurring 
Duff,  4  Johns.  Ch.  368;  Hawley  v.  through  such  dealings:  Wren  v.  Kir- 
James,  5  Paige,  318;  Pearson  v,  Jami-  ton,  11  Ves.  377;  Massey  v.  Banner,  1 
son,  1  McLean,  197;  Vose  v.  Trustees  Jacob  &  W.  241;  Clough  v.  Bond,  3 
etc.,  2  Woods,  647;  Seely  v.  Hills,  49  Mylne  &  C.  490;  Joy  v.  Campbell,  1 
Wis.  473;  [Fry  v.  Tapson,  28  Ch.  Div.  Schoales  &  L.  32S,  341;  Darke  v. 
268;  Fuller  v.  O'Neal,  69  Tex.  349;  5  Martyn,  1  Beav,  525;  Hawley  v. 
Am.  St.  Rep.  59  (a  sale  of  land  under  James,  5  Paige,  318,  487;  Sinclair  v. 
a  trust  deed  in  the  nature  of  a  mort-  Jackson,  8  Cow.  543;  Abbot  v.  Rubber 
gage  not  conducted  by  the  trustee  in  Co.,  33  Barb.  578;  Leggett  v.  Hunter, 
person  held  void;  contra,  Tyler  v.  19  N.  Y.  445;  Blight  v.  Schenck,  10 
Herring,  67  Miss.  169;  19  Am.  St.  Rep.  Pa.  St.  285;  51  Am.  Dec  478;  Lewis 
263).]  V.  Reed,  11  Ind.  239;  Telford  v.  Bar- 

'  For   example,   he  may  employ  a  ney,    1   Iowa,   575,   591;   [Speight  v. 

steward  or  manager  of  the  estate  for  Gaunt,  22  Ch.  Div.  727;  on  appeal,  9 

all  matters  strictly  ministerial;  he  can,  App.  Cas.  (H.  L.)  1;  compare  Fry  v. 

of  course,  employ  clerks,  book-keepers,  Tapson,  28  Ch.  Div.  268.] 
and   the   like;    he   can    deposit   trust         ^  Clough  v.  Bond,  3  Mylne  &  C.  490, 

moneys  in  a  responsible   bank,    and  497;  Burrows  v.  Walls,  6  De  Gex,  M. 


1583 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1070 


§  1070.  4.  The  Amount  of  Care  and  Diligence  Re- 
quired.—  The  principle  is  well  settled  that  trustees  are 
bound  to  exercise  care  and  prudence  in  the  execution  of 
their  trust,  in  the  same  degree  that  men  of  common  pru- 
pence  ordinarily  exercise  in  their  own  affairs.  A  trustee, 
in  other  words,  must  use  the  same  care,  skill,  diligence, 
and  prudence  in  his  management  of  the  trust  and  his 
dealings  with  the  trust  property  which  a  man  of  or- 
dinary care,  skill,  and  prudence  would  use  in  his  own 
transactions  and  with  his  own  property  under  like  cir- 
cumstances; and  the  trustee  is  answerable  for  all  losses, 
deficiencies,  and  injuries  which  are  occasioned  by  his 
affirmative  or  negative  violation  of  this  obligation.^    The 


&  G.  233;  Styles  v.  Guy,  1  Macn.  & 
G.  422;  Paddon  v.  Richardson,  7  De 
Gex,  M.  &G.  563;  Thompson  v.  Finch, 
8  De  Gex,  M.  &  G.  5G0,  503,  564; 
Bates  V.  Underbill,  3  Redf.  365;  Gray 
V.  Reamer,  11  Bush,  113;  Spencer  v. 
Spencer,  11  Paige,  299;  Clark  v.  Clark, 
8  Paige,  152;  35  Am.  Dec.  676;  Monell 
V.  Monell,  5  Johns.  Ch.  283;  9  Am. 
Dec.  298;  Banks  v.  Wilkes.  3  Sand. 
Ch.  99;  Pim  v.  Downing,  11  Serg.  & 
R.  66;  Jones's  Appeal,  8  Watts  &  S. 
143,  147;  42  Am.  Dec.  282;  Wayman 
V.  Jones,  4  Md.  Ch.  500;  Ringgold  v. 
Ringgold,  1  Har.  &  G.  11;  18  Am. 
Dec.  250;  Maccubhin  v.  Cromwell's 
Ex'rs,  7  Gill  &  J.  157;  Royall's  Adm'r 
V.  McKenzie,  25  Ala.  363;  State  v. 
Guilford,  15  Ohio,  593;  [also  Earle  v. 
Earle,  93  N.  Y.  113;  Hinson  v.  Wil- 
liamson, 74  Ala.  180.]  For  the  relations 
between  co-trustees  and  their  liabilities 
in  general,  see  post,  §§  1081,  1082. 

'  This  doctrine  was  so  fully  and  ably 
examined  in  the  very  recent  case  of 
Hun  V.  Cary,  82  N.  Y.  65,  37  Am. 
Rep.  546,  that  I  shall  quote  from  it  at 
some  length.  The  action  was  brought 
by  a  receiver  representing  the  depos- 
itors against  a  portion  of  the  directors 
of  a  savings  bank.  The  bank  was 
located  in  New  York  City,  and  did  a 
very  small  business.  Up  to  January, 
1873,  its  average  deposits  were  about 
seventy  thousand  dollars,  and  its  in- 
come had  been  less  than  its  expenses. 
In  May,  1873,  the  bank,  by  order  of 
the  board  of  directors,  bought  a  lot  for 
twenty-nine  thousand  dollars,  paying 


ten  thousand  dollars  of  this  price  ia 
cash;  it  then  erected  a  building  on 
this  lot,  costing  twenty-seven  thousand 
dollars,  and  gave  a  mortgage  thereoa 
for  thirty  thousand  five  hundred  dol- 
lars. All  this  was  done  with  the 
avowed  object  of  increasing  the  ap- 
parent credit  of  the  bank  and  thereby 
its  business.  Two  years  after,  the 
bank  failed.  This  lot  and  building, 
and  other  property  amounting  only  to 
one  thousand  dollars,  constituted  the 
entire  assets  of  the  bank.  In  other 
words,  all  the  assets  except  one  thou- 
sand dollars  were  swallowed  up  in  the 
lot  and  building,  and  this  was  all 
swept  away  by  a  foreclosure  of  the 
mortgage.  Before  the  purchase  of  the 
lot,  the  bank  had  occupied  leased 
rooms;  and  its  total  assets  were  sev- 
eral thousand  dollars  less  than  its 
debts,  which  fact  was  known  to  the 
directors  when  they  made  the  pur- 
chase. The  charter  gave  the  directors 
power  to  purchase  a  lot  for  a  banking- 
house.  Held,  that  the  transaction 
was  not  a  mere  error  of  judgment,  and 
that  the  directors  were  personally  lia- 
ble. In  regard  to  the  position  of 
directors,  the  court  held  that  tlie  rela- 
tion of  the  directors  to  the  bank  waa 
that  of  agent  to  a  principal;  the  rela- 
tion of  the  directors  to  the  depositora 
was  that  of  trustee  and  ceslui  que  trust. 
On  the  general  doctrine  concerning 
the  duty  of  trustees,  the  court  said, 
per  Earl,  J.  (p.  70):  "If  the  trustees 
act  fraiidnlcntly  or  do  a  willful  wrong, 
it  is  not  doubted  that  they  may  be 


§  1070 


EQUITY    JURISPRUDENCE. 


1584 


law  does  not  cast  upon  the  trustee  an  extraordinary  duty, 
nor  demand  an  extraordinary  care,  nor  hold  him  liable 


held  for  all  the  damage  they  cause  to 
the  bank  or  its  depositors.  But  if 
they  act  in  good  faith,  within  the  lim- 
its of  powers  conferred,  using  proper 
prudence  and  diligence,  they  are  not 
responsible  for  mere  mistakes  or  errors 
of  judgment.  What  degree  of  care 
and  diligence  are  they  bound  to  exer- 
cise ?  Not  the  highest  degree,  not 
Buch  as  a  very  vigilant  or  extremely 

careful  person  would  exercise 

When  one  deposits  money  in  a  savings 
l)ank,  or  takes  stock  in  a  corporation, 
he  expects,  and  has  the  right  to  ex- 
pect, that  the  trustees  or  directors 
will  exercise  ordinary  care  and  pru- 
dence in  the  trusts  committed  to  them, 
—  the  same  degree  of  care  and  pru- 
dence that  men  prompted  by  self- 
interest  generally  exercise  in  their  own 
affairs.  It  is  impossible  to  give  the 
measure  of  culpable  negligence  for  all 
cases,  as  the  degree  of  care  required 
depends  upon  the  subjects  to  which  it 
is  to  be  applied:  First  Nat.  Bank  v. 
Ocean  Nat.  Bank,  60  N.  Y.  278;  19 
Am.  Rep.  181.  There  is  a  classifica- 
tion of  negligence  to  be  found  in  the 
books,  not  always  of  practical  value, 
and  yet  sometimes  serviceable,  into 
slight  negligence,  gross  negligence, 
and  that  degree  of  negligence,  inter- 
mediate the  two,  attributed  to  the 
absence  of  ordinary  care;  and  the 
claim  on  behalf  of  these  trustees  is, 
that  they  can  only  be  held  responsible 
in  this  action  for  the  consequences  of 
their  gross  negligence,  according  to 
this  classification.  If  gross  negligence 
be  taken  according  to  its  ordinary 
meaning,  — as  something  nearly  ap- 
proaching fraud  or  bad  faith,  —  I  can- 
not yield  to  this  claim;  and  if  there 
are  any  authorities  upholding  the 
claim,  I  emphatically  dissent  from 
them.  It  seems  to  me  that  it  would 
be  a  monstrous  proposition  to  hold 
that  trustees,  intrusted  with  the  man- 
agement of  the  property,  interests, 
and  business  of  other  people,  who 
divest  themselves  of  the  management 
and  confide  in  them,  are  bound  to  give 
only  slight  care  to  the  duties  of  their 
trust,  and  are  liable  only  in  case  of 
gross  inattention  and  negligence;  and 
I  have  found  no  authority  fully  up- 
holding such  a  proposition.     It  is  true 


that  authorities  are  found  which  hold 
that  trustees  are  liable  only  for  crassa 
negliqentia,  which  literally  means  gross 
negligence;  but  that  phrase  has  been 
defined  to  mean  the  absence  of  ordi- 
nary care  and  diligence  adequate  to 
the  particular  case."  He  then  quotes 
from  Scott  v.  Depeyster,  1  Edw.  Ch. 
513,  543,  53  Am.  Dec.  624,  Hodges  v. 
New  England  Screw  Co.,  1  R.  I.  312, 
63  Am.  Dec.  624,  3  R.  I.  9,  Litchfield 
V.  White,  3  Sand.  545,  and  Charitable 
Corporation  v.  Sutton,  2  Atk.  405,  all 
of  which  directly  sustain  his  position, 
and  continues:  "In  the  Scotch  case  of 
Liquidators  of  the  Western  Bank 
V.  Douglas,  11  Ses.  Cas.  S.  3d  series, 
112,  it  is  said:  'Whatever  the  duties 
[of  trustees  and  directors]  are,  they 
must  be  discharged  with  fidelity  and 
conscience,  and  with  ordinary  and 
reasonable  care.  It  is  not  necessary 
that  I  should  attempt  to  define  where 
excusable  remissness  ends  and  gross 
negligence  begins.  That  must  depend 
to  a  large  extent  on  the  circumstances. 
It  is  enough  to  say  that  gross  negli- 
gence in  the  performance  of  such  a 
duty,  the  want  of  reasonable  and  ordi- 
nary fidelity  and  care,  will  impose  lia- 
bility for  loss  thereby  occasioned.'  In 
Spering's  Appeal,  71  Pa.  St.  11,  10 
Am.  Rep.  684,  Judge  Sharswood  said: 
•  They  [the  directors]  can  only  be  re- 
garded as  mandataries,  — persons  who 
have  gratuitously  undertaken  to  per- 
form certain  duties,  and  who  are 
therefore  bound  to  apply  ordinary  skill 
and  diligence, — but  no  more';  and 
added  that  the  directors  *  are  not  lia- 
ble for  mistakes  of  judgment,  even 
though  they  may  be  so  gross  as  to 
appear  to  us  absurd  and  ridiculous, 
provided  they  were  honest,  and  pro- 
vided they  are  fairly  within  the  scope 
of  the  powers  and  discretion  confided 
to  the  managing  body.'  As  I  under- 
stand this  language,  I  cannot  assent 
to  it  as  properly  defining  to  any  ex- 
tent the  nature  of  a  director's  respon- 
sibility. Like  a  mandatary,  to  whom 
he  has  been  likened,  he  is  bound  not 
only  to  exercise  proper  care  and  dili« 
gence,  but  ordinary  skill  and  judg- 
ment. As  he  is  bound  to  exercise 
ordinary  skill  and  judgment,  he  can- 
not set  up  that  he  did  not  possess 


1585 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1070 


for  mere  error  of  judgment,  much  less  does  it  make  liira 
an  insurer  of  the  property.     If  he  has  exercised  the  care 


them.  When  damage  is  caused  by 
his  wanb  of  judgment,  he  cannot  ex- 
cuse himself  by  alleging  his  gross 
ignorance." 

The  language  of  some  able  decisions 
may,  when  carelessly  read,  be  mis- 
leading. They  speak  of  '*  gross  "  neg- 
ligence as  a  measure  of  a  trustee's 
liability,  but  at  the  same  time  define 
"gross"  negligence  as  mei-ely  being 
the  want  of  ordinary  care.  Thus  in 
the  Scotch  case  quoted  above,  "gross 
negligence  "  is  made  to  be  synonymous 
with  "the  want  of  reasonable  and  or- 
dinary care  and  fidelity."  A  few  sub- 
Bequent  cases  have  taken  a  portion  of 
this  rule — the  gross  negligence — ap- 
parently without  adverting  to  the 
definition  thus  given  of  the  term: 
Spering's  Appeal,  71  Pa.  St.  11,  re- 
ferred to  by  Mr.  Justice  Earl,  may  be 
regarded  as  an  illustration.  It  may 
be  diflScult,  perhaps,  to  reconcile  the 
different  passages  of  Judge  Shars- 
wood's  opinion  in  this  case.  So  far  as 
it  holds  the  trustee  liable  only  for 
gross  negligence,  using  that  word  in 
any  other  sense  than  the  want  of  or- 
dinary care,  it  is  unsupported  by  au- 
thority. The  English  courts  have 
abandoned  the  three  grades  of  gross, 
ordinary,  and  slight  negligence.  The 
modern  English  decisions  have  entirely 
abrogated  the  doctrine  so  often  laid 
down  in  books,  that  an  uncompensated 
mandatary  or  other  bailee  is  only 
bound  to  use  slight  care,  and  is  only 
liable  for  gross  neglect;  they  hold  that 
such  mandatary  or  bailee  may  be 
bound  to  use  great  care,  and  is  always 
obliged  to  use  all  the  care  and  skill 
wliich  he  actually  possesses:  See 
Wilson  V.  Brett,  11  Mees.  &  W.  113, 
115,  per  Rolfe,  B. ;  Hinton  v.  Dibbin, 
2  Q.  B.  6415,  (561,  per  Lord  Denman; 
Wyld  V.  Pickford,  S  Mees.  &  W.  443, 
461,  402,  per  Parke,  B.;  Grill  v.  Cen- 
tral Iron  etc.  Co.,  L.  R.  1  Com.  P. 
600,  612,  614,  per  Willesand  Montague 
Smith,  JJ.  On  every  consideration  of 
principle,  as  well  as  upon  authority, 
the  same  doctrine  must  applj"^  to  trus- 
tees. The  case  of  Turqand  v.  Mar- 
shall, L.  R.  4  Ch.  376,  gives  no  sup- 
port whatever  to  the  broad  doctrine 
as  laid  down  by  Judge  Sharswood. 
The  decision  of  the  court  is  simply 
2  E«.  JuR.  — 100 


that  on  the  bill  framed  upon  charges 
of  misrepresentation  against  the  di- 
rectors, relief  cannot  be  granted  for 
their  negligence.  Lord  Hatherley 
does  not  discuss  the  general  duties  of 
directors,  much  less  those  of  trustees; 
hia  dictum  concerning  the  lialiility  of 
the  defendants  for  their  dealings 
(p.  3S6)  is  based  wholly  upon  the  terms 
of  their  "  deed  of  settlement "  and  the 
powers  which  it  gave  them  in  this  par- 
ticular case.  The  decision  is  not  an 
authority  upon  the  liability  in  general 
of  trustees  or  directors  for  care  and 
diligence.  In  the  often-quoted  case 
of  Clough  V.  Bond,  3  Mylne  &  C.  490, 
496,  Lord  Cottenham  states  the  rule 
in  a  very  clear  manner.  He  is  speak- 
ing of  the  duty  with  reference  to  the 
safety  and  security  of  trust  funds; 
but  the  same  doctrine  clearly  applies 
to  all  dealings  by  a  trustee  with  the 
affairs  of  the  trust  which  may  en- 
endanger  the  safety  of  the  estate. 
"It  will  be  found  to  be  the  result  of 
all  the  best  authorities  iipon  the  sub- 
ject, that  although  a  personal  repre- 
sentative, acting  strictly  within  the 
line  of  his  duty,  and  exercising  reason- 
able care  and  diligence,  will  not  be 
responsible  for  the  failure  or  depre- 
ciation of  the  fund  in  wliich  any  part 
of  the  estate  may  be  invested,  or  for 
the  insolvency  or  misconduct  of  any 
})erson  who  may  have  possessed  it,  yet 
if  that  line  of  duty  be  not  strictly  pursued, 
and  any  part  of  the  property  be  in- 
vested by  such  personal  representa- 
tive in  funds  or  upon  securities  not 
authorized,  or  be  put  within  the  con- 
trol of  persons  who  ought  not  to  b« 
intrusted  with  it,  and  a  loss  be  thereby 
eventually  sustained,  such  personal 
representative  will  be  liable  to  make 
it  good,  however  unexpected  the  re- 
sult, however  little  likely  to  arise 
from  the  course  adopted,  and  however 
free  such  conduct  may  have  been  from 
any  improper  motive." 

While  the  general  rule  is  thus  set- 
tled, the  courts  constantly  reiterate 
the  truth  that  in  its  application  each 
case  must  stand  upon  its  own  circum- 
stances. The  following  citations  are 
necessarily  given  as  mere  illustrations; 
in  some,  trustees  have  violated  their 
duty;  in  others,  they  have  erred  (if  ai 


§  1070 


EQUITY    JURISPRUDENCE. 


1586 


and  judgment  of  ordinary  prudent  men  in  their  own 
affairs,  he  will  not  be  chargeable  for  his  mere  errors  of 
judgment,  nor  for  accidental  injuries  and  losses.  This 
rule  concerning  the  extent  and  limits  of  the  trustee's 
duty  to  use  care,  diligence,  and  prudence  applies  to  all 
his  transactions  in  connection  with  the  trust,  and  all  his 
dealings  with  the  trust  property,  by  which  the  interests 
of  the  beneficiary  can  be  affected.  If  some  of  the  partic- 
ular rules  concerning  the  making  and  retaining  of  in- 
vestments seem  to  be  more  stringent,  they  will  be  found, 
upon  closer  examination,  to  be  applications  of  the  same 


all)  only  in  judgment:  Kekewich  v. 
Marker,  3  Macn  &  G.  311  (discretion 
expressly  given  to  the  trustees;  and 
see  ante,  cases  under  §  1062);  In  re 
Beloved  Wilkes's  Charity,  3  Macn.  & 
G.    440  (ditto);  Barnett  v.    Sheffield, 

1  De  Gex,  M.  &  G.  371,  379;  Manser 
V.  Dix,  8  De  Gex,  M.  &  G.  703,  712; 
Forshaw  v.  Higginson,  8  De  Gex,  M. 
&  G.  827,  832;  Baud  v.  Fardell,  7  De 
Gex,  M.  &  G.  628;  Harper  v.  Hayes, 

2  De  Gex,  F.  &  J.  542;  Dance  v,  Gold- 
ingham,  L.  R.  8  Ch.  902;  Youde  v. 
Cloud,  L.  R.  18  Eq.  634;  Vyse 
V.  Foster,  L.  R.  8  Ch.  309;  In  re 
Englefield  etc.  Co.,  L.  R.  8  Ch.  Div. 
388;  Massey  v.  Banner,  1  Jacob  &  W. 
241,  247;  Charitable  Corp'n  v.  Sutton, 
2  Atk.  400,  405;  Overend  v.  Gibb, 
•L.  R.  5  H.  L.  480,  484,  494;  Pool  v. 
Dial,  10  S.  C.  440;  Luigi  v.  Luchesi, 
12  Nev.  306;  Bacot  v.  Heyward,  5 
S.  C.  441;  Carpenter  v.  Carpenter, 
12  R.  I.  544;  .34  Am.  Rep.  716;  Gil- 
more  v.  Tuttle,  32  N.  J.  Eq.  611; 
[Tuttle  V.  Gilmore,  36  N.  J.  Eq.  617;] 
Russell  V.  Peyton,  4  111.  App.  473;  Hay- 
del  V.  Hurck,  5  Mo.  App.  267;  Mor- 
row V.  Saline  Co.  Comm'rs,  21  Kan. 
484;  Adair  v.  Brimmer,  74  N.  Y.  539; 
King  V.  Talbot,  40  N.  Y.  76;  50  Barb. 
453;  Foscue  v.  Lyon,  55  Ala.  440; 
Clark  V.  Anderson,  13  Bush,  111; 
Mansfield  v.  Alw^ood,  84  111.  497;  Get- 
tins  V.  Scudder,  71  111.  86;  Bowker  v. 
Pierce,  130  Mass.  262;  Hodges  v.  New 
England  Screw  Co.,  1  R.  I.  312;  53 
Am.  Dec.  624;  3  R.  I.  9;  Scott  v. 
Depeyster,  1  Edw.  Ch.  513,  543;  Litch- 
field V.  White,  3  Sand.  545;  Acker- 
man  V.  Emott,  4  Barb.  626,  645,  646; 
Ringgold  V.  Ringgold,  1  Har.  &  G.  11, 


25;  18  Am.  Dec.  250;  [also  Speight  v. 
Gaunt,  22  Ch.  Div.  727;  on  appeal,  9 
App.  Cas.  (H.  L.)  1;  Fry  v.  Tapson, 
28  Ch.  Div.  268;  Learoyd  v.  Whiteley, 
12  App.  Cas.  (H.  L.)  727;  affirmin,^  33 
Ch.  Div.  347;  Wilmerding  v.  McKes- 
son, 103  N.  Y.  329;  Matter  of  Cornell, 
110  N.  Y.  358;  Shurtlefif  v.  Rile,  140 
Mass.  213;  McCartin  v.  Traphagen, 
43  N.  J.  Eq.  340;  Fesmire's  Estate, 
134  Pa.  St.  67;  19  Am.  St.  Rep.  676; 
Parsley's  Adra'r  v.  Martin,  77  Va. 
376;  46  Am.  Rep.  733;  Pate  v.  Oliver, 
104  N.  C.  466;  Pope  v.  Mathews,  18 
S.  C.  444;  Grumpier  v.  Deens,  85  Ala. 
149;  Boaz  v.  Milliken,  83  Ky.  634; 
Loud  v.  W^inchester,  64  Mich.  23; 
Dundas  v.  Chrisman,  26  Neb.  495. 
The  fact  that  the  trustee,  by  the 
terms  of  the  instrument,  is  exempted 
from  liability  except  for  willful  and 
intentional  breaches  of  trust  does  not 
excuse  negligence  in  the  selection  of 
investments  for  the  trust  funds:  Tut- 
tle v.  Gilmore,  36  N.  J.  Eq.  617.]  See 
also  especially,  on  that  branch  of  the 
rule  which  frees  trustees  from  liability 
for  mere  errors  of  judgment,  Spering's 
Appeal,  71  Pa.  St.  11;  10  Am.  Rep. 
684;  Miller  v.  Proctor,  20  Ohio  St. 
442;  Godbold  v.  Branch  Bank,  11  Ala. 
191;  46  Am.  Dec.  211;  Fiulay  v.  Mer- 
riman,  39  Tex.  56,  62;  Salter  v.  Salter, 
6  Bush,  624,  638;  Cross  v.  Petree,  10 
B.  Mon.  413;  EUig  v.  Naglee.  9  Cal. 
683,  695;  Thompson  v.  Brown,  4  Johns. 
Ch.  619,627;  Vanderheyden  v.  Young, 
11  Johns.  150,  157;  Griffith  v.  Follett, 
20  Barb.  620,  634;  Smith  v.  Rathbun, 
22  Hun,  150;  [Pleason ton's  Appeal,  99 
Pa.  St.  362;  Williams  v.  Nichol,  47 
Ark.  254.1 


I 


1587  POWERS    OF    EXPRESS    TRUSTEES.  §  1071 

general  doctrine,  varied  only  by  the  nature  and  situation 
of  the  subject-matter.  It  results  from  the  duty  that  a 
trustee  may  be  held  accountable  for  more  property  tlian 
that  which  actually  came  into  his  possession.  He  may 
be  charged  with  rents,  profits,  interest,  income,  proceeds 
of  sales,  and  the  like,  which  he  never  in  fact  received, 
but  which  he  might  and  should  have  received  by  the 
exercise  of  due  and  reasonable  care,  diligence,  and  pru- 
dence in  his  modes  of  dealing.*  A  trustee  who  pays  the 
wrong  party  will  generally  be  liable  to  pay  over  again  to 
those  who  are  really  entitled.^ 

§  1071.  5.  The  Duty  as  to  Investments. — The  general 
obligation  under  consideration  finds  its  most  striking  and 
important  application  in  the  matter  of  the  investment  of 
trust  funds.  It  is  the  trustee's  duty  to  use  diligence  in 
investing  the  trust  property  so  that  it  may  produce  as 
much  income  as  possible,  and  also  to  use  care  and  pru- 
dence in  investing  it  in  such  securities  as  will  render  its 
loss  highly  improbable,  even  if  not  virtually  impossible. 
From  these  somewhat  antagonistic  duties  arise  two  cor- 
responding liabilities.  If  the  trustee  suffers  moneys  to 
lie  idle  in  his  hands,  producing  no  income,  when  by  a 
proper  investment  an  income  might  have  been  obtained, 
and  this  continues  for  an  unreasonably  long  time,  he  will 
be  liable  for  the  amount  of  income  which  he  might  and 
ought  to  have  made  by  an  investment,  and  will  be  charged 
with  such  amount  by  the  court  in  the  settlement  of  his 

*  Mansfield  v.  Alwood,  84  111.  497;  out  of  their  life  interest  in  fixing  the 
Ellig  V.  Naglee,  9  Cal.  684,  amount  of  the  deficiency:  Barratt  v. 

*  Where  a  trustee,  acting  in  good  Wyatt,  30  Beav.  442;  Davies  v.  Hodg- 
faith,  and  even  deceived  by  forged  son,  25  Beav.  177;  Griffiths  v.  Porter, 
documents,  pays  trust  funds  to  the  25  Beav.  236.  Where  an  infant  cestui 
wrong  party,  it  is  held  that  he  must  que  trust  falsely  represents  himself  to 
pay  over  again  the  amount,  with  in-  be  of  age,  and  thereby  procures  pay- 
terest,  to  those  who  are  entitled:  ment  by  the  trustee  of  the  amount 
Ashby  v.  Blackwell,  2  Eden,  299,  302;  payable  on  his  becoming  of  age,  he 
Eaves  V.  Hinkson,  30  Beav.  136;  Sporle  cannot  compel  the  trustee  to  pay  over 
V.  Barnaby,  10  Jur.,  N.  S.,  1142;  Hay-  again  when  he  attains  twenty-one: 
del  V.  Hurck,  5  Mo.  App,  267;  and  Overton  v.  Banister,  3  Hare,  503;  a 
where,  by  mistake,  he  pays  capital  to  cestui  que  trust  who  is  overpaid  must 
life  tenants,  instead  of  investing  it  and  refund:  Livesey  v.  Livesey,  3  Russ. 
paying  the  income,  he  must  make  it  287;  as  to  paying  the  wrong  person, 
good,  but  is  entitled  to  be  recouped  see  also  ante,  cases  under  §  1067* 


§  1072  EQUITY  JURISPRUDENCE.  1588 

accounts.  On  the  other  hand,  if  he  has  made  an  invest- 
ment in  improper  securities,  contrary  to  the  settled  rules 
of  equity  on  the  subject,  and  the  principal  has  been 
wholly  or  partially  lost  through  insolvency  or  deprecia- 
tion of  value,  or  has  failed  to  produce  income,  he  will 
be  held  personally  responsible  for  the  loss  or  deficiency. 
If,  however,  an  investment  is  made  with  the  exercise  of 
reasonable  care,  diligence,  and  business  prudence,  in  the 
form,  manner,  and  securities  approved  of  by  the  rules  of 
equity,  a  trustee  will  not  be  liable  for  losses  which  may 
occur  through  the  destruction  or  depreciation  of  values.' 
The  general  duty  involves  two  distinct  elements,  which 
will  be  separately  examined,  —  the  necessity  of  making 
investments,  and  the  proper  kinds  of  securities  in  which 
the  investments  may  be  made. 

§  1072.  The  Necessity  of  Making  Investments.  —  It  is 
the  trustee's  imperative  duty  to  render  the  trust  property 
as  productive  as  possible  consistent  with  its  security  and 
with  the  demands  of  ordinary  business  prudence  and 
judgment.  The  rule  is  general,  therefore,  that  if  he  per- 
mits the  money  to  remain  in  his  own  hands,  unproduc- 

»  Robinson  v.  Robinson,  1  Do  Gex,  How.  535,  542,  543;  Kimball  v,  Red- 

M.  &  G.  247,  254-257  (where  trustees  ing,  31   N.  H.  352;  64  Am.  Dec.  333; 

simply  neglect  to  invest  moneys,  they  Frey  v.  Frey,  17  N.  J.  Eq.  71,  72,  74; 

are  chargeable  only  with  the  princi-  Schieffelin  v.  Stewart,    1   Johns.   Ch. 

pal  sum  and  lawful  interest  thereon);  620;  7  Am.   Dec.   507;  Baker  v.   Dis- 

Att'y-Gen.  v.  Alford,  4  De  Gex,  M.  &  brow,  18  Hun,  29;  Brown  v.  French, 

G.  843  (ditto);  Ex  parte  Geaves,  8  De  125   Mass.    410;    28    Am.    Rep.    254; 

Gex,  M.  &  G.  291;  Lockhart  v.  Reilly,  Adair  v.  Brimmer,  74  N.  Y.  539;  In 

1  De  Gex  &  J.  464;  Lloyd  v.  Attwood,  re  Foster's  Will,  15  Hun,  387;  Roose- 

3DeGex&  J.  614;  Shepherd  v.  Mouls,  velt  v.  Roosevelt,  6  Abb.  N.  C.  447; 

4  Hare,   500,  503,  504;  Phillipson  v.  Bowman    v.    Pinkham,    71    Me.    295; 

Gatty,  7  Hare,  516;  Clough  v.  Bond,  Nancrede   v.   Voorhis,  32  N.  J.   Eq. 

3  Mylne  &  C.  490,  496,  497;  Mayor  of  524;  Gilmore  v.  Tuttle,  32  N.  J.  Eq. 
Berwick  v.  Murray,  7  De  Gex,  M.  611;  [Tuttle  v.  Gilmore,  36  N.  J.  Eq. 
&  G.  497,  519;  Burdick  v.  Garrick,  617;]  Clark  v.  Anderson,  13  Bush,  111; 
L.  R.  5  Ch.  233,  241 ;  Blogg  v.  John-  Dockery  v.  French,  73  N.  C.  420; 
son,  L.  R.  2  Ch.  225,  228;  Brown  v,  Moore  v.  Mitchell,  2  Woods,  483; 
Gellatly,  L.  R.  2  Ch.  751;  Stewart  v.  Kirby  v.  Goodykoontz,  26  Gratt.  298 
Sanderson,  L.  R.  10  Eq.  26;  Pickard  (in  the  three  preceding  cases  the  in- 
V.  Anderson,  L.  R.  13  Eq.  608  (consent  vestment  was  made  in  confederate  se- 

of  beneficiary);  In  re  T ,  L.  R.  15  curities);  Bowker  v.  Pierce,  130  Mass. 

Ch.  Div.   78;  Ex  parte  Norris,  L.  R.  262;  Sherman  v.  Parish,  53  N.  Y.  483 

4  Ch.  280;  Stone  v.  Stone,  L.  R.  5  Ch.  (acquiescence  of  the  beneficiary);  Or- 
74;  Budge  v.  Gummow,  L.  R.  7  Ch.  miston  v.  Olcott,  84  N.  Y.  o39;  Wig- 
719;  In  re  British  etc.  Co.,  L.  R.  14  gins  v.  Howard,  83  N.  Y.  613;  Ches- 
Ch.  Div.  335;  Barney  v.  Saunders,  16  terman  v.  Eyland,  81  N.  Y.  398. 


1589  POWERS    OF    EXPRESS    TRUSTEES.  §  1073 

tive,  for  a  period  which,  under  the  circumstances,  is 
unreasonable,  then  he  will  be  personally  charged  with 
the  lawful  interest  which  might  and  should  have  been 
obtained  by  the  exercise  of  reasonable  care  and  dili- 
gence; and  if  the  principal  fund  should  be  wholly  or 
parti}'-  lost  in  consequence  of  such  unreasonable  delay,  he 
will  be  compelled  to  make  up  the  deficiency.  Even  when 
the  instrument  creating  the  trust  prescribes  a  particular 
mode  of  investment, —  as,  for  example,  it  directs  that  all 
the  personal  property  should  be  converted  into  cash,  and 
the  proceeds  invested  in  the  purchase  of  land,  —  the  trus- 
tee cannot  be  justified  in  suffering  the  cash  to  lie  idle 
and  unproductive  for  an  unreasonable  length  of  time.^ 

§  1073.  Kinds  of  Investments — When  Particular  Se- 
curities are  Expressly  Authorized. —  There  are  two  cases 
to  be  considered:  1.  When  the  instrument  creating  the 
trust  expressly  authorizes  investment  in  particular  securi- 
ties, or  directs  particular  modes  of  investment;  2.  When 
the  instrument  is  wholly  silent  with  respect  to  the  mode 
of  investment,  and  the  matter  is  left  to  the  judgment  of 
the  trustee.  In  the  first  case,  when  the  instrument  itself 
directs  the  mode  and  nature  of  the  investment,  and  des- 
ignates the  securities,  the  trustee  is  bound  to  follow  these 
directions  with  scrupulous  care,  and  if  any  loss  of  trust 
property  is  the  result  of  his  obedience,  he  is  not  at  all 
responsible.  A  departure  from  the  directions  will  entail 
liability  for  the  losses  which  may  be  occasioned  thereby. 
Even  when  a  general  discretion  in  the  choice  of  securities 

^  Robinson  v.  Robinson,   1  De  Gex,  see  other  cases  in   the  last  preceding 

M.  &  G.  247;  Att'y-Gen.  v.  Alford,  4  note.      If   the   trustee   permits   trust 

De  Gex,  M.  &  G.  843;  Band  v.  Fardell,  moneys   to   remain   on   deposit   in   a 

7  De  Gex,  M.  &  G.   628;   Paddon  v.  bank  or  in  the  hands  of  a  third  per- 

Richardson,  7  De  Gex,  M.  &  G.  563;  son  for  an  unreasonable  time,  he  ifl 

Ex  parte  Geaves,  8  De  Gex,  M.  &  G.  responsible   for  any   loss:  Lupton    r, 

291;   Bate  V.  Hooper,  5  De  Gex,  M.  &  White,    15   Ves.    432;   and   see  arite, 

G.  338;   Sculthorpe   v.   Tipper,  L.  R.  §  1067,  and  cases  cited.     Or  if  he  de- 

13  Eq.  232;  In  re  British  etc.  Co.,  L.  lays  unnecessarily  in  collecting  a  de- 

R.  14  Ch.  Div.  335;  Gilman  v.  Gilman,  mand  and  it  is  thereby  lost:  Grove  v. 

2  Lans.  1;  [Cavender  v.  Cavender,  114  Price,  2(5  Beav.   103;  EUig  v.  Naglee, 

U.  S.  464;  Lent  v.  Howard,  89  N.  Y.  9  Cal.  683. 
170;  Nunn  v.  Nunn,  66  Ala.  35;]  and 


§  1074 


EQUITY    JURISPRUDENCE. 


1590 


is  expressly  given,  it  must  be  exercised  with  reasonable 
care  and  business  prudence.^ 

§  1074.    The  Same.    When  No  Directions  are  Given. — 

Where  the  instrument  of  trust  is  silent  as  to  the  mode  of 
investment,  the  rules  governing  the  action  of  trustees  may 
appear  to  be  somewhat  arbitrary,  but  are  in  reality  based 
upon  the  clearest  principles  of  justice  and  expediency. 
The  law  does  not  give  to  trustees  the  same  freedom  of 
choice  in  investments  which  may  be  exercised  by  pru- 
dent business  men  in  their  own  affairs.  A  business  man 
of  even  more  than  average  caution  may,  and  often  does, 
assume  intentional  risks  in  the  investment  of  his  own 
property;  for  the  sake  of  obtaining  a  greater  than  ordi- 
nary income,  he  will  often  invest  in  such  a  manner  that 
the  risk  of  ultimate  loss  is  considerable,  and  such  specu- 
lative use  of  his  property  would  not  be  regarded  as  illegit- 
imate nor  as  deserving  of  any  censure.     For  example,  he 


^  Mortimorev.  Mortimore,  4DeGex 
&  J.  472;  Baud  v.  Fardell,  7  De  Gex, 
M.  &  G.  628;  Paddon  v.  Richardson,  7 
DeGex,  M.  &  G.  563;  In  re  Langdale's 
Trust,  L.  R.  10  Eq.  39;  Stewart  v. 
Sanderson,  L.  R.  10  Eq.  26;  Pickard 
V.  Anderson,  L.  R.  13  Eq.  608  (invest- 
ing on  mere  personal  security  with 
consent  of  the  beneficiary);  Bethell  v. 
Abraham,  L.  R.  17  Eq.  24  (even  when 
trustees  are  clothed  with  discretion 
they  cannot  invest  in  foreign  funds  or 
railway  stocks);  Lewis  v.  Nobbs,  L.  R. 
8  Ch.  Div.  591  (where  trustees  are  ex- 
pressly authorized  to  vary  the  trust 
funds  and  "  to  invest  the  same  in  any 
other  funds  or  securities");  In  re 
Chennell,  L.  R.  8  Ch.  Div.  492;  In  re 
Wedderburn's  Trusts,  L.  R.  9  Ch.  Div. 
112;  In  re  Peyton,  L.  R.  7  Eq.  463; 
Clark  V.  St.  Louis  etc.  R.  R.,  58  How. 
Pr.  21;  Foscue  v.  Lyon,  55  Ala.  440; 
Bowman  v.  Pinkham,  71  Me.  295  (a 
trustee  expressly  authorized  to  invest 
as  he  shall  think  fit  cannot  buy  land  on 
credit,  and  bind  the  estate  by  his  note 
given  as  trustee);  Gilmore  v.  Tattle,  32 
N.  J.  Eq.  611  (a  trustee  clothed  with 
discretion  is  liable  for  loss  arising  from 
his  investment  in  second  mortgages); 
[Tuttle  V.  Gilmore,  36  N.  J.  Eq.  617;] 
Nancrede  v.  Voorhis,  32  N.  J.  Eq.  524 
(ditto);    Adair  v.  Brimmer,  74  N.  Y. 


539;  Denike  v.  Harris,  84  N.  Y.  89; 
[Whitehead  v.  Whitehead,  85  Va.  870; 
Zimmerman  v.  Fraley,  70  Md.  561  (di- 
rection to  invest  in  landed  securities 
does  not  authorize  a  purchase  of  land).] 
A  trustee  cannot  loan  on  mere  per- 
sonal security,  unless  authorized: 
Walker  v.  Symonds,  3  Swanst.  1,  63, 
80;  Darke  v.  Martyn,  1  Beav.  525; 
Styles  v.  Guy,  1  Macn.  &  G.  422; 
[Judge  of  Probate  v.  Mathes,  60  N.  H. 
433;  Baer's  Appeal,  127  Pa.  St.  360;] 
but  may  do  so  when  authorized:  Pad- 
don V.  Richardson,  7  De  Gex,  M.  &  G. 
563;  Denike  v.  Harris,  84  N.  Y.  89; 
but  even  then  he  cannot  lend  to  a  co- 
trustee,   unless    expressly    authorized: 

V.  Walker,  5  Russ.  7;  and  giving 

a  trustee  discretion  as  to  investment 
does  not  authorize  a  loan  on  mere  per- 
sonal security:  Pocock  v.  Reddington, 
5  Ves.  794.  Investment  in  corpora- 
tion stock  is  not  allowed  unless  ex- 
pressly authorized:  Traffordv.  Boehm, 
3  Atk.  440,  444;  Howe  v.  Earl  of  Dart- 
mouth, 7  Ves.  137,  150;  where  trustees 
invest  in  mortgages  they  are  responsi- 
ble for  the  value  of  the  land  and  the 
sufficiency  of  the  security  at  the  time 
of  the  investment:  Phillipson  v.  Gatty, 
7  Hare,  516;  but  not  for  a  subsequent 
depreciation:  Nancrede  v,  Voorhis,  32 
N.  J.  Eq.  524. 


1591  POWERS    OF    EXPRESS    TRUSTEES.  §  1074 

may  invest  in  the  stocks  of  companies  which  promise, 
and  with  good  fortune  may  pay,  large  dividends,  but 
which  also  may  utterly  fail.  No  such  risk  is  permitted 
to  the  trustee.  In  the  management  and  investment  of 
trust  property  for  the  benefit  of  the  cestui  que  trust,  the 
law,  while  requiring  some  income,  regards  the  security  of 
the  fund  invested  and  the  certainty  of  a  moderate  regu- 
lar income  as  of  paramount — of  absolutely  essential — im- 
portance wlien  compared  with  the  amount  of  the  income. 
It  permits  the  trustee  to  assume  no  risks  in  his  investment 
other  than  those  which  are  inseparable  from  every  species 
of  property.  Absolute  freedom  from  risk  is  impossible. 
The  most  stable  forms  of  property  may  lose  their  value; 
lands  may  depreciate;  even  nations  may  become  bank- 
rupt. From  these  risks  which  inhere  in  every  kind  of 
ownership  the  law  does  not  pretend  to  save  the  benefici- 
ary; but  from  risks  growing  out  of  the  uncertainty  of 
speculative  investments  the  law  does  protect  him  by  mak- 
ing the  trustee  personally  responsible  for  all  trust  funds 
invested  by  him  in  such  a  manner.  It  is  the  settled  rule 
of  equity,  in  the  absence  of  express  directions' in  the  in- 
strument creating  the  trust,  or  of  statutory  permission, 
that  trustees  or  executors  cannot  invest  trust  property 
upon  any  mere  personal  security,  nor  upon  the  stocks, 
bonds,  or  other  securities  of  private  business  corpora- 
tions.' Where  no  directions  are  given  by  the  instrument 
of  trust,  the  well-settled  rule  of  the  English  courts  of 
equity  is,  that  the  trustee  should  invest  trust  funds,  and 
can  only  escape  personal  risk  and  liability  by  investing, 
in  real  estate  securities,  or  in  the  public,  governmental 
securities  of  the   British  government.''     In  the   United 

'  Clough   V.   Bond,   3   Mylne   &   C.  or  in  the  governmental  stocks,  bonds, 

490,  496,  497;  Powell  v.  Evans,  5  Ves.  or   funds  of   foreign  countries,  or   in 

839;    Tebbs    v.    Carpenter,    1    Madd.  the  stocks  or  bonds  of  corporations,  is 

290;  Ex  parte  Geaves,  8  De  Gex,  M.  never  directed  by  the  court,  nor  per- 

&   G.   291;  Paddon  v.   Richardson,  7  mitted   in    the   aljsence   of    authority 

De  Gex,  M.  &  G.  563;  and  see  cases  given    by    the    instrument    of    trust: 

cited  in  last  preceding  note;  King  v.  Howe  v.  Earl  of  Dartmouth,  7  Ves. 

King,  3  Johns.  Ch.  552.  137,   151;  Hume  v.  Richardson,  4  De 

*  luvestment    in    munioii-al    bonds  Gex,  F.  &  J.  29;  Baud  v.  Fardell,  7  De 


1074 


EQUITY    JURISPRUDENCE. 


1592 


States,  while  the  rules  are  certainly  not  so  stringent  and 
invariable  as  in  England,  and  wliile  different  regula- 
tions may  prevail  to  some  extent  in  different  states, 
based  partly  upon  statutory  legislation,  and  partly  upon 
the  policy  of  encouraging  local  enterprises,  the  same 
fundamental  principle  of  requiring  permanent  invest- 
ments in  real  estate  or  governmental  securities  is  gener- 
ally recognized  by  the  courts,  —  at  least,  all  speculative 
risks  are  forbidden.*     Investments  in  first  mortgages  of 

Gex,  M.  &  G.  628;  Dimes  v.  Scott,  4 
Iluss.  195;  Holland  V.  Huglies,  IGVes. 
Ill;  Raby  v.  Ridehalgh,  7  De  Gex, 
M.  &  G.  104;  Robinson  v.  Robinson, 
1  De  Gex,  M.  &  G.  247,  263;  Morti- 
more  v.  Mortimore,  4  De  Gex  &  J. 
472;  Mant  v.  Leith,  15  Beav.  524; 
Harris  v.  Harris,  29  Beav.  107;  In  re 
Colne  Valley  etc.  R'y,  1  De  Gex,  F.  & 
J.  53;  Bethell  V.  Abraham,  L.  R.  17  Eq. 
24;  In  re  Rehoboth  Chapel,  L.  R.  19 
Eq.  180;  In  re  Chennell,  L.  R.  8  Ch. 
Div.  492;  In  re  Wedderburn's  Trusts, 
L.  R.  9Ch.  Div.  112;  Sculthorpev.  Tip- 
per, L.  R.  13  Eq.  232;  Budge  v.  Gum- 
mow,  L.  R.  7  Ch.  719.  [Several  special 
rules  have  been  established  concerning 
real  estate  securities,  as  to  the  amount 
which  may  be  loaned  on  property  of 
certain  classes,  the  care  required  in 
ascertaining  the  value  of  the  property, 
and  the  like:  See  Godfrey  v.  Faulk- 
ner, 23  Ch.  Div.  483;  Fry  v.  Tapson, 
28  Ch.  Div.  268;  Learoyd  v.  Whiteley, 
12  App.  Gas.  (H.  L.)  727;  affirming  33 
Ch.  Div.  347;  Olive  v.  Westerman,  34 
Ch.  Div.  70;  Webb  v,  Jonas,  39  Ch. 
Div.  660.] 

^  The  action  of  the  American  courts 
can  best  be  illustrated  by  the  facts  of 
a  few  very  recent  and  instructive  de- 
cisions. In  Adair  v.  Brimmer,  74  N. 
Y.  539,  the  subject  was  examined  in 
a  most  able  and  exhaustive  manner, 
and  trustees  were  sternly  held  up  to 
their  duty.  A  testator  had  given  an 
enormous  estate  to  three  trustees,  with 
power  to  sell  lands,  in  their  discre- 
tion, and  to  invest  the  proceeds. 
Among  the  lands  was  a  large  tract 
of  undeveloped  coal-land  in  Pennsyl- 
vania, of  which  the  testator  owned 
one  undivided  third,  the  other  two 
thirds  being  owned  by  M.  and  N., 
and  the  entire  tract  being  worth 
from  one  million  to  one  million  four 


hundred  thousand  dollars.  The  trus- 
tees conveyed  their  one  third  to  M. 
and  N.  nominally  for  the  price  of 
two  hundred  and  fifty  thousand  dol- 
lars. The  sale  was  really  made  to 
enable  M.  and  N.  to  organize  a  min- 
ing company,  and  the  land  was  im- 
mediately conveyed  by  them  to  the 
company.  Stock  of  this  company  was 
issued,  and  the  trustees  took  such 
stock  at  its  par  value  to  the  amount  of 
two  hundred  and  fifty  thousand  dol- 
lars as  the  consideration  for  the  sale 
of  the  land.  The  company  went  on 
to  develop  the  coal  mines,  and  was 
compelled  to  borrow  money,  and  to 
that  end  it  issued  its  bonds  for  several 
hundred  thousand  dollars,  which  the 
stockholders  were  obliged  to  take  pro 
rata,  and  the  trustees  thus  took  a 
large  amount  of  said  bonds  as  security 
for  money  advanced  by  them  to  the 
company.  The  stock  and  the  bonds 
became  worthless,  so  that  the  coal- 
land  had  in  fact  been  totally  lost  to 
the  trust  estate.  In  their  final  ac- 
counting the  trustees  claimed  that 
they  were  entitled  to  be  credited  with 
the  two  hundred  and  fifty  thousand 
dollars  in  the  stock,  and  with  the 
amount  of  the  company's  bonds  which 
they  had  taken.  The  court  held  that 
the  trustees  had  grossly  violated  their 
duty.  They  had  no  right  to  sell  the 
land  for  such  a  speculative  purpose; 
the  power  given  them  in  the  will  to 
sell  only  authorized  them  to  sell  for 
the  purpose  of  carrying  out  the  gen- 
eral objects  of  the  trust,  and  of  mak- 
ing the  property  certainly  productive 
for  the  beneficiaries.  Furthermore, 
they  had  no  authority  to  invest  the 
proceeds  in  such  securities  as  the 
company's  stock  and  bonds.  They 
were  to  be  charged  with  the  mar- 
ket  value  of   the    land  at   the   time 


1593 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1074 


improved  land  are  universally  favored,  and  the  trustee  is 
not  liable  for  any  subsequent   depreciation  of  value  if 


of  the  sale,  and  with  interest  thereon 
at  six  per  cent  computed  with  annual 
re-it'i.  The  trustees  having  set  up  ac- 
quiescence by  the  beneficiaries  in  de- 
fense, it  was  further  held  that  an 
acquiescence  or  assent  of  the  beneficia- 
ries, so  as  to  relieve  the  trustees,  could 
only  avail  when  given  after  a  full 
knowledge  of  all  the  facts,  and  a  full 
understanding  of  all  the  beneficiaries' 
own  rights  in  the  matter;  any  assent 
given  in  the  absence  of  such  full  knowl- 
edge and  understanding  was  of  no  ef- 
fect. King  V.  Talbot,  40  N.  Y.  76,  50 
Barb.  453,  is  also  a  very  instructive 
case.  Trustees  held  funds  given  by  a 
wdl,  in  trust,  to  apply  the  interest  to 
the  maintenance,  etc.,  of  the  benefi- 
ciaries during  their  minority,  and  on 
their  coming  of  age  the  principal  and 
all  accumulated  interest  were  to  be 
transferred  to  them  absolutely.  The 
trustees  invested  the  principal  moneys 
in  certain  securities,  and  on  the  bene- 
ficiaries coming  of  age,  the  trustees 
offered  to  deliver  to  them  these  same 
securities,  which  the  beneficiaries  re- 
fused to  accept.  There  was  no  allega- 
tion that  the  trustees  had  acted  in  bad 
faith,  and  the  only  question  was, 
whether  the  investments  were  proper 
and  such  as  the  beneficiaries  were 
bound  to  accept  in  discharge  of  the 
trustees*  obligation.  The  court  of  ap- 
peals held  the  following  propositions: 
Where  trustees  hold  funds  for  invest- 
ment for  the  benefit  of  cestuis  que  irus- 
tent  who  are  to  be  supported  out  of  the 
income  thereof,  the  law,  by  its  general 
principles,  imposes  on  the  trustees  the 
duty  of  placing  the  funds  in  a  position 
of  security,  of  seeing  that  they  pro- 
duce interest,  and  of  so  keeping  them 
that  they  may  always  be  subject  to 
future  recall  for  the  benefit  of  the  ces* 
tuis  que  trustent.  In  a  trust  of  this 
kind,  it  is  not  in  accordance  with  the 
nature  of  the  trust,  nor  a  compliance 
with  the  requirements  of  ordinary  pru- 
dence, for  the  trustee  to  place  the 
principal  of  the  fund  in  a  condition  in 
which  it  is  necessarily  exposed  to  the 
hazards  of  loss  or  gain,  and  in  which, 
by  the  very  terms  of  the  investment,  the 
principal  sum  is  not  to  be  retarned  at 
all.  The  investment  by  such  a  trustee 
in  the  stocks  of  canal,  railroad,  bank, 


insurance,  and  other  such  private  cor- 
porations is  a  violation  of  his  trust 
duty.  Held,  therefore,  where,  in  such 
a  trust,  the  trustee  had  invested  the 
principal  of  the  fund  in  stocks  of'the 
Delaware  and  Hudson  Canal  Co.,  the 
New  York  and  Harlem  R.  R.  Co  , 
the  New  York  and  New  Haven  R.  H. 
Co. ,  the  Saratogaand  Washington  R.  R. 
Co.,  and  the  IJank  of  Commerce,  the 
beneficiaries  were  not  bound  to  accept 
such  investments,  but  could  compel 
the  trustees  to  pay  over  the  principal 
fund  in  cash,  charged  with  interest  at 
six  per  cent  per  annum,  computed 
with  annual  7'ests.  It  may  be  re- 
marked that  all  these  companies  were 
at  the  time  in  good,  and  some  of  them 
in  very  high,  credit.  Woodruff,  J.,  said 
that  in  such  a  case,  where  there  were 
different  kinds  of  investments,  the 
beneficiaries  were  not  restricted  to  ac- 
cepting all,  or  rejecting  all,  but  might 
accept  some,  and  reject  others,  at  their 
pleasure.  Four  judges  were  of  opin- 
ion that,  in  the  absence  of  statute, 
trustees  holding  funds  for  investment, 
without  special  directions,  were  bound 
to  invest  either  in  governmental  or  in 
real  estate  securities,  according  to  the 
well-settled  rule  of  equity  in  England; 
that  any  other  investment  would  ren- 
der the  trustees  personally  liable  in 
case  of  loss  or  depreciation.  Three 
judges  were  of  opinion  that  so  strin- 
gent a  general  rule  could  not  be  re- 
garded as  apart  of  our  law.  The  opin- 
ion of  Mr.  Justice  Woodruff  in  this 
case  upholds,  in  a  most  admirable  man- 
ner, the  high  morality  of  equity  in 
determining  and  enforcing  the  obli- 
gations of  trustees  towards  their  bene- 
ficiaries: Oilman  v.  Gilnian,  2  Lans.  1. 
Large  amounts  of  money  were  given  by 
will  to  the  executors  as  trustees,  and 
they  were  directed  by  the  will  to  invest 
it  in  United  States  stocks,  or  state, 
city,  or  town  bonds,  or  in  bonds  and 
mortgages.  They  did  not  obey  these 
instructions.  They  kept  on  hand,  for 
years,  large  amounts  on  deposit  in 
their  individual  names,  and  these  de- 
posits they  frequently  used  in  their 
own  business;  but  all  the  snms  thus 
used  they  returned  to  the  estate, 
and  charged  themselves  with  interest 
thereon   during   the   time   they  were 


§  1074 


EQUITY    JURISPRUDENCE. 


1594 


the  original  security  was  sufficient.     Indeed,  investments 
of  this  form  are  generally  required  to  be  made  by  pub- 


using  the  same.  They  did  not  charge 
themselves  with  any  interest  on  the 
large  amounts  remaining  idle  in  bank. 
In  excuse  for  not  investing  in  the 
United  States  securities,  they  set  up 
that  the  beneficiaries  were  opposed  to 
any  investments  therein.  Held,  that 
this  last  allegation  was  no  excuse;  if 
they  had  invested  in  United  States  se- 
curities, even  against  the  consent  of 
the  beneficiaries,  they  would  have 
been  fully  justified;  and,  at  all  events, 
there  were  other  good  securities,  state 
and  municipal,  in  which  they  might 
have  invested  according  to  the  direc- 
tions of  the  will.  They  were  charged 
with  interest  on  all  balances  remain- 
ing in  their  liands  after  a  reasonable 
time,  viz.,  on  all  balances  remaining  on 
hand  six  months  after  allowing  thirty 
days  more  for  procuring  investments. 
Held  further,  that  they  would  ordi- 
narily be  chargeable  with  compound 
interest  on  the  trust  funds  which  they 
had  used  in  their  own  private  business; 
but  as  none  had  been  lost,  and  they 
had  charged  themselves  with  interest 
thereon,  the  court  would  not  enforce 
this  liability.  (This  was  a  mistaken 
leniency,  since  the  beneficiaries  were 
clearly  entitled  to  the  profits  of  the 
business  made  by  the  use  of  the  trust 
funils. )  Also,  that  while  trustees  and 
executors  are  entitled  to  be  allowed 
for  all  sums  reasonably  expended  in 
protecting  the  estate  or  in  maintain- 
ing or  defending  litigations  reasonably 
necessary  for  its  protection,  these 
defendants  were  not  entitled  to  be 
reimbursed  for  tlieir  expenses  in 
unsuccessfully  resisting  an  applica- 
tion to  compel  them  to  account,  and 
in  resisting  proceedings  for  contempt 
instituted  against  them  for  their  ne- 
glect to  obey  an  order  to  account: 
Chesterman  v.  Eyland,  81  N.  Y.  398 
(money  paid  into  court  and  invested 
by  officer  of  the  court  in  a  sufficient 
real  estate  mortgage;  the  officer  not 
liable,  although  by  a  great  deprecia- 
tion of  value,  the  land  turned  out  in- 
sufficient and  part  of  the  fund  was 
lost);  Denike  v.  Harris,  84  N.  Y. 
89;  reversing  23  Hun,  213  (trust 
money  loaned  on  the  borrower's  own 
promise,  without  any  further  security, 
according   to  express  directions  of   a 


will);  Orraiston  v.  Olcott,  84  N,  Y. 
339  (as  a  general  rule,  investments  of 
trust  moneys  in  foreign  securities,  or 
in  a  manner  which  takes  the  fund  be- 
yond the  reach  of  the  court,  as  in 
mortgages  on  foreign  lands,  etc.,  is 
improper,  and  a  trustee  making  such 
investment  does  so  at  his  own  peril. 
This  rule  is  not  absolutely  without  ex- 
ception; it  may  give  way  under  very 
special  and  imperative  circumstances. 
An  investment  in  mortgage  on  lands 
in  another  state,  sustained  under  the 
peculiar  circumstances  as  being  the 
only  mode  by  which  the  property 
could  be  saved);  [followed  in  Denton 
V.  Sanford,  103  N.  Y.  607;  see  also 
McCullough  V.  McCullough,  44  N.  J. 
Eq.  31.1,  and  note;]  Sherman  v.  Par- 
ish, 53  N.  Y.  483  (a  married  woman 
who  is  a  cestui  que  titist  may  consent 
to  an  unauthorized  investment  so  as 
to  bar  any  action  against  her  trustee); 
Wiggins  V.  Howard,  83  N.  Y.  61o; 
Foscue  V.  Lyon,  55  Ala.  440  (invest- 
ment in  mortgages  on  real  estate  is 
proper;  a  trustee  directed  to  invest  in 
stocks  cannot  compel  the  beneficiary 
to  accept  land  or  chattels);  Nancrede 
V.  Voorhis,  .32  N.  J.  Eq.  524  (a  trustee 
invests  in  second  mortgagesat  his  own 
peril,  but  is  not  liable  for  depreciation 
in  value  of  land  when  investment  is 
made  in  first  mortgages);  Gilmore  v. 
Tuttle,  32  N.  J.  Eq.  611  (trustee  is 
liable  for  loss  resulting  from  his  in- 
vestment in  second  mortgages);  [Tut- 
tle v.  GUinore,  36  N.  J.  Eq.  G17:] 
Clark  V.  Anderson,  13  Bush,  111 
(a  trustee  is  chargeable  for  all  loss 
resulting  from  a  change  of  invest- 
ment made  after  the  beneficiary  iiad 
become  of  age  and  entitled  to  the 
control  of  the  estate,  also  for  funds 
invested  in  second -mortgage  bonds 
of  a  railroad,  but  not  for  loss  from 
an  unexpected  depreciation  of  real 
estate,  where  the  investment  was  origi- 
nally proper);  Patteson  v.  Horsley, 
29  Gratt.  263  (a  trustee  is  liable  for 
loss  from  investment  in  Confederate 
securities);  Dockery  v.  French,  73 
N.  C.  420  (ditto);  Moore  v.  Mitchell, 
2  Woods,  483  (ditto);  Kirby  v.  Goody- 
koontz,  26  Gratt.  298  (ditto);  [contra, 
Douglass  V.  Stephenson,  75  Va.  749; 
Waller's   Adui'r   v.  Catlett'a  Ex'r,  83 


1595  POWERS    OF    EXPRESS    TRUSTEES.  §  1074 

lie  officials  of  trust  moneys  paid  into  court.  Invest- 
ments in  second  or  other  subsequent  mortgages  would 
be  at  the  trustee's  own  peril.  Trustees  may  always  in- 
vest in  the  governmental  securities  of  the  state  under 
whose  jurisdiction  they  are,  and  in  those  of  the  United 
States;  and  perhaps  an  investment  in  the  public  securi- 
ties of  other  states  of  the  Union,  of  which  the  credit  is 
firmly  established,  may  be  permitted;  but  to  any  greater 
extent  than  this,  investments  in  foreign  securities  are  a 
violation  of  the  trustee's  duty.  In  some  of  the  states, 
statutes  permit  investments  in  the  municipal  bonds  of 
cities,  counties,  and  towns  of  the  state  within  whose  ju- 
risdiction the  trustee  acts.  Wherever  the  principles  of 
equity  jurisprudence  have  been  fully  accepted  by  the 
courts,  trustees  are  not  allowed  to  invest  in  the  stocks, 
bonds,  and  other  securities  of  private  corporations, — 
certainly  not  without  a  statutory  permission.  Such  un- 
authorized investments  do  not  ipso  facto  render  the 
trustees  personally  liable,  where   no  loss  ensues;  but  if 

Va.  200;]  Tucker  v.  State,  72  Ind.  242  6  Gill  &  J.  171,  192;  Ellig  v.  Naglee, 
(an  investment  in  the  stock  of  corpo-  9  Cal.  6S3.  [Many  cases  are  cited  in 
rations  is  improper,  and  made  at  the  Lamar  v.  Micon,  112  U.  S.  452,  46-'), 
trustee's  own  peril);  Bowker  v.  Pierce,  which  also  holds  investment  in  Con- 
130  Mass.  262  (a  trustee  who,  in  good  federate  bonds  unlawful  (p.  476).  See 
faith  and  in  the  exercise  of  a  sound  also  Opie  v.  Castleman,  32  Fed.  Rep. 
discretion,  retains  an  investment  in  511  (Confederate  money);  Crabb  v. 
railroad  stoclc,  when  it  is  gradually  Young,  92  N.  Y.  56;  Porter  v.  Wood- 
falling  in  value,  is  not  responsible  for  rufiF,  36  N.  J.  Eq.  174,  )85;  McCoy  v. 
the  depreciation,  although  the  stock  Harwitz,  62  Md.  183;  Cogljill  v.  Boyd, 
becomes  worthless.  This  decision  cer-  77  Va.  450;  Simmons  v,  Oliver,  74  Wis. 
tainly  does  not  represent  the  true  doc-  633;  Tuttle  v.  Gilmore,  36  N.  J.  Eq. 
trine  of  equity.  It  is  directly  opposed  617  (investments  in  second  mortgacjes, 
to  the  rule  as  settled,  not  only  in  Eiig-  no  circumstances  being  siiown  to  jus- 
land,  but  by  the  overwhelming  weight  tify  a  resort  to  such  hazardous  securi- 
of  the  highest  American  authority);  ties,  or  investments  made  without 
see  also  Barney  v.  Saunders,  16  How.  instituting  proper  inquiries  as  to  the 
535;  Kimball  v.  Reding,  31  N.  H.  352;  value  of  tlie  securities,  are  not  excused 
64  Am.  Dec.  333  (a  very  instructive  by  a  clause  in  the  instrument  creating 
case);  Lovell  v.  Minot,  20  Pick.  116;  the  trust  exempting  the  trustee  from 
32  Am.  Dec.  206;  Harvard  College  v.  liability  except  for  "willful  andinten- 
Amory,  9  Pick.  446;  Smith  v.  Smith,  tional  breaches  of  trust");  Dickinson's 

4  Johns.  Ch.  281,  445;  Thompson  v.  Appeal,  152  Mass.  184  (investment 
Brown,  4  Johns.  Ch.  619,  628;  Acker-  in  railroad  stocks  allowed  in  Massa- 
man  v,  Emott,  4  Barb.  626;  Worrell's  chusetts,  but  not  when  the  enti^rprise 
Appeal,  9  Pa.  St.  508;  Swoyer'a  Ap-  is  hazardous);  Peckham  v.  Newton, 
peal,  5  Pa.  St.  377;  Twaddell's  Appeal,  15  R.I.  321  (no  limitation  in  Rhode 

5  Pa.  St.  15;  Murray  v.  Feinour,  2  Island  to  einy  particular  class  of  secu- 
Md.  Ch.  418,  419;  Evans  v.  Iglehart,  rities).] 


§  1075  EQUITY   JURISPRUDENCE.  1596 

any  loss  results,  they  must  make  it  good.  "Where,  how- 
ever, the  trust  provides  for  a  transfer  of  the  property  to 
the  beneficiaries,  they  are  not  bound  to  accept  such  un- 
authorized securities  from  the  trustees,  even  though  these 
securities  are  not  at  all  depreciated  in  value.  It  should 
be  carefully  observed,  in  this  connection,  that  if  the  bene- 
ficiary is  sui  juris  and  competent  to  bind  himself,  his 
consent  to  the  irregular  investment  would  be  a  justifica- 
tion of  the  trustee's  action,  and  a  waiver  of  all  claim 
against  him  for  resulting  loss.^ 

§  1075.  III.  To  Act  with  Good  Faith.  1.  The  Duty 
not  to  Deal  with  Trust  Property  for  his  Own  Advantage. — 
Absolute  and  most  scrupulous  good  faith  is  the  very  es- 
sence of  the  trustee's  obligation.  The  first  and  principal 
duty  arising  from  this  fiduciary  relation  is  to  act  in  all 
matters  of  the  trust  wholly  for  the  benefit  of  the  benefi- 
ciary. The  trustee  is  not  permitted  to  manage  the  afl'r  rs 
of  the  trust,  or  to  deal  with  the  trust  property,  so  as  to 
gain  any  advantage,  directly  or  indirectly,  for  himself, 
beyond  his  lawful  compensation.  The  equitable  rules 
which  govern  the  personal  dealings  between  trustees  and 
all  other  fiduciaries  and  their  beneficiaries  —  their  con- 
tracts, purchases,  gifts,  and  the  like  —  have  already  ^  n 
examined,  and  this  branch  of  their  general  obligation  to 
use  good  faith  needs  no  further  discussion.'  It  is  equally 
imperative  upon  the  trustee,  in  his  dealings  with  trust 
property,  not  ^  it  in  his  own  private  business,  not  to 

make  any  inc  ai  profits  for  himself  in  its  manage- 

ment, and  no  o  acquire  any  pecuniary  gains  from  his 
fiduciary  posi  ion.  The  beneficiary  is  entitled  to  claim 
all  advantages  actually  gained,  and  to  hold  the  trustee 
chargeable  for  all  losses  in  any  way  happening,  from  a 
violation  of  this  duty.' 

*  A  married  woman  is  competent  to  '  Thus  if   a  trustee  or  other    fidu- 

bind  herself  in   this   manner   when  a  ciary  buys  up  a  debt  or  encumbrance 

beneficiary:     Sherman   v.    Pariah,    53  against  the  estate  at  less  than  its  full 

N.  Y.  483.     [See  also,  in  general,  Et-  amount,  he  cannot  retain  the  benefit 

ting  V.  Marx,  3  Fed.  Rep.  673.]  of  the  discount,  but   can  only  credit 

'  See  ante,  §§  9.55-965.  himself   with  the  sum  actually  paid: 


1597 


POWERS    OF    EXPRESS    TRUSTEES. 


§   1076 


§  1076.  2.  The  Duty  not  to  Mingle  Trust  Funds  with 
his  Own  Funds.  —  This  second  important  duty  of  good 
faith  includes  not  only  the  intentional  use  of  trust  funds 
in  the  trustee's  own  business:  it  prohibits  the  mixing  the 


I 


Pooley  V.  Quilter,  2  De  Gex  &  J.  327; 
4  Drew.  184;  Fosbrooke  v.  Balguv,  1 
Mylne  &  K.  226;  see  ante,  §  9o9.  [See 
also  Baugh's  Ex'r  v.  Walker,  77  Va. 
99;  Powell  v.  Powell,  80  Ala.  11.] 
Using  trust  money  in  the  trustee's  own 
business,  in  trade  or  mercantile  adven- 
tures, ill  stock  speculations,  in  buying 
and  selling  land,  and  the  like,  is  a 
breach  of  trust:  Docker  v.  Somes,  2 
Mylne  &  K.  655;  Willett  v,  Blanford, 
1  Hare,  253;  Heathcote  v.  Hulme,  1 
Jacob  &  W.  122;  Moons  v.  DeBernales, 
1  Russ.  301;  San  Diego  v.  San  Diego 
etc.  R.  R.,  44  Cal.  10(5.  112-116;  Page 
V.  Naglee,  6  Cal.  241 ;  Gunter  v.  Janes, 
9  Cal.  643,  660-662;  Commonwealth 
V,  McAlister,  28  Pa.  St.  480. 

T^'ie  penalty  for  a  violation  of  this 
du|)'maybe  imposed  in  any  form  ne- 
cessary to  a  complete  indemnificatioa 
of  the  beneficiary.  Where  the  trus- 
tee has  used  trust  funds  in  his  own 
business,  in  trade,  speculation,  has 
made  profits,  acquired  property,  and 
the  like,  the  beneficiary  may,  if  he 
elect,  claim  and  secure  the  advantage, 
profits,  property,  etc.,  for  his  own 
benefit.  If  the  gains,  profits,  or  ac- 
qi>-\tions  of  such  dealings  cannot  be 
ascciL-ined  with  certainty,  the  trustee 
may  be  held  liable  to  pay  extra  inter- 
est, and  even  compound  interest. 
The  beneficiary  is  not,  however,  per- 
mitted to  claina  both  profits  and  inter- 
est; he  is  required  to  elect  between 
the  two.  Finally,  if  the  trustee  uses 
trust  funds  for  such  improper  pur- 
poses, and  loses  them  in  any  manner, 
he  will  be  obliged  to  make  up  the  loss 
to  an  extent  sufficient  to  give  the 
beneficiary  complete  indemnity,  not 
only  for  the  jirincipal,  but  also  for  the 
income  or  interest  which  ou^hfc  to 
have  been  made  by  the  exercise  of 
good  faith  ^nd  ordinary  business  pru- 
dence. These  conclusions  are  illus- 
trated by  the  cases  above  cited,  and 
also  by  those  following:  Robinson  v. 
Robinson,  1  De  Gex,  M.  &  (i.  247,  256, 
257;  Ex  parte  Geaves,  8  De  Gex,  M. 
&  G.  291;  Lloyd  v.  Attwood,  3  De  Gex 
&  J.  614;  General  Exch.  Bank  v. 
Horner,  L.  R.  9  Eq.  4S0;   Whitney  v. 


Smith,  L.  R.  4  Ch.  513  (a  trustee  who 
also  acted  as  solicitor  in  a  transfer  of 
certain  trust  property  cannot  be 
charged  with  profits  wliich  he  made  as 
acting  solicitor);  Ellis  v.  Barker,  L. 
R.  7  Ch.  104;  Parker  v.  McKenna, 
L.  R.  10  Ch.  96;  Albion  etc.  Co.  v. 
Martin,  L.  R.  1  Ch.  Div.  580;  In  re 
Imperial  Land  Co.,L.  R.  4Ch.  Div.  566; 
Land  Credit  Co.  v.  Lord  Fermoy,  L. 
R.  8  Eq.  7;  AVilliams  v.  Powell,  15 
Beav.  461;  Sweet  v.  Jeffries,  67  Mo. 
420;  Vason  v.  Beall,  58  Ga.  500;  O'Hal- 
loran  v.  Fitzgerald,  71  lU-  5.'<;  Roberts 
V.  Moseley,"64  .Mo.  507;  Fulton  v. 
Whitney,  66  N.  Y.  54S;  5  Hun,  16; 
Fast  V.  Mcpherson,  98  111.  496;  Col- 
trane  v.  Worrell,  30  Gratt.  4.34;  Mor- 
row V.  Saline  Co.  Comm'rs,  21  Kan. 
4S4;  Heath  v.  Waters,  40  Mich.  457; 
Malone  v.  Kelley,  54  Ala.  532  (both 
profits  and  interest  not  permitted); 
Baker  v.  Disbrow,  18  Hun,  29;  Ro- 
maine  v.  Hendrickson,  27  N.  J.  Eq, 
162;  Blauvelt  v.  Ackerman,  20  N.  J. 
Eq.  141,  148,  149;  Staats  v.  Bergen, 
17  N.  J.  Eq.  534,  562,  563;  Trull  v. 
Trull,  13  Allen,  407;  Marsh  v.  Renton, 
99  Mass.  132,  135;  Schieflelin  v.  Stew- 
art, 1  Johns.  Ch.  6"20;  7  Am.  Dec.  507; 
Gilman  v.  Gilman,  2  Lans.  1;  Diflfen- 
derffer  v.  Winder,  3  Gill  &  J.  311; 
Chapman  v.  Porter,  69  N.  Y.  276; 
Barnes  v.  Brown,  80  N.  Y.  527,  535; 
Duneomb  v.  N.  Y.  etc.  R.  R.,  84  N. 
Y.  190;  Davis  "  "R.ock  Creek  etc.  Co., 
55  Cal.  359;  -•  'In.  Rep.  40;  Cham- 
berlain \t.  .  ^Wool  etc.  Co.,  54 
Cal.  103;  st.  '■f  cases  in  the  two 
following  notes»j  ^See  also  Buwen  v. 
Richardson,  133  ,  ! ass.  296;  Huzard  v. 
Durant,  14  R.  I.  Si);  Dugan  v.  Capner, 
44  N.  J.  Eq.  339;  Haberman's  Aj)peal, 
101  Pa.  St.  329;  Dorsey  v.  Banks,  70 
Md.  508;  Burwell  v.  Burwell's  Guar- 
dian, 78  Va.  574;  Carr  v.  Askew,  94 
N.  C.  194;  Dowlmg  v.  Feeley,  72  Ga. 
557;  Powell  v.  Powell,  80  Ala.  1;  State 
V.  Roeper,  82  Mo.  57;  Baker's  Appeal, 
120  Pa.  St.  33;  Marshall  v.  Carson,  38 
N.  J.  Eq.  250;  48  Am.  Rep.  319;  and 
see  the  various  questions  in  regard  to 
profits  and  interest  discussed  at  length 
in  Cruce  v.  Cruce,  81  Mo.  676.] 


§  1076  EQUITY    JURISPRUDENCE.  1598 

two  funds  together  in  one  amount,  the  depositing  trust 
moneys  in  his  own  personal  account  with  his  own  moneys 
in  bank,  borrowing  trust  funds  or  going  through  the  form 
of  borrowing  for  his  own  use,  mingling  receipts  and  pay- 
ments of  trust  moneys  and  his  own  moneys  in  his  books 
of  account,  and  all  similar  modes  of  combining  or  failing 
to  distinguish  between  the  two  funds.  The  trustee  may 
not  thus  mingle  trust  moneys  with  his  own,  even  though 
he  eventually  accounts  for  the  whole,  and  nothing  is  lost. 
The  rule  is  designed  to  protect  the  trustee  from  tempta- 
tion, from  the  hazard  of  loss,  and  of  being  a  possible  de- 
faulter. When  a  trustee  does  mingle  trust  moneys  with 
his  own,  the  right  and  lien  of  the  beneficiary  attach  to 
this  entire  combined  fund  as  security  for  all  that  actu- 
ally belongs  to  the  trust  estate.  A  violation  of  this  duty 
subjects  the  trustee  to  the  following  liabilities:  1.  If  the 
mingling  is  followed  by  actual  loss,  accidental  or  other- 
wise, the  trustee  must  make  good  the  princi])al  sum  lost, 
together  with  interest,  and  perhaps  with  compound  inter- 
est; 2.  Where  there  has  been  no  positive  loss,  but  the 
whole  funds,  principal,  profits,  and  proceeds,  are  in  the 
trustee's  hands  in  their  mingled  condition,  the  burden  of 
proof  rests  upon  him  of  showing  most  conclusively  what 
portion  is  his,  and  whatever  of  the  mixed  fund,  including 
both  profits  and  principal,  he  cannot  thus  show  to  be  his 
own,  even  though  it  be  the  whole  mass,  will  be  awarded 
to  the  beneficiary.  The  beneficiary  is  always  entitled  to 
claim  and  receive  the  actual  profits  when  they  can  be 
ascertained;  3.  If  it  is  diflScult  to  distinguish  the  funds 
so  as  to  tell  the  amount  of  profits  or  proceeds  which  is  the 
beneficiary's  share,  the  court  may  not  only  require  the 
trustee  to  restore  the  principal  which  he  has  appropriated, 
but  in  place  of  the  profits  may  compel  him  to  pay  inter- 
est compounded,  with  rests  annual  or  semi-annual,  or 
even  more  frequent,  as  the  extent  of  his  bad  faith  may 
seem  to  demand;  4.  Even  if  the  trustee  voluntarily 
accounts  for  and  restores  all  the  principal  that  he  has 


1599  POWERS    OF    EXPRESS    TRUSTEES.  §  1077 

mingled  with  his  own,  the  court  will  at  all  events  charge 
him  with  interest  thereon.' 

§  1077.  3.  The  Duty  not  to  Accept  Any  Position  or 
Enter  into  Any  Relation,  or  do  Any  Act  Inconsistent  with 
the  Interests  of  the  Beneficiary.  —  This  rule  is  of  wide  ap- 
plication, and  extends  to  every  variety  of  circumstances. 
It  rests  upon  the  principle  that  as  long  as  the  confidential 
relation  lasts  the  trustee  or  other  fiduciary  owes  an  un- 
divided duty  to  his  beneficiary,  and  cannot  place  himself 
in  any  other  position  which  would  subject  him  to  conflict- 
ing duties,  or  expose  him  to  the  temptation  of  acting  con- 
trary to  the  best  interests  of  his  original  cestui  que  trust. 
The  rule  applies  alike  to  agents,  partners,  guardians, 
executors  and  administrators,  directors  and  managing 
officers  of  corporations,  as  well  as  to  technical  trustees. 
The  most  important  phase  of  this  rule  is  that  which  for- 
bids trustees  and  all  other  fiduciaries  from  dealing  in 
their  own  behalf  with  respect  to  matters  involved  in  the 
trust,  and  this  prohibition  operates  irrespectively  of  the 
good  faith  or  bad  faith  of  such  dealing.  It  is  therefore 
a  gross  violation  of  his  duty  for  any  trustee  or  director, 
acting  in  his  fiduciary  capacity,  to  enter  into  any  con- 

'  It    should    be   observed   that   the  so  as  that   they  cannot   be  separated 

trustee  is  liable  for  trust  money  lost  with  perfect  accuracy,  he  is  liable  for 

while  mingled  with  his  own,  or  while  the  whole");  Woodruff  v.  Boyden,  3 

being  used   in   his   own   business,  no  Abb.  N.  C.  29;  Malone  v.  Kelley,  54 

matter  how  or  by  what  cause  the  loss  Ala.  5.32;  Davis  v.  Coburn,  128  Mass. 

occurs.     He   may   have   used  the  ut-  377;  Marine  Bank  v.  Fulton  Bank,  2 

most  care  and  prudence  in  conducting  Wall.  252;  Case  v.  Abeel,  1  Paige,  393; 

the   business,  and  the  loss  may  have  Utica  Ins.  Co.  v.  Lynch,  11  Paige,  520; 

been   the  result  of  unforeseen,  inevi-  Mumford  v.  Murray,  6  Johns.   Ch.  1; 

table  accident, — he  is  still  liable,  since  Kip  v.  Bank  of  New  York,  10  Johns, 

he  is  engaged  in  a  positive  violation  of  63;    Comm.  v.  McAlister,  28  Pa.  St. 

duty:    Lupton  v.  White,  15  Ves.  432;  480;  Gunter  v.  James,  9  Cal.  643,  660- 

Heathcote   v.  Hulme,   1  Jacob  &  W.  662  (a  very  instructive  case);  Livings- 

122;  Mason  v.   Morley,  34  Beav.  471,  ton  v.   Wells,  8  S.   C.  347.     [See  also 

475;  Frith  v.  Cartland,  2  Hem.  &  M.  Nat.  Bank  v.  Ins.  Co.,'  104  U.  S.  54; 

417;  Pennell  v.  Deffell,  4  De  Gex,  M.  Matter  of  Kernochan,  104  N.  Y.  618; 

&G.  372;Erne3tv.  Croysdill,2DeGex,  Roberts's  Appeal,  92  Pa.   St.  407;  At- 

F.  &  J.  175;  ExparteGeaves,  SDeGex,  kinsou  v.  Ward,  47  Ark.  533;  Page  v. 

M.  &  G.  291;  Cook  v.  Addison,  L.  R.  Holman,  82  Ky.  573;  Asay  v.   Allen, 

7  Eq.  466,  470   ("it   is   a  well-estab-  124  111.  .391;  Brazel  v.  Fair,  26  S.  C. 

lished  doctrine  in  this  court  that  if  a  370  (trustee  uses  trust  funds  to  erect 

trustee  or  agent   mixes  and   confuses  improvements  on  his  own  bind);  Nalt- 

the  property  which  he  holds  in  a  fidu-  ner  v.   Dolan,   108  lud.   504;  58  Am. 

ciary  character  with  his  own  property,  Rep.   61.] 


§  1077 


EQUITY    JURISPRUDENCE. 


1600 


tract  with  himself  connected  with  the  trust  or  its  manage- 
ment; such  a  contract  is  voidable,  and  may  be  defeated  or 
set  aside  at  the  suit  of  the  beneficiary.  If,  however,  the 
trustee's  act,  in  violation  of  this  rule,  is  not  done  in  bad 
faith,  and  the  beneficiary  has  received  any  benefit  there- 
from, it  cannot  be  avoided  without  a  restoration  to  the 
trustee  of  what  has  thus  been  received.^  As  another  ap- 
plication of  the  general  doctrine,  a  trustee  is  bound  to 

justly  due  to  him,  or  for  a  liability 
justly  incurred  by  him.  See  also 
Barnes  v.  Brown,  80  N,  Y.  527,  535, 
per  Earl,  J.  Tlie  following  cases  il- 
lustrate the  general  duty  in  its  various 
applications:  Aberdeen  R'y  v.  Blaikie, 
1  Macq.  461 ;  Lloyd  v.  Attwood,  3  De 
Gex  &  J.  614  (trustees  bound  to  give 
full  information);  Imperial  etc.  Ass'n 
V.  Coleman,  L.  R.  6  Ch.  55S;  Flana- 
gan  V.  Great  West.  R'y,  L.  R.  7  Eq. 
116,  123;  Albion  etc.  Co.  v.  Martin,  L. 
R.  1  Ch.  Div.  580;  Twin  Lick  Oil  Co.  v. 
Marbury,  91  U.  S.  587;  Risley  v. 
Indianapolis  etc.  R.  R.,  62  N.  Y.  240; 
Hoyle  v.  Plattsburgh  etc.  R.  R.,  54 
N.  Y.  314,  328;  13  Am.  Rep.  595; 
Butts  v.  Wood,  37  N.  Y.  317;  Smith  v. 
Lansing,  22  N.  Y.  520,  531;  Gardner 
V.  Ogden,  22  N.  Y.  327;  78  Am.  Dec. 
192;  Fulton  v.  Whitney,  66  N.  Y.  548; 
N.  Y.  Central  Ins.  Co.  v.  Nat.  Protect. 
Ins.  Co.,  I4N.Y.  85;St.  James'sChurch 
V.  Church  of  the  Redeemer,  45  Barb. 
356;  Davis  v.  Rock  Creek  etc.  Co.,  55 
Cal.  359;  36  Am.  Rep.  40;  Chamber- 
lain v.  Pacific  Wool  etc.  Co.,  54  Cal. 
103;  San  Diego  v.  San  Diego  etc.  R.  R., 
44  Cal.  106,  112-116;  Stewart  v.  Le- 
high  Val.  R.  R.,  38  N.  J.  L.  505;  Gard- 
ner v.  Butler,  30  N.  J.  Eq.  702;  Sweet 
v.  Jeflfries,  67  Mo.  420;  Roberts  v. 
Moseley,  64  Mo.  507;  O'Halloran  v. 
Fitzgerald,  71  111.  53;  Fast  v.  McPher- 
Bon,  98  111.  496;  Morrow  v.  Saline  Co. 
Comm'rs,  21  Kan,  484;  [Wardell  v. 
R.  R.  Co.,  103  U.  S.  651;  Thomas  v. 
Brownville  etc.  R.  R.  Co.,  109  U.  S. 
524;  Jackson  v.  McLean,  36  Fed.  Rep. 
213;  Jesup  v.  111.  Cent.  R.  R.  Co.,  43 
Fed.  Rep.  483;  Smith  v.  Los  Angeles 
etc.  Ass'n,  78  Cal.  289;  12  Am.  St.  Rep. 
53;  Memphis  etc.  R.  R.  Co.  v.  Woods, 
88  Ala.  630;  16  Am.  St.  Rep.  81;  Bulk- 
ley  v.  Whitcomb,  121  N.  Y.  Ill;  Pear- 
son V.  Concord  R.  R.,  62  N.  H.  537; 
13  Am.  St.  Rep.  590;  Jacksn  V.  Mc- 
Lean, 100  Mo.  130.] 


*  Since  the  applications  of  this  duty 
to  corporation  directors  and  officers 
are  very  important  and  frequent,  it 
will  be  proper  to  make  a  brief  quota- 
tion from  one  or  two  very  recent  cases. 
In  Duncomb  v.  New  York  etc.  R.  R., 
84  N.  Y.  190,  198,  the  court  said: 
"  It  is  not  intended  to  deny  or  question 
the  rule  that,  whether  a  director  of  a 
corporation  is  to  be  called  a  trustee  or 
not  in  a  strict  sense,  there  can  be  no 
doubt  that  his  character  is  fiduciary, 
and  that  he  falls  within  the  doctrine 
by  which  equity  requires  that  confi- 
dence shall  not  be  abused  by  the  party 
in  whom  it  is  reposed,  and  which  it 
enforces  by  imposing  a  disability,  either 
partial  or  complete,  upon  such  party 
to  deal  on  his  own  behalf  in  respect  to 
any  matter  involving  such  confidence. 
Nor  is  it  at  all  questioned  that,  in  such 
cases,  the  right  of  the  beneficiary  or 
those  claiming  through  him  to  avoid- 
ance does  not  depend  upon  the  ques- 
tion whether  the  trustee  in  fact  has 
acted  fraudulently,  or  in  good  faith 
and  honestly:  Davoue  v.  Fanning,  2 
Johns.  Ch.  260.  But  the  rule  was 
adopted  to  secure  justice,  not  to  work 
injustice;  to  prevent  a  wrong,  not 
to  substitute  one  wrong  for  another; 
and  hence  have  arisen  limitations  upon 
its  operation,  calculated  to  guard  it 
against  evil  results  as  inequitable  aa 
those  it  was  designed  to  prevent. 
Thus  the  beneficiary  may  avoid  the 
act  of  the  trustee,  but  cannot  do  so 
without  restoring  what  he  has  re- 
ceived: York  Co.  V.  Mackenzie,  8 
Brown  Pari.  C.  42.  To  cling  to  the 
fruits  of  the  trustee's  dealing  while 
seeking  to  avoid  his  act,  to  take  the 
benefit  of  his  loan  and  yet  avoid  and 
reverse  its  security,  would  be  grossly 
inequitable  and  unjust."  The  court 
held  that  the  rule  does  not  apply 
where  a  trustee  or  dii-ector  simply 
takes  collateral  security   for   a   debt 


1601      POWERS  OF  EXPRESS  TRUSTEES.   §§  1078,  1079 

communicate  to  his  beneficiary  any  knowledge  or  infor- 
mation he  may  have  obtained  affecting  the  beneficiary's 
interests  so  far  as  they  are  embraced  in  or  depend  upon 
the  trust  or  confidential  relation.' 

§  1078.  4.  The  Duty  not  to  Sell  Trust  Property  to 
Himself  nor  to  Buy  from  Himself.  —  This  particular  duty 
has  already  been  fully  discussed.  It  has  been  showu 
that  where  a  trustee  deals  directly  with  his  beneficiary 
by  way  of  purchase  or  sale,  the  transaction  is  presump- 
tively invalid;  and  that  where  a  trustee  with  authority 
to  sell  directly  or  indirectly  purchases  the  property  for 
himself  behind  his  beneficiary's  back,  or  where  a  trustee 
with  authority  to  buy  purchases  the  property  in  such  a 
manner  from  himself,  in  each  case  the  transaction  may 
be  avoided  by  the  beneficiary,  unless  he  has  ratified  it 
with  full  knowledge  of  all  the  facts.'' 

§  1079.  IV.  Breach  of  Trust,  and  Liability  therefor.  — 
It  might  be  supposed  that  the  term  "  breach  of  trust" 
was  confined  to  willful  and  fraudulent  acts  which  have  a 
quasi  criminal  character,  even  if  they  have  not  been 
made  actual  crimes  by  statute.  The  term  has,  however, 
a  broader  and  more  technical  meaning.  It  is  v^'ell  settled 
that  every  violation  by  a  trustee  of  a  duty  which  equity 
lays  upon  him,  whether  willful  and  fraudulent,  or  done 
through  negligence,  or  arising  through  mere  oversight 
or  forgetfulness,  is  a  breach  of  trust.  The  term  there- 
fore includes  every  omission  or  commission  which  vio- 
lates in  any  manner  either  of  the  three  great  obligations 

»  [See  §§  902-904.]  80    111.   100;     Star  Fire   Ins.    Co.  r. 

»  See    ante,    §§   958-965,  1049-1052.  Palmer,  41  N.  Y.  Sup.  Cfc.  2G7;  Spon- 

See  also  In  re  Bloye's  Trust,  1  Macn.  cer's   Appeal,  80  Pa.  St.  317;    Tatum 

&  G.  488;  Knight  v.  Marjoribanks,  2  v.  McLellan,  50  Misa.  1;  Union  Slate 

Macn.  &  G.   10;  Hickley  v.   Hickley,  Co.  v.  Tilton,  69  Me.   244;    James  v. 

L.  R.  2  Ch.  Div.  190;  Ellis  v.  Barker,  James,  55  Ala.  525;  Higgins  v.  Curtiss, 

L.  R.  7  Ch.  104;   Boerum  v.  Scheuck,  82  111.   28;    Ferguson  v.   Lowery,   54 

41  N.  y.  182  (when  a  trustee   to  sell  Ala.  510;  25  Am.  Rep.  718;  [Morse  v. 

has  himself  purchased  the  trust  prop-  Hill,  1.3G  Mass.  60  (the  purchase  may 

erty,  the  mere  receipt  and  acceptance  be  avoided  by  a  part  of  the  beneficia- 

of  the  proceeds  by  the  beneficiary  ia  ries);  Pittsburg  Min.   Co.  v.  Spooner, 

not  such  a  ratification  as  will  prevent  74  Wis.  307;  17  Am.  St.  Rep.  149  (co' 

him  from  avoiding  the  sale);  Munn  v.  poratiou  trustees).] 
Berges,  70  111.  604;  Bush  v.  Sherman, 
2  Eq.  Jur.  — 101 


§  1080  EQUITY    JUllISPRUDENCB.  1602 

already  described:  of  carrying  out  the  trust  according  to 
its  terms,  of  care  and  diligence  in  protecting  and  invest- 
ing the  trust  property,  and  of  using  perfect  good  faith. 
This  broad  conception  of  breach  of  trust,  and  the  liabil- 
ities created  thereby,  are  not  confined  to  trustees  regu- 
larly and  legally  appointed;  thej^  extend  to  all  persons 
who  are  acting  trustees,  or  who  intermeddle  with  trust 
property.^  In  order  that  a  trustee  may  be  personally 
liable  for  a  breach  of  trust,  he  must  be  sui  juris. ^ 

§  1080.  Nature  and  Extent  of  the  Liability.  —  It  has 
already  been  shown  that  a  beneficiary  may  always  claim 
and  reach  the  trust  property  through  all  its  changes  of 
form  while  in  the  hand  of  the  trustee,  and  that  he  may 
also  follow  it  into  the  possession  and  apparent  owner- 
ship of  third  persons,  until  it  has  been  transferred  to  a 
bona  fide  purchaser  for  valuable  consideration  and  without 
notice;  and  that  a  court  of  equity  will  furnish  him  with 
all  the  incidental  remedies  necessary  to  enforce  his  claim 
and  to  render  it  effective.*  In  addition  to  this  claim  of 
the  beneficiary  upon  the  trust  estate  as  long  as  it  exists, 
the  trustee  incurs  a  personal  liability  for  a  breach  of 
trust  by  way  of  compensation  or  indemnification,  which 
the  beneficiary  may  enforce  at  his  election,  and  which 
becomes  his  only  remedy  whenever  the  trust  property 
has  been  lost  or  put  beyond  his  reach  by  the  trustee's 
wrongful  act.  The  trustee's  personal  liability  to  make 
compensation  for  the  loss  occasioned  by  a  breach  of  trust 

1  Rackham  v.  Siddall,  1  Macn.  &  G.  Heyl,  L.  R.  20  Eq.  321;  although  her 

607;  Lord  v.   Wightwick,  4  De  Gex,  separate  estate  might  be  liable  under 

M.  &  G.  803;  Life   A.ss'n  of  Scotland  some   circumstances:    See   Brewer  v. 

V.  Siddal,  3  De  Gex,  F.  &  J.  58;  Pearce  Swirles,  2  Smale  &  G.  219;  Fletcher  v. 

V.  Pearce,  22  Beav.  248;  Hennessey  v.  Green,  .33  Beav.  426;    as  to  wrongful 

Bray,  33  Beav.  9G.     [That  the  words  investments  made  with  her  consent, 

"  willful  and  intentional  breaches  of  see  Cocker  v.  Quayle,  1  Russ.   &   M. 

trust  "  may  include  mere  acts  of  neg-  535;    Kellaway   v.   Johnson,  5   Beav. 

ligence,    see    Tuttle    v.    Gilmore,    36  319.     An  infant  is  not,  in  general,  lia- 

N.  J.  Eq.  617.]  ble  for  a  breach  of  trust:   Whitmore 

*  Where  the  common-law  disabilities  v.  Weld,  1  Vern.  326,  328;  Hind- 
of  coverture  prevail,  a  married  woman  marsh  v.  Southgate,  3  Russ.  324;  un- 
does not  become  personally  liable  for  less  it  was  intentional  and  fraudulent: 
her  breach  of  trust:  Underwood  v.  Cory  v.  Gertcken,  2  Madd.  40;  Wright 
Stevens,  1  Mer.  712,  717;  Cresswell  v.  v.  Snowe,  2  De  Gex  &  S.  321. 
V.   Dewell,  4  Giff.    460;    Wainford  v.         »  See  ante,  §§  1048-1058. 


1603 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1081 


is  a  simple  contract  equitable  debt/  It  may  be  enforced 
by  a  suit  in  equity  against  the  trustee  himself,  or  against 
his  estate  after  his  death,  and  the  statute  of  limitations 
will  not  be  admitted  as  a  defense  unless  the  statutory 
language  is  express  and  mandatory  upon  the  court.^  The 
amount  of  the  liability  is  always  sufficient  for  the  com- 
plete indemnification  and  compensation  of  the  benefi- 
ciary.' 

§  1081.  Liability  among  Co-trustees.  —  I  do  not  now 
speak  of  the  liability  for  the  acts  or  defaults  of  a  co-trus- 
tee, but  assume  that  co-trustees  have  concurred  in  a  breach 
of  trust.  The  rule  is  firmly  settled  that  where  a  breach 
of  trust  has  affected  two  or  more  or  all  of  co-trustees  with 
a  common  liability,  they  are  liable  jointly  and  severally; 
each  is  liable  for  the  whole  loss  sustained  or  the  whole 


•Vernon  v.  Vawdry,  2  Atk.  119. 
Adey  v.  Arnold,  2  De  Gex.  M.  &  G. 
432;  Lockhart  v.  Reilly,  1  De  Gex  & 
J.  464;  Obee  v.  Bishop,  1  De  Gex,  F. 
&  J.  137;  Ex  parte  Blencowe,  L.  R.  1 
Ch.  393;  Holland  v.  Holland,  L.  R.  4 
Ch.  449;  Wynch  v.  Grant,  2  Drew. 
312;  Benbury  v.  Benbury,  2  Dev.  & 
B.  Eq.  235,  238;  [Little  v.  Chadwick, 
151  Mass.  109.]  The  distinction  be- 
tween specialty  debts  and  simple  con- 
tract del)ts  in  the  settlement  of  estates 
being  generally  abolished  in  this  coun- 
try, the  liability  of  the  trustee  may 
properly  be  described  as  an  equitable 
contract  liability  or  debt, —  that  is,  an 
equitable  liability  of  the  same  nature 
as  that  arising  from  breach  of  contract. 

MSee§419.] 

*  The  general  doctrines  concerning 
the  trustee's  liability  for  profits,  for 
interest  simple  or  compound,  and  for 
the  funds  lost  or  misapplied,  have 
been  stated  in  the  foregoing  para- 
graphs. For  a  more  detailed  discus- 
sion of  these  rules,  especially  as  to  in- 
terest, the  reader  must  be  referred  to 
the  various  treatises  upon  trusts.  As 
to  the  liability  of  the  trustee's  estate 
after  his  death,  and  the  defense  of  the 
statute  of  limitations,  .see  Devaj'nes 
V.  Robinson,  24  Beav.  86;  Brittlebank 
V.  Goodwin,  L.  R.  5  Eq.  545;  Wood 
V.  Weightman,  L.  R.  13  Eq.  4.34; 
Taylor  v.  Cartwright,  L.  R.  14  Eq. 
167;  Burdick  v.  Garrick,  L.  R.  5  Uh. 


233;  Stone  v.  Stone.  L.  R.  5  Ch.  74; 
Dixon  V.  Dixon,  L.  R.  9  Ch.  Div.  587; 
Pinson  v.  Gilbert,  57  Ala.  35;  Rowe 
V.  Bentley,  29  Gratt.  756.  [See  also 
Richardson  v.  Hutchins,  68  Tex.  81.] 
As  to  the  liability  in  general,  see  Rob- 
inson V.  Robinson,  1  De  Gex,  M.  &  G. 
247  (for  interest);  Att'y-Gen.  v.  Al- 
ford,  4  De  Gex,  M.  &  G.  843  (ditto); 
Cossor  V.  Radford,  1  De  Gex,  J.  &  S. 
5S5;  Bostock  v.  Floj'er,  L.  R.  1  Eq. 
26  (liable  for  fraud  of  his  attorney); 
Sutton  V.  Wilders,  L.  R.  12  Eq.  373 
(ditto);  Ho])good  v.  Parkin,  L.  R.  11 
Eq.  74  (liable  for  the  negligence  of  hia 
attorney);  In  re  Grabowski'a  Settle- 
ment, L.  R.  6  Eq.  12  (for  compound  in- 
terest); Cook  V.  Addison.  L.  R.  7  Eq. 
466;  Beaty  v.  Curson,  L.  R.  7  Eq.  194; 
Jacubs  V,  Rylance,  L.  R.  17  Eq.  341; 
Livingston  v.  Wells,  8  S.  C.  347;  Lee- 
don  V.  Lombaert,  80  Pa.  St.  381; 
Brown  v.  Lambert's  Adm'r,  33  Gratt. 
256;  and  see  cases  cited  under  the 
last  preceding  paragraphs.  [See  also 
Stothotf  V.  Reed,  32  N.  J.  Eq.  213; 
Dilworth's  Appeal,  108  Pa.  St.  92;  Zim- 
merman V.  Fraley,  70  Md.  561;  Kom'- 
ley  V.  Towsley,  53  Mich.  329;  Adams 
V.  Lanibard,  SO  Cal.  426;  Atkinson  v. 
Ward,  47  Ark.  533.  That  the  liabil- 
ity of  the  trustee  may  be  limited  by 
the  instrument  creating  the  trust,  l)ut 
that  a  strict  rule  of  construction  will 
be  applied  against  such  limitation,  see 
Tuttle  V.  Gilmore,  36  N.  J.  Eq.  617.] 


§  1081 


EQUITY   JURISPRUDENCE. 


1604 


amount  due,  and  a  decree  obtained  against  them  jointly 
may  be  enforced  against  any  one  of  them.^  Wherever 
two  or  more  co-trustees  are  thus  jointly  and  severally  lia- 
ble in  the  same  amount  for  a  breach  of  trust  which  is 
not  purely  tortious  in  its  nature,  —  as  where  it  consists  in 
a  failure  to  carry  out  the  directions  of  the  trust,  or  a  fail- 
ure to  make  proper  investments,  or  other  like  acts  of 
omission  or  commission  which  are  not  fraudulent,  or  do 
not  involve  a  willful  breach  of  good  faith,  —  a  right  of 
contribution  exists  among  themselves;  and  if  one  of  them 
has  paid  the  amount  of  liability,  he  may  enforce  a  con- 
tribution from  the  others,  in  a  suit  brought  for  that  pur- 
pose. In  such  cases,  upon  the  general  principles  of  equity 
pleading,  all  the  trustees  who  are  liable  should  be  joined 
as  defendants  in  a  suit  brought  by  the  beneficiary;  the 
contribution,  however,  cannot  be  enforced  in  that  suit.^ 


'  Wilson  V.  Moore,  1  Mvlne  &  K. 
126;  Lvse  v.  Kingdon,  1  Coll.  C.  C. 
184,  188;  Att'y-Gen.  v.  Wilson,  Craig 
&  P.  1,  28;  Lawrence  v.  Bowie,  2  Phill. 
Ch.  140;  Fletcher  v.  Green,  33  Beav. 
426;  Rehdenv.  Wesley,  29  Beav.  21.3, 
215;  Burrows  v.  Walls,  5  De  Gex,  M. 
G.  233;  Wiles  v.  Gresliam,  5  De  Gex, 
M.  &  G.  770;  Ex  parte  Geaves,  8  De 
Gex,  M.  &  G.  291 ;  Lockhart  v.  Reilly, 
1  De  Gex  &  J.  484;  Case  v.  James,  3 
De  Gex,  F.  &  J.  25(3;  Turquand  v. 
Marshall,  L.  R.  6  Eq.  112;  Sculthorpe 
V.  Tipper,  L.  R.  13  Eq.  232;  Ashhurst 
V.  Mason,  L.  K.  20  Eq.  225;  Ex  parte 
Norris,  L.  R.  4  Ch.  280;  Budge  v. 
Gummow,  L.  R.  7  Ch.  719;  Ellis  v. 
Barker,  L.  R.  7  Ch.  104;  Evans  v. 
Bear,  L.  R.  10  Ch.  76;  Butler  v.  But- 
ler, L.  R.  5  Ch.  Div.  554;  7  Ch.  Div. 
116;  In  re  Endefield  etc.  Co.,  L.  R.  8 
Ch.  Div.  388;  Land  Credit  Co.  v.  Lord 
Fermoy,  L.  R.  8  Eq.  7,  11,  13;  5  Ch. 
763;  Hun  v.  Gary,  82  N.  Y.  65;  37  Am. 
Rep.  546;  Wectjen  v.  Vibbard,  5  Hun, 
2(55;  Heath  v.  Waters,  40  Mich.  457 
(where  one  trustee  deals  with  another 
person,  whom  he  knows  to  be  also  a 
trustee,  in  such  a  manner  as  amounts 
to  a  breach  of  the  latter's  trust,  both 
are  affected  with  an  equitable  liability); 
see  also,  on  the  general  subject  of  the 
trustees'  liability:  Townley  v.  Sher- 
borne, Bridg.  35;  Brice  v.  Stokes,  11 


Ves.  319;  2  Lead.  Caa.  Eq.,  4th  Am, 
ed.,  1738.  1748,  1791,  and  notes  of  the 
English  and  American  editors. 

^  This  rule  is  sometimes  laid  down 
in  the  broadest  terms,  as  though  the 
right  of  contribution  was  universal, 
existing  in  every  instance  of  liability 
among  co-trustees  for  any  breach  of 
trust.  This  is  certainly  erroneous, 
since  the  distinction  mentioned  in  the 
text  is  clearly  made  by  the  decisions. 
The  general  language  of  judicial  opin- 
ions in  stating  the  rule  should  always 
be  interpreted  by  the  facts  of  the  case 
before  the  court.  It  has  also  been 
said  that  the  defaulting  trustees  should 
all  be  joined  as  defendants  in  a  suit  by 
the  beneficiary,  in  order  that  the  con- 
tribution among  them  might  be  set- 
tled and  enforced  by  the  one  decree. 
This  view  is  not  sustained  by  the 
decisions.  Many  of  the  authorities 
which  recognize  the  right  of  contribu- 
tion declare  in  the  most  positive  man- 
ner that  it  cannot  be  enforced  among 
the  defendants  in  the  suit  brought 
against  them  by  the  beneficiary.  The 
true  reason  for  making  them  all  par- 
ties is,  that  they  may  be  bound  by  the 
decree  which  fixes  the  amount  of  the 
liability  for  which  they  must  contrib- 
ute: See  Perry  on  Trusts,  sees.  848,  876. 
The  leading  case  on  the  subject  of  con- 
tribution is  Lingard  v.  Bromley,  1  Ves. 


1605 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1081 


Where,  on  the  other  hand,  the  breach  of  trust  concurred 
in  by  several  co-trustees  is  tortious  in  its  nature,  as  where 
it  is  actually  fraudulent,  or  consists  in  an  intentional 
misappropriation  of  trust  funds  to  the  trustee's  own  use, 
or  in  any  other  willful  violation  of  good  faith,  or  perhaps 
in  gross  and  culpable  negligence  occasioning  a  loss,  there 
is  no  right  of  contribution  among  the  trustees;  the  bene- 
ficiary may,  at  his  election,  sue  one  or  more  of  the  wrong- 
doers without  joining  all  who  are  liable.* 


&  B.  114,  117.  Two  trustees  were 
sued,  aud  a  decree  was  obtained  against 
them  jointly  for  not  conveying  certain 
property.  The  master  of  rolls  said: 
"Where  damages  are  recovered  against 
several  defendants  guilty  of  a  tort, 
a  court  of  justice  will  not  enforce  a 
contribution  among  them;  but  here  is 
nothing  but  the  non-performance  of  a 
civil  obligation.  The  trustees  were 
bound  to  convey;  a  loss  was  occasioned 
by  their  not  conveying,  and  they  were 
bound  to  make  good  that  loss.  The 
liability,  therefore,  was  not  at  all  ex 
delicto."  He  goes  on  to  show  that 
there  was  not  the  slightest  fraud  in 
the  defendants'  default,  and  they  were 
entitled  to  a  contribution.  The  whole 
reasoning  indicates  the  ground  upon 
which  the  right  of  contribution  is 
placed  to  be  the  absence  of  any  tor- 
tious character  in  the  defendants' 
breach  of  trust.  In  Sherman  v.  Par- 
ish, 53  N.  y.  483,  489,  defendant  was 
sued  for  an  alleged  breach  of  trust  in 
not  making  proper  investments.  The 
court  held  that  the  fault,  if  any,  was 
entirely  that  of  the  defendants'  co- 
trustee, who  was  not  made  a  party 
defendant,  and  that  the  defendant 
was  not  at  all  liable.  Folger,  J., 
added:  "It  is  quite  clear  that  if  de- 
fendant had  been  held  to  answer  in 
the  first  instance  to  the  plaintiff,  he 
should  have  recompense  from  the  es- 
tate of  the  active  trustee,  contribu- 
tion from  that  of  the  co-trustee  equally 
in  fault,  and  be  enabled  to  pursue  and 
recover  the  fund  in  the  securities  in 
which  it  has  been  put."  He  goes  on 
to  say  that  the  other  co-trustee  was  a 
necessary  party,  and  seems  to  inti- 
mate as  the  reason,  that  the  court 
might  by  its  decree  in  the  same  suit 
adjust  the  rights,  and  enforce  the  con- 
tribution    between     the     defendants 


themselves.  This  whole  statement  is 
an  obUer  dictum;  but  tlie  rule  which 
it  lays  down  concerning  the  right  of 
contribution  is  undoubtedly  correct 
when  confined  to  such  cases  as  the  one 
then  before  the  court.  The  conclusion 
which  the  learned  judge  reaches,  that 
the  contribution  would  be  enforced  by 
the  decree  in  the  suit  brought  by 
the  beneficiary,  is  certainly  not  sup- 
ported by  the  decisions  which  he  cites. 
See  also  Coppard  v.  Allen,  2  De  Gex, 
J.  &  S.  173,  177,  per  Turner,  L.  J.; 
Fletcher  v.  Green,  33  Beav.  513,  515 
(while  admitting  the  right  of  contri- 
bution, expressly  holds  that  "  the 
equities  of  the  defendants  as  between 
themselves  cannot  bo  determined  in 
this  suit "  brought  by  the  cestui  que 
tniat);  Att'y-Gen.  v.  Daugars,  33  Beav. 
621,  624  (same  rule);  Perry  v.  Knott, 
4  Beav.  179,  180  (holds  that  all  the 
defaulting  trustees  should  be  made 
parties,  not  because  contribution  could 
be  enforced  in  this  suit,  for  it  could 
not;  "  but  if  they  were  all  present, 
the  amount  due  would  be  settled  in 
the  presence  of  all,  and  in  a  subsequent 
suit /or  contribution,  the  amount  would 
already  have  been  conclusively  de- 
cided"); Pitt  v.  Bonner,  1  Younge 
&  C.  Ch.  670  (a  contribution  as  to 
costs  by  the  defendants  was  decreed 
bi/  consent  of  the  parties  on  motion  in 
the  same  suit);  Wilson  v.  Goodman, 
4  Hare,  54;  Munch  v.  Cockerell,  8 
Sim.  219  (all  the  defaulting  trustees 
are,  in  general,  necessary  parties  de- 
fendant in  a  suit  for  a  breach  of  trust); 
Priestman  v.  Tindall,  24  Beav.  244; 
Baynard  v.  W^oolley,  20  Beav.  583; 
Birks  V.  Micklethwait,  33  Beav.  409. 
'  In  Att'y-Gen.  v.  Wilson,  Craig 
&  P.  1,  28,  a  suit  was  brought  against 
a  portion  of  a  body  of  trustees,  who 
had  been  guilty  of  a  willful  mi«appro- 


§1082 


EQUITY    JURISPRUDENCE. 


1606 


§  1082.  Liability  for  Co-trustees.  — The  general  theory 
of  equity  is,  that  each  one  of  several  trustees  has  the  same 
rights  as  the  others  with  respect  to  the  possession,  con- 
trol, and  management  of  the  trust  property.  It  follows 
as  a  necessary  consequence  of  this  conception,  and  the 
general  rule  is  well  settled,  that  each  trustee  is  generally 
liable  only  for  his  own  conduct  in  dealing  with  the  affairs 
of  the  trust;  he  is  not  responsible  for  the  acts  or  defaults 
—  the  intentional  or  negligent  breaches  of  trust  —  of  a 
co-trustee,  in  which  he  has  not  joined  or  concurred,  or  to 
which  he  has  not  consented,  or  which  he  has  not  aided 
or  made  possible  by  his  own  negligence.^     Where  a  trus- 


priation  of  trust  funds,  and  of  gross 
negligence  in  the  management  of  the 
trust  estate.  The  objection  was  urged 
with  great  earnestness  that  all  the 
wrong-doing  trustees  should  have  been 
made  defendants,  and  that  the  suit 
could  not  be  sustained  against  a  part 
of  them  only.  Lord  Gotten  ham  laid 
down  the  rule  in  the  following  em- 
phatic manner,  and  his  conclusions 
are  founded  upon  plain  and  settled 
principles:  "It  was  then  urged  that 
all  the  governing  body,  at  least  all 
who  took  any  part  in  these  transac- 
tions, ought  to  be  co-defendents.  Upon 
this  point,  also.  Lord  Hardwicke's  au- 
thority in  the  Charitable  Corporation 
Case,  2  Atk.  400,  406,  is  of  the  high- 
est  value.  It  was  urged  that,  as  the 
injury  had  arisen  from  the  miscon- 
duct of  many,  each  ought  to  be  an- 
swerable for  so  much  only  as  his 
particular  misconduct  had  occasioned; 
but  Lord  Hardwicke  said:  'If  this 
doctrine  should  prevail,  it  is  indeed 
laying  the  ax  to  the  root  of  the  tree. 
But  if  upon  inquiry  there  should  ap- 
pear to  be  supine  negligence  in  all  of 
them,  by  which  a  gross  complicated 
loss  happens,  I  will  never  determine 
that  they  are  not  all  guilty;  nor  will  I 
ever  determine  that  a  court  of  equity 
cannot  lay  hold  of  every  breach  of 
trust,  let  the  person  guilty  of  it  be 
either  in  a  private  or  a  public  capacity.  * 
In  cases  of  this  kind,  where  the  liabil- 
ity arises  from  the  wrongful  act  of  the 
parties,  each  is  liable  for  all  the  con- 
sequences, and  there  is  no  contrifmlion 
between  them,  and  each  case  is  distinct, 
depending  upon  the  evidence  against 


each  party.  It  is  therefore  not  neces- 
sary to  make  all  parties  who  may 
more  or  less  have  joined  in  the  act 
complained  of;  nor  would  any  one 
derive  any  advantage  from  their  being 
all  made  defendants,  because,  as  the 
decree  would  be  general  against  all 
found  to  be  guilty  of  the  charge,  it 
might  be  executed  against  any  of  them. 
It  is  evident  that  Lord  Hardwicke,  in 
the  case  of  the  Charitable  Corporation, 
considered  that  each  defendant  would 
be  liable  for  each  transaction  in  which 
he  had  been  a  parby."  He  also  cites 
Att'y-Gen.  v.  Brown,  1  Swanst.  265, 
decided  by  Lord  Eldon  as  sustaining 
his  conclusion.  The  same  distinction 
was  recognized  and  followed,  and 
declared  to  be  the  well-settled  rule,  in 
Cunuingham  v.  Pell,  5  Paige,  607,  per 
Walworth,  C. ;  and  in  Heath  v.  Erie 
R.  R.  Co.,  8  Blatch.  347;  Smith  v. 
Rathbun,  22  Hun,  150.  [See  also 
Wilkinson  v.  Dodd,  40  N.  J.  Eq. 
12.3.] 

'  Townley  V.  Sherborne, .  Bridg.  35; 
Brice  V.  Stokes.  11  Ves.  319;  2  Lead. 
Cas.  Eq.,4thAm.  ed..  1738,  1748-1790, 
1791-1805;  the  English  and  American 
authorities  are  collected  in  the  editor's 
notes;  Derbishire  v.  Home,  3  De  Gex, 
M.  &  G.  80  (not  liable  for  moneys 
which  come  into  the  hands  of  a  co- 
trustee); Paddon  v.  Richardson,  7  De 
Gex,  M.  &  G.  563  (money  having  been 
loaned  to  a  co-trustee  in  pursuance  of 
express  directions  of  the  trust,  the 
omission  of  the  other  trustee  to  com- 
pel its  repayment  did  not  render  that 
other  trustee  liable  for  its  loss,  in  the 
absence  of  any  misconduct  on  his  part); 


1607  POWERS    OF    EXPRESS    TRUSTEES.  §   1082 

tee  who  is  not  really  an  acting  one  joins  merely  for  the 
sake  of  conformity  with  his  co-trustees  who  are  acting,  in 
receipts  given  for  money,  he  is  not  liable  with  respect  to 
such  money  to  the  beneficiary.^  The  foregoing  statement 
of  the  general  doctrine  shows  that  a  trustee  is  not  abso- 
lutely and  under  all  circumstances  free  from  liability  with 
respect  to  his  co-trustees.  A  trustee  is  responsible  for  the 
willful  or  negligent  wrongful  acts  or  omissions  —  breaches 
of  trust  —  of  his  co-trustee  to  which  he  consented,  or 
which  by  his  own  negligence  he  made  it  possible  for  his 
co-trustee  to  commit.  Every  trustee  is,  of  course,  liable 
for  the  defaults  of  his  co-trustee  in  which  he  has  joined 
or  concurred,  but  his  liability  then  arises  from  his  own 
actual  breaches  of  trust,  and  not  from  those  of  his  fellow- 
trustee.  "With  respect  to  the  liability  of  a  trustee  for  the 
acts  of  a  co-trustee,  there  are  three  modes  in  which  he 
may  become  liable  according  to  the  ordinary  rules  of  the 
court:   1.  Where   one  trustee  receives  trust  money  and 

Barnard  v.  Bagshaw,  3  De  Gex,  J.  &  ecutors;  that  each  is  liable  only  for 
S.  355  (trustees  are  not  liable  for  his  own  acts,  and  cannot  be  made  re- 
moneys  which  a  co-trustee  gets  into  sponsible  for  the  default  of  another, 
his  possession  without  their  consent  or  unless  he  in  some  manner  aided  or 
knowledge  and  by  a  fraud  upon  them);  concurred  therein:  Ormiston  v.  Olcott, 
Land  Credit  Co.  v.  Lord  Fermoy,  84  N.  Y.  339,  346;  citing  Sutherland 
L.  R.  5  Ch.  763;  reversing  8  Eq.  7  (a  v.  Brush,  7  Johns.  Ch.  17,  22;  11  Am. 
director  is  not  liable  for  a  breach  of  Dec.  383;  Monell  v.  Monell,  5  Johns, 
trtist  by  the  other  directors  of  which  Ch.  2S3;  9  Am.  Dec.  298;  Manahan  v. 
he  had  no  knowledge);  Cargill  v.  Gibbons,  19  Johns.  427;  Kip  v.  Denis- 
Bower,  L.  R.  10  Ch.  Div.  502,  514  (a  ton,  4  Johns.  23;  Banks  v.  Wilkes,  3 
director  of  a  company  is  not  liable  for  Sand.  Ch.  99;  and  disapproving  of 
a  fraud  committed  by  his  co-directors  Bates  v.  Underbill,  3  Redf.  365.  [As 
unless  he  has  either  authorized  it  or  to  executors,  etc.,  see  Nanz  v.  Oakley, 
tacitly  permitted  it);  Williams  v.  120  N.  Y.  84;  Tompkins  v.  Tompkins, 
Nixon,    2   Beav.    472;    Att'y-Gen.    v.  18  S.  C.  1.] 

Holland,  2  Younge  &  C.  683;  Kip  v.  '  Brice  v.  Stokes,  11  Ves.  319,  324; 
Deniston,  4  Johns.  23;  and  see  Mendes  Walker  v.  Symonds,  3  Swanst.  1,  63; 
V.  Guedalla,  2  Johns.  &  H.  259;  Cot-  Gray  v.  Reamer,  11  Bush,  113;  Sin- 
tara  V.  East.  Cos.  R'yi  1  Johns.  <fe  H.  clair  v.  Jackson,  8  Cow.  543;  Peter  v. 
243;  Trutch  v.  Lamprell,  20  Beav,  Beverly,  10  Pet.  531,  562:  1  How.  1.34; 
116;  Baynard  v.  WooUey,  20  Beav.  Taylor  v.  Benham,  5  How.  233.  But 
583;  Griffiths  v.  Porter,  25  Beav.  236;  he  must  prove  affirmatively  that  he 
Eager  v.  Barnes,  31  Beav.  579.  [See  acted  only  for  the  sake  of  conformity; 
also  Fesmire's  Estate,  1.34  Pa.  St.  67;  and  even  then  he  will  be  liable  if  he 
19  Am.  St.  Rep.  676.]  It  seems  to  be  negligently  permit  his  co-trustee  to  re- 
settled in  New  York  that  where  per-  tain  the  trust  money  for  his  own  uses, 
sons  are  at  once  executors  and  trustees,  or  to  deal  with  it  in  violation  of  the 
the  liability  of  one  for  the  acts  of  the  trust:  Brice  v.  Stokes,  supra;  Ingle  V. 
other  is  the  same  as  in  the  case  of  ex-  Partridge,  32  Beav.  661. 


§  1083  EQUITY  JURISPRUDENCE.  1608 

hands  it  over  to  a  co-trustee  without  securing  its  due  ap- 
plication; 2.  Where  he  permits  a  co-trustee  to  receive 
trust  money  without  making  due  inquiry  as  to  his  deal- 
ing with  it;  3.  Where  he  becomes  aware  of  a  breach  of 
trust,  either  committed  or  meditated,  and  abstains  from 
taking  the  necessary  steps  to  obtain  restitution."  It  thus 
appears  that  the  consent  to  a  co-trustee's  breach  of  trust 
need  not  be  express.  It  may  be  implied  from  the  trus- 
tee's conduct  in  refraining  from  taking  reasonable  and 
necessary  steps  to  prevent  or  repair  the  loss.*  In  apply- 
ing this  general  rule,  some  of  the  American  decisions  do 
not  hold  trustees  to  quite  so  rigid  a  responsibility  for 
mere  omissions  to  interfere  with  the  wrongful  acts  of 
their  fellows  as  is  done  by  the  English  cases;  but  there 
does  not  appear  to  be  any  substantial  difference  in  the 
modes  of  formulating  the  doctrine  by  the  courts  of  the 
two  countries. 

§  1083.  The  Beneficiary  Acquiescing  or  Concurring. 
—  A  beneficiary  who,  subsequently  to  a  breach  of  trust, 
acquiesces  in  it,  cannot  maintain  a  suit  for  relief  against 
those  who  would  otherwise  have  been  liable.     The  acqui- 

*  See  ante,  §  1069,   as  to  negligent  Elmendorf  v.  Lansing,  4  Johns.    Ch. 

surrender  of   entire  control  to  a  co-  562;    Banks  v.   Wilkes,  3  Sand.    Ch. 

trustee:    Wilkins   v.    Hogg,    8    Jur.,  99;   Mesick  v.   Mesick,   7  Barb.   120; 

N.  S.,  25;  French  v.  Hobson,   9  Ves.  Smith    v.     Rathbun,    22    Hun,     150; 

103;  Bricev.  Stokes,  11  Ves.  319, 324;  Bates    v.    Underbill,     3    Redf.     365; 

Hovey  v.  Blakeman,  4  Ves.  596;  Sad-  Schenck  v.  Schenck,  2  N.  J.   Eq.  174; 

lerv.  Hobbs,  2  BrownCh.  114;  Board-  Irwin's  Appeal,  35  Pa.  St.  294;  Du- 

man  v.  Mosman,  1  Brown  Ch.  68;  Joy  commun's    Appeal,    17   Pa.    St.    268; 

V.  Campbell,  1  Schoales  &  L.  328,  341;  Jones's   Appeal,    8  Watts   &   S.    141, 

Broadhurst  v.  Balguy,  1  Younge  &  C.  147;  42  Am.  Dec.  282;  Pirn  v.  Down- 

16;  Hanburyv,  Kirkland,  3  Sim.  265;  ing,   11    Serg.  &   R.  66;  Wayman    v. 

Mucklow  V.  Fuller,  Jacob,  198;  Booth  Jones,    4   Md.    Ch.  500;   Ringgold  v. 

V.  Booth,  1  Beav.  125;  Styles  v.  Guy,  Ringgold,  1  Har.  &G.  11;  18  Am.  Dec. 

1  Macn.   &  G.  422,   430;  Burrows  v.  250;  Latrobe  v.   Tiernan,  2  Md.   Ch. 

Walls,  5  De  Gex,  M.  &  G.  233;  Thomp-  474;  Maccubbiu  v.  Cromwell's  Ex'ra, 

son  V.  Finch,  8  De  Gex,  M.  &  G.  560,  7  Gill  &  J.  157;  Worth  v.  McAden,  1 

563,    564;    22   Beav.    316;    Ex    parte  Dev.  &  B.  Eq.  199;  Graham  v.  David- 

Geaves,  8  De  Gex,  M.  &  G.  291;  Case  son,  2  Dev.  &  B.  Eq.   155;  Taylor  v. 

V.    James,    3   De   Gex,    F.   &  J.  256;  Roberts,     3     Ala.    83,    86;     Royall's 

Mendes  v.  Guedalla,   2  Johns.   &    H.  Adm'r   v.    McKenzie,    25    Ala.     363; 

259;  Evans  v.  Bear,  L.  R.   10  Ch.  76;  Hall  v.   Carter,    8   Ga.  388;  State   v. 

Lewis  V.  Nobbs,  L.  R.  8  Ch,  Div.  591,  Guilford,   15  Ohio,   593;  Edmonds  v. 

594;    Spencer  v.  Spencer,    11    Paige,  Crenshaw,     14    Pet.     166.    [See    also 

299;    Clark   v.    Clark,    8  Paige,    152;  Bruen  v.  Gillet,  115  N.  Y.  10;  12  Am. 

35  Am.  Dec.  676;  Monell  v.  Monell,  5  St.  Rep.  764.] 
Johns.  Ch.  283,  296;  9  Am.  Dec.  298; 


1609 


POWERS    OF    EXPRESS    TRUSTEES. 


10S3 


escence,  in  order  to  produce  this  effect,  must  take  place 
with  full  information  by  the  beneficiary  of  all  the  facts, 
and  with  full  knowledge  of  his  legal  rights  arising  from 
those  facts;  in  short,  it  must  have  all  the  requisites  of  an 
acquiescence  heretofore  described,  to  defeat  the  liability 
of  a  defaulting  fiduciary.'  Although,  in  general,  lapse  of 
time  is  not  a  defense  to  the  beneficiary's  right  of  action, 
yet  a  great  delay  after  knowledge  of  the  breach  of  trust 
may  be  a  bar.  If  a  cestui  que  trust  is  a  party  to,  or  con- 
curs in,  or  even  assents  to,  a  breach  of  trust  by  the  trus- 
tee, he  debars  himself  thereby  of  all  claim  for  relief.^ 


»  See  arite,  §§  964,  965;  Walker  v. 
Symonds,  3  Swanst.  1,  64;  Wedder- 
burn  V.  Wedderburn,  4  Mylne  &  C. 
41;  Munch  v.  Cockerrell,  5  Mylue  & 
C.  178;  Cockerell  v.  Cholmeley,  1 
Russ.  &  M.  418,  425;  Strange  v. 
Fooks,  4  GiflF.  408;  Burrows  v.  Walls, 
5  De  Gex,  M.  &  G.  233;  Life  Ass'n  v. 
Siddal,  3  De  Gex,  F.  &  J.  58,  74;  Far- 
rant  V.  Blanchford,  1  De  Gex,  J.  &  S. 
107,  119,  120;  Aveline  v.  Melhuish,  2 
De  Gex,  J.  &  S.  288;  Zambaco  v. 
Cassavetti,  L.  R.  1 1  Eq.  439;  Sleeman 
V.  Wilson,  L.  R.  13  Eq.  36;  Jones  v. 
Higgins,  L.  R.  2  Eq.  538;  Clark  v. 
Clark,  8  Paige,  152;  35  Am.  Dec.  676; 
Banks  v.  Wilkes,  3  Sand.  Ch.  99; 
Monell  V.  Monell,  5  Johns.  Ch.  283;  9 
Am.  Dec.  298;  Jones's  Appeal,  8 
Watts  &  S.  141,  147;  42  Am.  Dec.  282; 
Pim  V.  Downing,  11  Serg.  &  R.  66; 
Wayman  v.  Jones,  4  Md.  Ch.  500; 
Ringgold  V.  Ringgold,  1  Har.  &  G.  11; 
18  Am.  Dec.  250;  State  v.  Guilford, 
15  Ohio,  593;  Royall's  Adm'r  v.  Mc- 
Kenzie,  25  Ala.  363.  As  to  delay,  see 
Bright  V.  Legerton,  2  De  Gex,  F.  &  J. 
606;  Hodgson  v.  Bibby,  32  Beav.  221; 
Clanricarde  v.  Henning,  30  Beav.  175; 
Browne  v.  Cross,  14  Beav.  105;  Obee 
V,  Bishop,  1  De  Gex,  F.  &  J.  137; 
Scott  V.  Haddock,  11  Ga.  258. 

Acquiescence,  assent,  release,  and 
like  acts,  in  order  to  be  operative, 
must  be  made  by  a  cesttii  que  trust  who 
is  8ui  juris.  If  a  trustee  relies  upon 
a  release  or  discharge  given  by  the 
beneficiary,  it  is  incumbent  upon  the 
trustee  to  show  that  he  gave  the  cestui 
que  trust  full  information  as  to  all  his 
rights;  and  it  is,  in  fact,  a  part  of 
the   trustee's  general  duty  to  impart 


knowledge  of  his  own  legal  rights  to 
the  beneficiary:  March  v.  Russell,  3 
Mylne  &  C.  31;  Lloyd  v.  Attwood,  3 
De  Gex  &  J.  614;  Avoline  v.  Melhuish, 
2  De  Gex,  J.  &  S.  288;  Farrant  v. 
Blanchford,  1  De  Gex.  J.  &  S.  107, 
119,  120;  Williams  v.  Reed,  3  Mason, 
405;  Bondv.  Bond,  7  Allen,  1;  Negley 
V.  Lindsay,  67  Pa.  St.  217;  5  Am. 
Rep.  427;  Cumberland  Coal  Co.  v. 
Sherman,  20  Md.^  117.  [See  also  Zim- 
merman v.  Fraley,  70  Md.  561;  Wil- 
son V.  Maryland  L.  Ins.  Co.,  60  Md. 
150.] 

^  Mere  knowledge,  however,  of  a 
breach  of  trust  is  not  an  assent,  much 
less  a  concurrence:  Brice  v.  Stokes,  11 
Ves.  319;  Walker  v.  Symonds,  3 
Swanst.  1,  64;  March  v.  Russell,  3 
Mylne  &  C.  31;  Life  Ass'n  etc.  v.  Sid- 
dal, 3  De  Gex,  F.  &  J.  58,  61;  Phipps 
V.  Lovegrove,  L.  R.  16  Eq.  80;  Towa 
of  Verona  v.  Peckham,  66  Barb.  103. 
Where  there  are  several  beneficiaries, 
and  one  of  them  takes  a  part  in  a 
breach  of  trust,  whereby  a  loss  is  oc- 
casioned, his  interest  in  the  trust 
property  may  be  reached,  retained, 
and  applied  to  make  good  the  loss  for 
the  benefit  of  the  other  beneficiaries; 
and  this  equity  extends,  not  only  to 
the  interest  while  in  the  hands  of  the 
wrong-doing  cestui  que  trust,  but  also 
to  those  claiming  it  under  or  through 
him:  Woodyatt  v.  Gresley,  8  Sim.  180; 
Priddy  v.  Rose,  3  Mer.  86;  Williams 
V.  Allen,  32  Beav.  650;  and  see  Jacubs 
V.  Rylance,  L.  R.  17  Eq.  341;  Bntler 
v.  Carter,  L.  R.  5  Eq.  276.  If  third 
persons  are  parties  to  a  breach  of 
trust,  they  are  equally  liable  with 
the  trustee:  Dixou  v.  Dixon,  L.  R.  9 


§  1084  EQUITY  JURISPRUDENCE.  1610 

§  1084.  Third.  The  Trustee's  Compensation  and  Al- 
lowances.—  It  is  the  well-settled  doctrine  of  the  English 
equity  that  the  trustee's  office  is,  as  a  rule  of  law,  wholly 
gratuitous.  In  the  absence  of  a  provision  for  compen- 
sation contained  in  the  instrument  creating  the  trust,  he 
is  not  entitled  to  make  any  charge  for  his  services,  trouble, 
or  loss  of  time,  even  though  great  advantage  had  resulted 
therefrom  to  the  beneficiaries.*  Where  the  trustee  is  also 
an  attorney,  and  acts  as  such  on  behalf  of  the  estate,  he  is 
even  not  entitled  to  full  costs  or  attorney's  fees  as  against 
the  cestui  que  trust,  but  can  only  be  allowed  for  costs  actu- 
ally out  of  pocket,  or  disbursements.^  The  testator,  or 
other  person  who  creates  a  trust,  may  expressly  provide 
for  a  salary  or  compensation  of  any  form  to  be  paid  to  the 
trustee,  and  such  provision  will  be  binding,  and  will  be 
followed  by  the  courts.'  This  stringent,  and  certainly 
unwise,  rule  of  the  English  equity  has  not  been  followed 
in  the  United  States.  With  very  few,  if  any,  exceptions 
among  the  various  states,  trustees,  as  well  as  executors 
and  administrators,  are  allowed  compensation  for  their 

Oh.    Div.    587;   Rolfe  v.  Gregory,   11  trustee's  partner,  who  is  not  himself  a 

Jur.,  N.  S.,  98;  Bridgman  v.  Gill,  24  trustee:  Lincoln  v.  Windsor,  9  Hare, 

Beav.  302.     [See  also,  in  general.  But-  158;  Christophers  v.  White,  10  Beav. 

terfield   v.    Cowing,   112  N.    Y.    486;  523;  Lyon  v.  Baker,  5  De  Gex   &  S. 

Pope  V.   Farnsworth,   146    Mass.  339;  622.     With  regard  to  trustee's  costs, 

McCoy  V.  Poor,  56  Md.  197  (laches).]  see  also  King  v.  King,  1  De  Gex  &  J. 

^  Even  a  settled  account  which  con-  663;  In  re  Woodburn'a  Will,  1  De  Gex 

tained   items    of   such  charges  would  &  J.   332;  Ex  parte  Tonilinson,   3  De 

be  set   aside:  Robinson  v.   Pett,  3  P.  Gex,   P.   &  J.  745;  Smith  v.   Dresser, 

Wms.  249;  2Lead.  Cas.  Eq.,  4th  Am.  L.    R.    1    Eq.    651;   In   re   Whitton's 

ed.,    512,    514-537,    note   of    English  Trusts,  L.  R.   8  Eq.  .352;  Bowyer  v, 

editor;  Aylifife  v.  Murray,  2  Atk.   58;  Griffin,  L.  R.  9  Eq.  340;  In  re  Elliot's 

Barrett  v.  Hartley.  L.  R.   2   Eq.  789;  Trusts,  L.  R.    15  Eq.   194;    Ex  parte 

the   court  will   sometimes,    however,  Angerstein,  L.  R.  9  Ch.  479;  Walters 

make  an   allowance  for  compensation  v.    Woodbridge,    L.    R.    7    Ch.    Div. 

in  special  cases:  Forster  v.  Ridley,  4  504. 

De  Gex,  J.  &  S.  452;  Marshall  v.  Hoi-  nVebb   v.    Earl   of  Shaftesbury,  7 

loway,  2  Swanst.  432;  and  see  Doug-  Ves.  480;  Baker  v.  Martin,  8  Sim.  25. 

las  V.   Archbutt,  2  De  Gex  &  J.   148;  A  contract  for  compensation  between 

Bainbrigge  v.  Blair,  8  Beav.  588.  the  trustee  and  the  cestui  que  trust  may 

^Cradock  v.  Piper,  1  Macn.  &G.  664;  be  valid;  but  is  treated  as  any  other 

New  V.  Jones,  1  Macn.  &  G.  668,  note;  agreement  by  which  a  trustee  obtains 

Broughtonv.  Broughton,  5  De  Gex,  M.  an  advantage  from  his  beneficiary, — 

&  G.  160;  Gomley  v.  Wood,  3  Jones  &  the  most  perfect  good  faith  is  required: 

L.    678,  688;    Mayer  v.  Galluchat,  6  Moore  v.  Frowd,  3  Mylne   &   C.  45, 

Rich.  Eq.  1.     This  rule  is  applied  also  48;  Douglas  v.  Archbutt,  2  De  Gex  & 

where  the  legal  business  is  done  by  the  J.  148. 


1611  POWERS    OF    EXPRESS    TRUSTEES.  §  1085 

services;  in  most  of  the  states  the  right  to  the  compen- 
sation and  the  amount  of  it  have  been  fixed  by  statutory 
legislation.  Where  the  instrument  creating  the  trust  pro- 
vides that  the  trustee  shall  have  a  compensation  for  his 
services,  such  provision  will  be  enforced.  If  tlie  instru- 
ment declares  the  rate  of  compensation,  it  must  be  fol- 
lowed; if  it  establishes  no  rate,  the  trustee  is  entitled  to  a 
reasonable  amount,  which  will  be  ascertained  by  means 
of  a  judicial  investigation,  as  to  the  value  of  his  services.' 
Where  no  provision  is  made  by  the  creator  of  the  trust, 
the  trustee  is  allowed  the  amount  fixed  by  statute,  or  in 
the  absence  of  statute,  the  amount  determined  by  the 
court  to  be  reasonable  and  just.^ 

§  1085.  Allowances  for  Expenses  and  Outlays.  —  In  ad- 
dition to  his  compensation  in  this  country,  and  without 
any  compensation  in  England,  the  trustee  is  entitled  to 
be  allowed,  as  against  the  estate  and  the  beneficiary,  for 
all  his  proper  expenses  out  of  pocket,  which  include  all 
payments  expressly  authorized  by  the  instrument  of  trust, 
all  reasonable  expenses  in  carrying  out  the  directions  of 
the  trust,  and,  in  the  absence  of  any  such  directions,  all 
expenses  reasonably  necessary  for  the  security,  protec- 
tion, and  preservation  of  the  trust  property,  or  for  the 
prevention  of  a  failure  of  the  trust.  He  is  also  entitled 
to  be  indemnified  in  respect  of  all  personal  liabilities 

» In  the  Matter  of  Schell,  53  N.  Y.  Appeal,  108  Pa.  St.  314;  56  Am. 
263,  265;  Meachamv.  Sternes,  9  Paige,  Rep.  208.  See  also,  to  the  same  effect, 
398;  Wagstafif  v.  Lowerre,  23  Barb,  but  that  no  extra  compensation  will  be 
209.  [The  English  rule  is  followed  in  allowed  for  skill  in  the  general  man- 
Illinois:  Cook  v.  Gilmore,  133  III.  139.]  agement    of    the    estate,  whereby  its 

^  In  the  note  of  the  American  editor  value  is  greatly  increased,  Grimball 
.  to  Robinson  v.  Pett,  2  Lead.  Cas.  Eq.,  v.  Cruse,  70  Ala.  534.]  A  trustee  who 
4th  Am.  ed.,  512,  538-600,  the  stat-  commits  a  breach  of  trust  is  not  en- 
utes  of  the  various  states  and  the  de-  titled  to  commissions:  Singleton  v. 
cisions  thereon  are  collected;  see  also  Lowndes,  0  S.  C.  465.  [See  also  Top- 
Perry  on  Trusts,  sec.  918.  A  person  ping  v.  Windley,  99  N.  C.  4  (failure  to 
who  is  both  executor  and  trustee  is  keep  accounts);  Pollard  v.  Lathrop. 
not  entitled  to  commissions  by  way  of  12  Col.  171;  but  that  commissions  will 
compensation  in  both  capacities  on  the  not  be  refused  because  of  mistakes  of 
same  fund  for  the  same  time:  Hall  v.  judgment  on  the  part  of  llie  IniMce-t, 
Hall,  78  N.  Y.  535.  [That  a  trustee  whereby  the  estate  has  suffered  loss, 
who  is  also  a  lawyer  is  entitled  to  or  has  been  rendered  insolvent,  see 
extra  compensation  for  his  professional  Merkel's  Estate,  131  Pa.  St.  584; 
services   to   the   estate,  see  Perkins's  Fahuestock's  Appeal,  104  Pa.  St.  46.] 


§  1085 


EQUITY    JURISPRUDENCE. 


1612 


incurred  by  himself  for  any  of  these  purposes.*  Where 
a  trustee  properly  advances  money  for  any  of  the  above- 
mentioned  objects,  so  that  he  is  entitled  to  reimburse- 
ment, he  also  has  a  lien  as  security  for  the  claim,  either 
upon  the  corpus  of  the  trust  property,  or  upon  the  in- 
come, as  the  case  may  be;  but  for  moneys  improperly  paid 
there  is  no  lien.  Although  in  general  a  creditor  who 
advances  money  to  a  trustee  obtains  only  the  personal 
liability  of  the  trustee,  and  has  no  demand  enforceable 
against  the  estate,  yet  if  the  expenditure  is  authorized, 
and  the  loan  is  necessary,  the  trustee  may,  at  the  time  of 
procuring  the  advance,  whether  money  or  services,  by  an 
express  agreement  with  the  creditor,  make  the  demand  a 
charge  upon  the  estate,  and  thus  create  a  lien  in  favor  of 
the  creditor;  or  the  trustee  may  so  deal  with  the  estate  in 
the  first  instance  as  to  acquire  a  lien  in  his  own  favor, 
and  may  then  assign  such  lien  to  the  creditor.^     It  is 


•  He  is  thus  entitled  to  be  allowed 
for  proper  disbursements  occasioned 
by  the  necessary  employment  of  attor- 
neys, agents,  etc. :  Macnamara  v.  Jones, 
2  Dick.  587;  "Every  trustee  is  entitled 
to  the  necessary  and  proper  expenses 
incurred  in  protecting  the  property 
committed  to  his  care.  If  they  have 
a  right  to  protect  the  property  from 
immediate  and  direct  injury,  they 
must  have  the  same  right,  where  the 
injury  threatened  is  indirect  but  prob- 
able ":  Bright  v.  North,  2  Phill.  Ch. 
216,  220,  per  Lord  Cottenham;  Wor- 
rall  V.  Harford,  8  Ves.  4,  8;  Phene  v. 
Gillan,  5  Hare  1,  9;  Douglas  v.  Arch- 
butt,  2  De  Gex  &  J.  148;  Benett  v. 
Wyndham,  4  De  Gex,  F.  &  J.  259  (in- 
demnity against  liability);  Duncan  v. 
Findlater,  6  Clark  &  F.  894;  Heriot'a 
Hospital  V.  Ross,  12  Clark  &  F.  507; 
Mersey  Docks  Trustees  v.  Gibbs,  1 1 
H.  L.  Cas.  686;  L.  R.  1  H.  L.  93;  Jervis 
V.  Wolferstan,  L.  R.  18  Eq.  18;  EUig 
V.  Naglee,  9  Cal.  683;  Beatty  v.  Clark, 
20  Cal.  11,  30;  New  v.  Nicoll,  73  N.  Y. 
127;  29  Am.  Rep.  Ill;  [Stott  v.  Milne, 
25  Ch.  Div.  710;  Trustees  v.  Green- 
ough,  105  U.  S.  527;  Hobbsv.  McLean, 
117  U.  S.  567;  Reynolds  v.  Cridge,  131 
Pa.  St.  189;  Stewart  v.  Fellows,  128 
lU.  480;  Thomson  v.  Smith,  64  N.  H. 
412.] 


» In  New  V.  Nicoll,  73  N.  Y.  127, 
130,  131,  29  Am.  Rep.  Ill,  the  court 
held,  per  Earl,  J. :  "  The  general  rule 
undoubtedly  is,  that  a  trustee  cannot 
charge  the  trust  estate  by  his  execu- 
tory contracts,  unless  authorized  to  do 
so  by  the  terms  of  the  instrument  creat- 
ing the  trust.  Upon  such  contracts  he 
is  personally  liable,  and  the  remedy  is 
against  him  personally.  But  there 
are  exceptions  to  this  general  rule. 
When  a  trustee  is  authorized  to  make 
an  expenditure,  and  he  has  no  trust 
funds,  and  the  expenditure  is  neces- 
sary for  the  protection,  reparation,  or 
safety  of  the  trust  estate,  and  he  is 
not  willing  to  make  himself  personally 
liable,  he  may  by  express  agreement 
make  the  expenditure  a  charge  upon 
the  trust  estate.  In  such  a  case  he 
could  himself  advance  the  money  to 
make  the  expenditure,  and  he  would 
have  a  lien  upon  the  trust  estate,  and 
he  can  by  express  contract  transfer 
this  lien  to  any  other  party  who  may 
upon  the  faith  of  the  trust  estate 
make  the  expenditure."  It  was  fur- 
ther held  that  where  there  was  no 
original  agreement  giving  a  lien  to 
the  creditor,  and  no  assignment  by 
the  trustee  of  his  own  lien,  so  that  the 
creditor  merely  relied  upon  the  trus- 
tee's personal  liability,  a  lien  upon  the 


1613 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1086 


hardly  necessary  to  add  that  the  foregoing  rules  con- 
cerning compensation,  allowances,  and  liens  do  not  apply 
to  trustees  in  invitum.  Since  their  paramount  duty  is  to 
convey  the  property  at  once  to  the  beneficial  owner,  they 
are  clearly  not  entitled  to  be  reimbursed  for  expenditures 
made,  much  less  to  be  allowed  compensation,  while  they 
are  violating  this  obligation. 

§  1086.  Fourth.  Removal  and  Appointment  of  Trus- 
tees.—  The  power  of  courts  of  equity  over  the  removal  and 
appointment  of  trustees,  independently  of  any  statutory 
authority,  or  any  directions  in  the  instrument  of  trust,  is 
well  established.*     This   power   is   confined   to  cases  of 


estate  in  favor  of  the  creditor  could 
not  be  created  by  the  trustee's  mere 
subsequent  promise.  In  Ellig  v.  Nag- 
lee,  9  Cal.  683,  it  was  held  that  where 
the  trustee  makes  advances  out  of  his 
own  funds  to  the  beneficiary,  with 
the  understanding  that  he  should  te 
repaid  out  of  the  rents  and  profits, 
he  obtains  a  lien  upon  the  future  in- 
come, but  not  upon  the  corpus  of  the 
trust  property;  and  the  same  is  true 
of  necessary  advances  made  under 
like  circumstances  for  the  protection 
of  the  estate.  Beatty  v.  Clark,  20 
Cal.  11,  30,  shows  what  payments 
made  by  a  trustee  out  of  his  own 
funds,  and  what  advances  made  to 
him  by  third  persons,  can  be  an  equi- 
table lien  upon  the  trust  property, 
namely,  if  the  payment  by  himself, 
or  the  loan  by  the  creditor,  was  not 
expressly  autliorized  by  the  trust  in- 
strument, such  payment  or  loan  must 
be  necessary  for  the  preservation  of 
the  property,  or  to  prevent  a  failure 
of  the  trusts:  Noyes  v.  Blakeman,  6 
N,  Y.  5G7;  3  Sand.  531;  Randall  v. 
Dusenbury,  63  N.  Y.  645;  7  Jones  & 
S.  174;  Stanton  v.  King,  8  Hun,  4; 
Worrall  v,  Harford,  8  Ves.  4,  8;  Mori- 
son  v.  Morison,  7  De  Gex,  M.  &  G. 
214;  Ex  parte  Chippendale,  4  De  Gex, 
M.  &  G.  19;  McNeillie  v.  Acton,  4  De 
Gex,  M.  &  G.  744;  Francis  v.  Francis, 
5  De  Gex,  M.  &  G.  108;  Leedham  v. 
Chawner,  4  Kay  &  J,  458;  Ex  parte 
Rogers,  8  De  Gex,  M.  &  G.  271;  Ten- 
nant  v.  Trenchard,  L.  R.  4  Ch.  537; 
In  re  Leslie's  Trusts,  L.  R.  2  Ch.  Div. 
185.  Notwithstanding  tho«e  authori- 
ties, it  aeeins  to  be  held  in  Taylor  v. 


Clark,  56  Ga.  .309,  that  a  trustee  has 
no  power  to  create  a  lien  upon  the 
estate  nor  upon  the  crops,  for  supplies 
furnished  necessary  to  produce  such 
crops;  and  in  Steele  v.  Steele's  Adm'r, 
64  Ala.  438,  38  Am.  Rep.  15,  that  a 
trustee  cannot  create  a  lien  in  favor 
of  a  creditor  without  express  authority 
given.  See  also,  with  respect  to  the 
general  subject  of  liens,  Starr  v.  Moul- 
ton,  97  111.  525;  Robinson  v.  Hersey, 
60  Me.  225;  Bradbury  v.  Birchmore, 
117  Mass.  569,  580-582;  Rensselaer 
etc.  R.  R.  V.  Mdler,  47  Vt.  146; 
Williams  v.  Smith,  10  R.  I.  280,  283; 
Rvder  v.  Sisson,  7  R.  I.  341;  Ferry  v, 
Laible,  27  N.  J.  Eq.  146;  Kearney  v. 
Kearney,  17  N.  J.  Eq.  59;  [Johnson 
V.  Leman,  131  111.  COS);  Fox  worth  v. 
White,  72  Ala.  224:  Blackshear  v. 
Burke,  74  Ala.  2.39;  Dickinson  v.  Con- 
niff,  65  Ala.  581.]  As  to  the  effect  of 
a  statute  giving  a  creditor  an  action  at 
law  for  services  rendered  to  the  trust 
estate,  see  Askew  v.  Myrick,  54  Ala. 
30. 

^  For  the  details  of  this  subject  the 
reader  must  be  referred  to  treatises 
upon  trusts  and  trustees.  The  power 
is  somewhat  discretionary,  and  each 
case  must  largely  depend  upon  its  own 
circumstances.  Tlie  settled  doctrines 
of  equity  are  fairly  summed  up  in  sec- 
tions 2'279-22S9  of  the  Civil  Code  of 
California,  which  are  coi)ied  from  the 
corresponding  sections  1208-1215  of 
the  proposed  New  York  Civil  Code. 
These  provisions  are  as  follows:  "  Sec. 
2279:  A  trust  is  extinguished  by  tlie 
entire  fulfillment  of  its  object,  or  by 
Buch  object  becoming  impossible  or  ua- 


§  1086 


EQUITY    JURISPRUDENCE. 


1614 


actual  express  trusts.  It  cannot,  in  the  nature  of  things, 
extend  to  implied  trustees,  or  trustees  in  invitum;  nor 
does  it  apply  to  those  persons  who  stand  in  fiduciary  re- 
lations, and  are  for  some  purposes  treated  as  trustees.  A 
court  of  equity  may  remove  a  trustee  on  his  own  applica- 
tion when  he  washes  to  be  discharged;  and  it  may  and 
will  remove  a  trustee  who  has  permanently  changed  his 
residence  to  another  country,  or  has  absconded,  or  has 
been  guilty  of  some  breach  of  trust,  or  violation  of  duty, 
or  has  become  insolvent,  or  is  incapable,  through  age  or 
other  infirmity,  of  performing  the  trust  duties.  The  ex- 
ercise of  this  function  by  a  court  of  equity  belongs  to 
what  is  called  its  sound  judicial  discretion,  and  is  not  con- 
trolled by  positive  rules,  except  that  the  discretion  must 
not  be  abused.^ 


lawful.  Sec.  2280:  A  trust  cannot  be 
revoked  after  its  acceptance,  except  by 
the  consent  of  all  the  beneficiaries,  un- 
less a  power  of  revocation  is  reserved 
in  the  instrument  of  trust.  Sec. 
2281:  The  oflSce  of  a  trustee  is  vacated 
by  his  death,  or  by  his  discharge. 
Sec.  2282:  A  trustee  can  be  discharged 
from  his  trust  only  as  follows:  By  the 
extinction  of  the  trust;  by  the  comple- 
tion of  his  duties  under  the  trust;  by 
such  means  as  may  be  ^jrescribed  by 
the  declaration  of  trust;  by  the  consent 
of  the  beneficiary,  if  he  had  capacity 
to  contract;  by  the  judgment  of  a  com- 
petent tribunal,  in  a  direct  proceeding 
for  that  purpose,  that  he  is  of  unsound 
mind;  or  by  the  superior  court  [i.  e., 
by  a  court  of  general  equity  jurisdic- 
tion]. Sec.  2283:  The  court  may  re- 
move any  trustee  who  has  violated  or 
is  unfit  to  execute  the  trust;  or  may 
accept  the  resignation  of  a  trustee. 
Sec.  2287:  The  court  may  appoint  a 
trustee  whenever  there  is  a  vacancy, 
and  the  declaration  of  trust  does  not 
provide  a  practicable  method  of  ap- 
pointment. Sec.  2288:  On  the  death, 
renunciation,  or  discharge  of  one  of 
several  co-trustees,  the  trust  survives 
to  the  others.  Sec.  2289:  When  a 
trust  exists  without  any  appointed 
trustee,  or  where  all  the  trustees  re- 
nounce, die,  or  are  discharged,  the 
court  must  appoint  another  trustee. 
The  court  may,  in  its  discretion,  ap- 


point the  original  number  or  any  less 
number  of  trustees." 

»  People  v.  Norton,  9  N.  Y.  176;  In 
re  Cohn,  78  N.  Y.  248;  Preston  v. 
Wilcox,  ,38  Mich.  578;  In  re  Bernstein, 
.3  Kedf.  20  (resignation);  North  Caro- 
lina R.  R.  v.  Wilson,  81  N.  C.  22.3; 
McPherson  v.  Cox,  96  U.  S.  404;  Sat- 
terfield  v.  John,  53  Ala.  127;  Farmers' 
Loan  etc.  Co.  v.  Hughes,  18  N.  Y. 
Sup.  Ct.  130  (removing  to  a  foreign 
country);  Bloomer's  Appeal,  83  Pa.  St. 
45;  Sparhawk  v.  Sparhawk,  114  Mass. 
.356;  Ketchum  v.  Mobile  etc.  R.  R.,  2 
Woods,  532;  Scott  v.  Rand,  118  Mass. 
215;  In  re  Adams's  Trust,  L.  R.  12  Ch. 
Div.  634;  Ex  parte  Hopkins,  L.  R.  9 
Ch.  506;  as  to  accepting  a  voluntary 
resignation,  see  Wilkinson  v.  Parry,  4 
Russ.  272,  276;  Coventry  v.  Coventry, 
1  Keen,  758;  Greenwood  v.  Wakeford, 
1  Beav.  576,  581;  Forshaw  v.  Higgin- 
son,  20  Beav.  485;  In  re  Stokes's  Trusts, 
L.  R.  13  Eq.  333;  Chalmer  v.  Bradley, 
1  Jacob  &  W.  51,  68;  Cruger  v.  Halii- 
day,  11  Paige,  314;  Shepherd  v.  Mc- 
Evers,  4  Johns.  Ch.  136;  8  Am.  Dec. 
561;  Diefendorf  v.  Spraker,  10  N.  Y. 
246;  as  to  removal  in  general,  see  For- 
ster  V.  Davies,  4  De  Gex,  F.  &  J.  133, 
138;  In  re  Blanchard,  3  De  Gex,  F.  & 
J.  131;  Palairet  v.  Carew,  32  Beav. 
564,  567;  Crombes  v.  Brookes,  L.  R. 
12  Eq.  61 ;  In  re  Roche.  2  Dru.  &  War. 
287;  and  In  re  Watts's  Settlement,  9 
Hare,  106  (bankruptcy);  as  to  foreign 


1615 


POWERS    OF    EXPRESS    TRUSTEES. 


§  1087 


§  1087  Appointment  of  New  Trustees.  —  The  principle 
has  already  been  stated  that  an  express  trust  validly  cre- 
ated shall  not  fail  for  want  of  a  trustee.  Courts  of  equity, 
therefore,  independently  of  statute,  possess  the  inherent 
power  and  jurisdiction  to  appoint  new  trustees  whenever 
such  action  is  necessary  to  protect  the  rights  of  the  bene- 
ticiaries.  In  the  absence  of  any  other  method  prescribed 
by  the  instrument  creating  the  trust,  a  court  of  equity 
will  appoint  trustees  when  none  at  all  have  been  named 
by  the  creator  of  the  trust,  and  will  appoint  new  trustees 
when  those  originally  named  refuse  to  accept,  or  when  a 
vacancy  occurs  by  their  death,  resignation,  permanent 
residence  in  a  foreign  country,  or  removal  from  office,  as 
heretofore  described.*  The  power  of  appointment  will  be 
exercised  on  behalf  of  a  beneficiary  who  has  a  real  inter- 
est, even  though  it  be  contingent.  Its  exercise,  as  in  the 
case  of  removal,  is  a  matter  of  sound  judicial  discretion. 


residence,  see  Mennard  v.  Welford,  1 
Smale  &  G-.  426;  In  re  Bignold's  Trusts, 
L.  R.  7  Ch.  223;  Withington  v.  With- 
ington,  16  Sim.  104.  [See  also  Letter- 
stedt  V.  Broers,  9  App.  Cas.  (Priv. 
Coun.)  371;  In  re  Nash,  16  Ch.  Div. 
504  (lunatic);  Irvine  v.  Dunham,  111 
U.  S.  327;  Clay  v.  Edwards,  84  Ky. 
548.] 

»  Leggett  V.  Hunter,  19  N.  Y.  445, 
459;  In  re  Robinson,  37  N.  Y.  261; 
Quackenboss  v.  Southwick.  41  N.  Y. 
117;  In  re  Stevenson,  3  Paige,  420; 
In  re  Van  Schoonhoven,  5  Paige,  55!); 
Mask  V.  Miller,  7  Baxt.  527;  Green  v. 
Blackwell,  31  N.  J.  Eq.  37;  Att'y- 
Gen.  V.  Barbour,  121  Mass.  568; 
Ketchum  v.  Mobile  etc.  R.  R.,  2 
Woods,  532;  Collier  v.  Blake,  14  Kan. 
250;  Millard  v.  Eyre,  2  Ves.  94; 
Buchanan  v.  Hamilton,  5  Ves.  722; 
Dodkin  v.  Brunt,  L.  R.  6  Eq.  580; 
Coombes  v.  Brookes,  L.  R.  12  Eq.  61; 
In  re  Bignold's  Trusts,  L.  R.  7  Ch. 
223;  In  re  Tempest,  L.  R.  1  Ch.  485. 
The  court  does  not  necessarily  adhere  to 
the  original  number,  but  may  appoint 
more  or  less,  unless  the  instrument 
of  trust  expressly  requires  the  same 
number  to  be  kept  up:  In  re  Tunstall's 
Will,  4  De  Gex  &  S.  421;  D'Adhemar 
V.  Bertrand,  35  Beav.  19;  In  re  Welch, 


3  Mylne  &  C.  292;  Miller  v.  Priddon, 
1  De  Gex,  M.  &  G.  335;  Emmet  v. 
Clark,  3  Giff.  32,  35;  as  illustrations 
of  appointments,  see  Ex  parte  Countess 
of  Mornington,  4  De  Gex,  M.  &  G.  537; 
In  re  Boyce,  4  De  Gex,  J.  &  S.  205; 
In  re  Price's  Trust,  L.  R.  6  Eq.  400; 
Dodkin  v.  Brunt,  L.  R.  6  Eq.  580; 
King  of  Hanover  v.  Bank  of  England, 
L.  R.  8  Eq.  350;  In  re  Raphael's 
Trust,  L.  R.  9  Eq.  233;  In  re  Sinirth- 
waite's  Trusts,  L.  R.  11  Eq.  251;  In 
re  Davis's  Trusts,  L.  R.  12  Eq.  214;  In 
re  Stokes's  Trusts,  L.  R.  13  Eq.  333; 
In  re  Driver's  Settlement,  L.  R.  19 
Eq.  352;  In  re  White,  L.  R.  5  Ch.  698; 
In  re  Sparrow,  L.  R.  5  Ch.  662;  In  re 
Donisthorpe,  L.  R.  10  Ch.  55;  In  re 
Rathbone,  L.  R.  2  Ch.  Div.  483;  In 
re  Dalgleish's  Settlement,  4  Ch.  Div. 
143;  In  re  Lamotte,  L.  R.  4  Ch.  Div. 
325;  In  re  Hodgson,  L.  R.  11  Ch.  Div. 
888;  In  re  Harford's  Trusts,  L.  R.  13 
Ch.  Div.  135;  In  re  Liddiard,  L.  R.  14 
Ch.  Div.  310.  [See  also  Keiiaday  v. 
Edwards,  134  U.  S.  125;  Farrar  v. 
McCue,  89  N.  Y.  140;  Rovce  v. 
Adams,  123  N.  Y.  402:  Carruth  v. 
Carruth,  148  Mass.  431;  Tucker 
V.  Grundy,  83  Ky.  540;  Leinaa  v. 
Sherman,  117  111.  657.] 


§  1088  EQUITY    JURISPRUDENCE.  1616 

In  filling  vacancies,  therefore,  the  court  is  not  necessarily 
confined  to  the  original  number  of  trustees.  In  the  ap- 
pointment as  well  as  in  the  removal  of  trustees  the  court 
keeps  in  view  and  endeavors  to  accomplish  three  main 
objects:  the  wishes  of  the  creator  of  the  trust,  the  interests 
of  all  the  beneficiaries,  not  some  of  them,  and  the  efi*ectual 
performance  of  the  trust.  Even  when  the  power  of  ap- 
pointment is  conferred  by  the  instrument  of  trust  upon 
an  individual,  a  court  of  equity  may  control  its  exercise 
so  as  to  prevent  an  abuse  of  discretion.^ 


SECTION  VII. 

CORPORATION  DIRECTORS  AND   OTHER  QUASI  TRUSTEES. 


§  1088.  Quasi  trustees;  fiduciary  persons. 

§  1089.  Corporation  directors  and  officers. 

§  1090.  Trust  relations  in  stock  corporations. 

§  1091.  Liability  of  directors  for  a  violation  of  their  trust. 

§  1092.  First  class:  Directors  guilty  of  fraudulent  misrepresentations,  etc 

§  1093.  Second  class:   Ultra  vires  proceedings  of  directors. 

§  1094.  Third  class:  Wrongful  dealing  with  corporate  property, 

§  1095.  Fourth  class:  The  same;  the  corporation  refuses  to  sue. 

§  1096.  Special  classes. 

§  1097.  Guardians. 

§  1088.  Quasi  Trustees  —  Fiduciary  Persons.  —  The 
conception  of  a  trust  runs  through  a  large  part  of 
equity  jurisprudence,  and  is  the  source  of  many  doc- 
trines applicable  to  conditions  which  are  not  strictly 
trusts.  Wherever  there  is  a  fiduciary  relation,  although 
the  fiduciary  may  not  hold  the  legal  title  to  property  in 
which  the  beneficiary  has  only  an  equitable  estate,  the 
dealings  of  the  parties  with  each  other  and  with  the 
subject-matter  of  the  relation  are  governed  by  the  same 
rules  which  determine  the  duties  of  actual  trustees  tow- 
ards their  cesiuis  que  trustent,  and  the  beneficiaries  are, 

»  Bailey  v.  Bailey,  2  Del.  Ch.  95. 


1617  CORPORATION    DIRECTORS.  §  10S9 

in  general,  entitled  to  the  same  remedies  which  are  given 
to  cestuis  que  trustent  against  those  who  are  truly  express 
trustees.*  It  may  be  said,  therefore,  tliat  the  equitable 
obligations  resting  upon  and  the  equitable  remedies 
given  against  guardians,  committees  of  persons  non  com- 
potes mentis,  corporation  directors,  partners,  agents,  as 
well  as  executors  and  administrators,  are  analogous  to 
those  resting  upon  and  given  against  actual  trustees; 
they  result  directly  from  the  theory  of  trusts,  and  are  not 
viere  applications  of  the  doctrine  concerning  accounting. 
I  purpose,  in  the  present  section,  to  describe  the  opera- 
tion of  the  theory  of  trusts  upon  certain  species  of  fiduci- 
ary persons,  especially  corporation  directors  and  officers; 
some  other  species  will  be  considered  in  subsequent 
chapters.'^ 

§  1089.  Corporation  Directors  and  OflBcers.  — The  di- 
rectors and  supreme  managing  officers  of  corporations 
are  constantly  spoken  of  as  trustees.  They  are  not, 
however,  true  trustees  with  the  corporation  or  the  stock- 
holders as  their  true  cestuis  que  trustent,  since  they  hold 
neither  the  legal  title  to  the  corporate  property  nor  that 
to  the  stock.  In  fact,  directors  are  clothed  at  the  same 
time  with  a  double  character,  —  that  of  quasi  trustees  and 
that  of  agents.^  It  is  of  the  utmost  importance  to  dis- 
criminate exactly  between  these  two  characters,  and  to 
determine  accurately  for  whom,  over  what  subject-matter, 
and  to  w^hat  extent  they  are  thus  trustees;  for  upon  this 
trust  relation  primarily  depend  the  equitable  remedies 
which  may  be  obtained  against  them  by  the  corporation 

^  See   ante,  §§   955-965,    1044-1058,  in  some  degree,  in  the  position  of  trus- 

1075-1078.  tees.      There    is    no    inconsistency  in 

*  Namely,  executors  and  adminis-  this  double  view  of  the  position  of 
trators,  partners,  and  agents.  directors.     They  are  agents,  and  can- 

*  In  Ex  parte  Chippendale,  4  De  not  bind  their  companies  beyond  their 
Gex,  M.  &  G.  19,  52,  Turner,  L.  J.,  powers.  They  are  trustees,  and  are 
speaking  of  the  relation  between  the  entitled  to  be  indemnified  for  ex- 
directors  and  the  company,  said:  "Al-  penses  incurred  by  them  within  the 
though  directors  undoubtedly  stand  limits  of  their  trust."  See  also  Hun 
in  the  position  of  agents,  and  cannot  v.  Gary,  82  N.  Y.  65,  70;  37  Am. 
bind  their  companies  beyond  the  lim-  Rep.  546;  Kelley  v.  Greealeaf,  3  Story, 
its  of  their  authority,  they  also  stand,  93,  101. 

2  Eq.  Jub.  — 102 


§  1090  EQUITY    JURISPRUDENCE.  1618 

or  by  the  stockholders.'  With  the  character  of  agents 
belonging  to  directors,  the  present  discussion  has  little 
or  nothing  to  do.  From  their  function  of  agency  are 
derived  their  powers  to  act  for  the  corporation  as  a  legal 
entity;  it  measures  the  extent  of  these  powers  in  the 
management  of  both  the  external  and  internal  affairs;  it 
fixes  the  rights  and  obligations  of  the  corporation  in  deal- 
ings with  stockholders  and  with  third  persons.  The 
rights,  duties,  liabilities,  and  remedies  which  result  from 
the  directors'  agency  are  therefore  chiefly  legal;  the  equi- 
table rights,  duties,  and  remedies  are  mainly  referable  to 
the  trust  element  of  the  directors*  functions. 

§  1090.  Trust  Relations  in  Stock  Corporations.  —  The 
trust  character  of  directors  is  involved  in  the  very  organ- 
ization of  a  corporation,  and  is  necessarily  twofold, — 
towards  the  corporation,  and  towards  the  stockholders. 
The  doctrines  are  fundamental  and  familiar  that  the 
corporation  itself  is  a  legal  personality,  and  holds  the  full 
title,  legal  and  equitable,  to  all  corporate  property.  Stock- 
holders, individually  and  separately,  hold  the  full  title, 
legal  and  equitable,  to  their  respective  shares  of  stock.  A 
stockholder  does  not,  by  virtue  of  his  stock,  acquire  any 
estate,  legal  or  equitable,  in  the  corporate  property;  he  ob- 
tains only  a  right  to  participate  in  the  lawful  dividends 
while  the  corporation  is  in  being,  and  to  his  proportion- 
ate share  of  the  net  assets  upon  its  dissolution  and  final 
settlement.     Shares  of  stock,  however,  are  regarded   by 

*  There  has    been    some  confusion  relation,  to  show  when  directors  are 

upon   this   subject   in   the    decisions,  quasi  trustees  for  the  stockholders  and 

There   are,  as  I   shall   show,  several  when   for   the   corporation,  and  over 

classes  of  suits  against  directors  main-  what   species   of    property   the   trust 

tained   by  a  stockholder,   or   by   the  extends   in   each   of   these   instances, 

stockholders,  or    by  the    corporation;  then  all  difficulties  connected  with  the 

they  are  governed  by  entirely  distinct  various  kinds  of  suits  against  direc- 

rules,  and  depend  upon  entirely  differ-  tors  will  be  removed,  and  it  will  be 

ent  conditions  of  fact.     Rules  peculiar  apparent  that  all  these  equitable  rem- 

to  one  of  these  classes  have  sometimes  edies  are  governed  by  a  system  of  dis- 

been    applied   to   cases    belonging  to  tinct  but  harmonious  rules.      I  shall 

another  class.     Such  mistakes   result  attempt  to  accomplish  this  result,  and 

from  a  failure  to  form  a  correct  notion  I  believe  that  the  conclusions  of  the 

of  the  trust  relation   in  which  direc-  text  are  fully  sustained  by  courts  of 

tors  are  placed.     If  it  be  possible  to  the  highest  ability  and  authority, 
formulate   a   true    statement   of    this 


1619  CORPORATION    DIRECTORS.  §  1090 

courts  of  law  and  of  equity  as  a  species  of  property,  as 
vendible  in  the  market,  as  having  a  pecuniary  value,  and 
as  clothing  their  owner  with  proprietary  rights  which  will 
be  protected  and  enforced.*  From  this  analysis  it  is  ob- 
vious that,  so  far  as  the  trust  embraces  or  is  concerned  with 
the  corporate  property,  the  directors  and  managing  officers 
occupy  the  position  of  quasi  trustees  towards  the  corpora- 
Hon  only;  there  is  no  relation  of  beneficiary  and  trustee, 
having  the  corporate  property  for  its  subject-matter,  be- 
tween the  stockholders  and  the  directors.  The  directors 
are  also  agents  for  the  corporation,  but  that  fact  does  not 
prevent  them  from  being  in  a  partial  sense  trustees  for 
the  corporation.  The  important  conclusion  I  repeat,  that 
this  phase  of  their  trust  is  concerned  with  and  confined 
to  the  corporate  property;  from  it  arise  their  fiduciary 
duties  towards  the  corporation  in  dealing  with  such  prop- 
erty, and  the  equitable  remedies  of  the  corporation  for  a 
violation  of  those  duties.  On  the  other  hand,  the  direc- 
tors and  managing  officers  occupy  the  position  of  quasi 
trustees  towards  the  stockholders  alone,  and  not  at  all 
towards  the  corporation,  with  respect  to  their  shares  of 
stock.  Since  the  stockholders  own  these  shares,  and 
"since  the  value  thereof  and  all  their  rights  connected 
therewith  are  affected  by  the  conduct  of  the  directors,  a 
trust  relation  plainly  exists  between  the  stockholders  and 
the  directors,  which  is  concerned  with  and  confined  to  the 
shares  of  stock  held  by  the  stockholders;  from  it  arise  the 
fiduciary  duties  of  the  directors  towards  the  stockholders 
in  dealings  which  may  affect  the  stock  and  the  rights  of 
the  stockholders  therein,  and  their  equitable  remedies  for 
a  violation  of  those  duties.  To  sum  up,  directors  and 
managing  officers,  in  addition  to  their  functions  as  mere 
agents,  occupy  a  double  position  of  partial  trust;  they  are 
quasi  or  sub  modo  trustees  for  the  corporation  with  respect 
to  the  corporate  property,  and  they  are  quasi  or  sub  modo 

^  Thus,  for  example,  trover  could  be  maintained  for  a  wrongful  coaversioa 
of  shares. 


§  1091  EQUITY    JURISPRUDENCE.  1620 

trustees  for  the  stockholders  with  respect  to  their  shares 
of  the  stock.' 

§  1091.  Liability  of  Directors  for  a  Violation  of  their 
Trust.  —  Whenever  directors  or  managing  officers,  acting 
within  the  scope  of  their  general  powers  as  agents,  vio- 
late the  rights  of  a  stockholder,  their  act  is  binding  upon 
the  corporation;  it  is,  in  legal  effect,  the  act  of  the  cor- 
poration, and  the  stockholder  has  a  remedy,  legal  or 
equitable  as  the  case  may  be,  by  suit  against  the  corpora- 
tion.^ With  remedies  of  this  kind  against  the  corpora- 
tion we  are  not  at  present  concerned,  since  they  result 
from  the  directors'  powers  as  agents,  and  not  at  all  from 
their  functions  as  quasi  trustees.  In  regard  to  the  vari- 
ous remedies  against  the  directors  or  managing  officers 
for  their  breaches  of  trust,  the  conclusions  reached  in 
the  preceding  paragraph  furnish  a  most  clear  and  certain 
criterion.  Whenever  the  acts  of  the  directors  do  not 
consist  of  any  wrongful  misuse  of  the  corporate  property, 

*  The  conclusions  of  the  text  are  Rock  Creek  etc.  Co.,  55  Cal,  359;  36 
fully  sustained  by  the  following  cases,  Am.  Rep.  40;  Booth  v.  Robinson,  55 
among  others,  although  no  single  de-  Mfl.  419;  Chouteau  v.  Allen,  70  Mo. 
cision,  so  far  as  I  am  aware,  attempts  290;  Van  Dyck  v.  McQuade,  86  N.  Y. 
to  give  the  complete  analysis  or  to  38,  45,  46,  per  Danforth,  J.;  Chase  v. 
formulate  the  entire  results.  Different  Vanderbilt,  62  N.  Y.  307. 
cases  have  announced  different  phases  The  dictum  in  Spering's  Appeal,  71 
of  the  doctrine,  and  by  a  comparison  Pa.  St.  11,  10  Am.  Rep.  684,  which 
of  all,  the  general  principle  is  estab-  describes  directors  as  mere  manda- 
lished:  Ex  parte  Chippendale,  4  De  taries,  cannot  be  reconciled  with  the 
Gex,  M.  &  G.  19,  52;  Bagshaw  v.  general  consensus  of  authorities. 
Eastern  Union  R'y,  7  Hare,  114,  130,  "As,  for  example,  when  the  direc- 
131;  2  Hall  &  T.  201;  Foss  v.  Har-  tors  or  oflBcers  improperly  refuse  to 
bottle,  2  Hare,  461,  493,  494;  Russell  recognize  a  transfer  of  stock,  and  to 
V.  Wakefield  etc.  Co.,  L.  R.  20  Eq.  issue  a  new  certificate  to  the  assignee, 
474,  479;  Duncomb  v.  New  York  etc.  or  when  they  otherwise  refuse  to  ad- 
R.  R.,  84  N.  Y.  190;  Smith  v.  Rath-  mit  the  rights  of  one  who  is  really  a 
bun,  22  Hun,  150;  Hun  v.  Cary,  82  stockholder,  and  to  issue  to  him  the 
N.  Y.  65,  70;  Forbes  v.  Memphis  etc.  stock  to  which  he  is  justly  entitled, 
R.  R.,  2  Woods,  323;  Jackson  v.  Lude-  their  conduct,  though  wrongful  in  the 
ling,  21  Wall.  616;  Smith  v.  Poor,  3  particular  instance,  falls  within  the 
Ware,  148;  Black  v.  Delaware  etc.  Co.,  scope  of  their  proper  functions.  The 
22  N.  J.  Eq.  130,  393;  Simons  v.  Vul-  stockholder  may  therefore  maintain 
can  Oil  etc.  Co.,  61  Pa.  St.  202;  100  an  action  at  law  against  the  corpo- 
Am.  Dec.  628;  Chetlain  v.  Republic  ration  for  damages,  or  he  may  some- 
Life  Ins.  Co.,  86  111.  220;  Deaderick  v.  times  resort  to  a  suit  in  equity  for 
Wilson,  8  Baxt.  108;  Corbett  v.  Wood-  the  purpose  of  compelling  it  to  issue 
ward,  5  Saw.  403;  Ryan  v.  Leaven-  the  stock  and  to  register  it  upon  the 
worth  etc.  R'y,  21  Kan.  365;  Forbes  books  of  the  company.  [See  §§  1411, 
V.   McDonald,    54   Cal.    98;   Davis   v.  1412.] 


I 


1621  CORPORATION    DIRECTORS.  §  1092 

or  wrongful  exercise  of  the  corporate  franchise,  but  are 
of  such  a  nature  that  they  directly  and  primarily  affect 
the  interest  of  the  stockholders  in  their  shares  of  stock, 
by  diminishing  its  value,  or  otherwise  imparing  their  pro- 
prietary rights  in  it,  then  the  stockholders  are  directly 
injured  and  are  primarily  interested;  as  the  cestuis  que 
trustent  whose  rights  have  been  violated,  they  must  insti- 
tute and  maintain  any  equitable  suits  for  relief  against 
their  defaulting  trustees;  the  remedy  is  for  their  benefit 
and  belongs  to  them  alone.  On  the  other  hand,  wher- 
ever the  breach  of  trust  consists  in  a  wrongful  dealing  of 
any  kind  or  in  any  manner  with  the  corporate  property 
or  with  the  corporate  franchises,  the  corporation  itself  is 
directly  injured  and  is  primarily  interested;  as  the  cestui 
que  trust  whose  rights  have  been  violated,  it  must  insti- 
tute and  maintain  any  equitable  suit  for  relief  against  its 
defaulting  trustees;  the  remedy  obtained,  whether  pecu- 
niary or  otherwise,  is  for  its  benefit,  and  belongs  to  it 
alone.  Under  certain  special  circumstances  in  cases  of 
this  latter  kind,  where  the  suit  should  be  brought  by  the 
corporation  as  plaintiff,  but  it  becomes  impossible  to  in- 
stitute such  a  proceeding,  in  order  to  prevent  a  complete 
failure  of  justice  the  stockholders  are  permitted  to  set  the 
machinery  of  the  court  in  motion  by  commencing  the 
action  in  their  own  names;  but  otherwise  the  suit  is 
treated  in  every  respect  as  one  brought  by  and  for  the 
corporation.  In  applying  these  general  propositions,  it 
will  be  found  that  there  are  several  distinct  classes  of 
cases  appropriate  for  different  conditions  of  fact,  and 
governed  by  different  rules.  These  various  classes  I  shall 
now  proceed  to  describe. 

§  1092.  First  Class.  Directors  Guilty  of  Fraudulent 
Misrepresentations  or  Concealments.  —  V/here  directors  or 
managing  officers  issue  prospectuses,  circulars,  or  reports 
containing  fraudulent  misrepresentations  or  concealments 
concerning  the  company's  affairs,  and  persons  are  in- 
duced   by   tliese    documents  to    purchase    shares  of   the 


§  1093  EQUITY   JURISPRUDENCE.  1622 

stock,  or  to  enter  into  contracts  for  their  purchase,  and 
thereby  sustain  a  loss,  such  defrauded  stockholders  may, 
as  has  already  been  shown,  either  obtain  the  relief  by 
repayment  or  rescission  against  the  corporation,  or  may 
obtain  relief  against  the  fraudulent  directors  personally 
by  means  of  an  equitable  suit  for  an  accounting  and 
repayment  of  the  money,  or  by  an  action  at  law  for  the 
deceit.  The  equitable  suits  against  the  directors  must 
plainly  be  brought  by  the  stockholders,  and  not  by  the 
corporation,  since  the  wrong  is  not  done  to  the  corporate 
property  or  franchises,  but  consists  wholly  in  a  violation 
of  the  stockholders'  proprietary  rights  in  their  shares 
of  stock.^  Such  a  suit  cannot  be  maintained  by  one 
stockholder  suing  on  behalf  of  himself  and  all  others 
similarly  situated;  the  injury  is  several  and  individual;^ 
each  defrauded  stockholder  must  sue  for  himself.^ 

§  1093.  Second  Class.  Ultra  Vires  Proceedings  of 
Directors.  —  In  a  second  class  of  cases,  where  the  direc- 
tors are  not  charged  with  any  misappropriation  of  the 
corporate  property  for  their  own  benefit,  nor  with  any 
breach  of  their  fiduciary  duty  to  the  corporation,  but, 
although  purporting  to  act  for  the  common  welfare,  they 
have  adopted,  or  are  about  to  adopt,  some  measure  which 
is  ultra  vires,  or  beyond  the  scope  of  their  corporate 
powers,  a  suit  may  be  prosecuted  against  them  by  stock- 
holders to  obtain  the  appropriate  relief,  either  of  rescis- 
sion or  of  prevention.^     Under  some  circumstances,  even 

'  Kiach  V.  Cent.  R'y  of  Venezuela,  3  sel,  M.  R.,  after  describing  the  8uit» 

De  Gex,  J.  &  S.  122;  Cent.  E,'y  etc.  v.  generally  to  be  brought  by  the  corpo- 

Kisch,  L.  R.  2  H.  L.  99;  Hill  v.  Lane,  ration,    and    stating  that    there    are 

L.  R.   11    Eq.  215;    Peek  v.  Gurney,  exceptions   to   this    rule,    adds:    "It 

L.  R.  13  Eq.  79;  L.  R.  6  H.  L.  377;  remains   to  consider  what   are   those 

Ship  V.  Crosskill,  L.  R.  10  Eq.  73,  82,  exceptional  cases  in  which  such  a  suit 

83;  Henderson  v.  Lacon,  L.  R.  5  Eq.  [i.  e.,  by  stockholders]  should  be  al- 

249;    Cargill  v.  Bower,  L.  H.   10  Ch.  lowed.     We  are  all  familiar  with  one 

Div.  502;  Rohrschneider  v.  Knicker-  large  class  of  cases  which  are  certainly 

bocker   Ins.    Co.,   76    N.   Y.    216;   32  the  first  exception  to  the  rule.     They 

Am.    Rep.    290;   see  ante,  §  881,  and  are  cases  in  which  an  individual  cor- 

casea  in  notes.  porator  sues  to  prevent  the  corpora- 

*  Turquand  v.    Marshall,    L.  R.    4  tion  either  commencing  or  continuing 
Ch.  376,  385.  the  doing  of  something  which  is  be- 

*  In  Russell  v.  Wakefield  etc.  Co.,  yond  the  powers  of  the  corporation." 
L.  R.  20  Eq.  474,  481,  Sir  George  Jes- 


1G23  CORPORATION    DIRECTORS.  §  1093 

a  single  dissentient  stockholder  would  not  be  bound  by 
such  an  act,  done  by  a  unanimous  board  of  directors, 
and  approved  by  all  the  other  stockholders  except  him- 
self. The  theory  of  this  class  of  suits  is,  that  a  stock- 
holder has  a  right  that  the  operations  of  the  corporatiou 
should  be  kept  by  the  directors  witliin  the  powers  con- 
ferred by  its  charter;  every  measure  which  transcends 
those  powers,  although  done  in  good  faith,  violates  the 
rights  which  inhere  in  the  ownersliip  of  stock,  and  puts 
the  value  of  the  stock  itself  at  hazard.  The  suit  may  be 
brought  by  a  single  stockholder  suing  on  his  own  account 
alone,  or  by  a  stockholder  suing  on  behalf  of  himself  and 
all  others  who  are  similarly  situated.  The  corporation 
is,  of  course,  made  a  co-defendant,  and  any  other  corpo- 
ration or  person  who  has  joined  in  the  ultra  vires  transac- 
tion may  also  be  made  a  co-defendant,*  There  is  also  a 
special  action  strictly  analogous  to  those  properly  belong- 
ing to  this  class.  When  the  managing  body  are  doing  or 
are  about  to  do  an  ultra  vires  act  of  such  a  nature  as  to 
produce  public  mischief,  the  attorney-general,  as  the  rep- 
resentative of  the  public  and  of  the  government,  may 
maintain  an  equitable  suit  for  preventive  relief.' 

*  Bagshaw  v.   Eastern   Union   R'y,  v.    Aldrich,   86  111.   504;   Chetlain  v. 

7  Hare,  114,  130,  131;  Ware  v.  Grand  Republic  Life  Ins.    Co.,   80  111.    220; 

Junction  etc.  Co.,  2  Russ.  &  M.  470;  Heath   v.    Erie   R'y,  8   Blatchf.   347; 

Simpson  v.  Westminster  Hotel  Co.,  2  Ribon  v.    R.   R.    Cos.,    16  Wall.  446- 

De  Gex,  F.  &  J.  141;  8  H.  L.  Cas.  712;  fTomkinaon  v.  S.   E.   R'y  Co.,  35  Clu 

Hare  v.  London  etc.  R'y,  2  Johns.  &  Uiv.  675;  Elkins  v.  C.  &  A.  R.  R,  Co.,. 

H.  80;  Simpson  v.  Denison,   10  Hare,  36  N.  J.  Eq.  5.] 

51;  Beman  v.  Rufford,  1  Sim.,  N.  S.,         '  Some  of  the  cases   seem   to  hold 

550;  Salomons  V.  Laing,  12  Beav.  377;  that   the   attorney-general   may   thus. 

Colman  v.  Eastern  Cos.  R'y,  10  Beav.  interfere  to  restrain  every  uUra  vires 

1;  Russell  v.  Wakefield  etc.   Co.,   L.  proceeding   of   a  cor]ioration,  on   the 

R.  20  Eq.  474,  481;  Clinch  V.  Financial  ground  that   the  public  and  govern- 

Corporation,  L.  R.  5  Eq.   450;  Att'y-  mental  rights  mu.?t  necessarily  be  in- 

Gen.  V.  Great  Eastern  R'y,  L.  R.  11  vaded  thereby.     The  later  decisions, 

Ch.  Div.  449,  485-500,  per  Baggallay,  however,  have  established  the  liinita- 

L.  J.;  Menier  v.  Hooper's  Tel.  Works,  tion  as  stated  in  the  text:  Att'y-Gen. 

L.  R.  9  Ch.  350;  MacDougall  v.  Gar-  v.  Great  East.  R'y,  L.  R.  11  Ch.  Div. 

diner,  L.  R.   1  Ch.  Div.    13;  Kent  v.  449,  485-500;  Att'y-Gen.   v.   Ely  etc. 

Quicksilver  Min.  Co.,   78  N.  Y.    159;  R'y,  L.  R.  4  Ch.  194,  199;  Att'y-Gen. 

Butts  V.  Wood,  37  N.  Y.  317;  Mander-  v.  Great  West.  R'y,  L.  R.  7  Ch.  767; 

son  V.   Commercial  Bank,  28  Pa.  St.  Att'y-Gen.     v.     Cockermouth    Local 

379;  Black  v.    Delaware  etc.  Co.,  22  Board,  L.  R.   18  Eq.    172;  Att'y-Gen. 

N.  J.  Eq.  130,  393;  Marseilles  etc.  Co.  v.  Great  North.  R'y,  1  Drew.  &  S.  154. 


§  1094  EQUITY  JURISPRUDENCE.  1624 

§  1094.  Third  Class.  Wrongful  Dealing  with  Corpo- 
rate Property.  —  In  this  vastly  most  numerous  and  impor- 
tant class,  the  wrongful  acts  of  the  directors  or  officers 
primarily  and  immediately  affect  the  corporation,  either 
by  misuse  of  its  property  or  by  abuse  of  its  franchises. 
The  kinds,  forms,  and  modes  of  such  wrongful  acts  are 
practically  unlimited  in  number  or  variety.  In  general, 
where  the  directors  or  officers,  or  some  of  them,  cause  a 
loss  of  corporate  property  by  negligence,  or  culpable  lack 
of  prudence,  or  failure  to  exercise  their  functions;  or 
fraudulently  misappropriate  the  corporate  property  in 
any  manner,  whether  for  their  own  benefit  or  for  the 
benefit  of  third  persons;  or  obtain  any  undue  advantage, 
benefit,  or  profit  for  themselves  by  contract,  purchase, 
sale,  or  other  dealings  under  color  of  their  official  func- 
tions; or  misuse  the  franchises,  or  violate  the  rules  estab- 
lished by  the  charter  or  the  by-laws  for  their  management 
of  the  corporate  aff'airs;  or  in  any  other  similar  manner 
commit  a  breach  of  their  fiduciary  obligations  towards 
the  corporation,  so  that  it  sustains  an  injury  or  loss,  and  a 
liability  devolves  upon  themselves,  —  then  the  corporation 
is  the  party  which  must,  as  the  plaintiff",  bring  an  equi- 
table suit  for  relief  against  the  wrong-doers;  the  trust 
relation  between  itself  as  the  cestui  que  trust  and  the  de- 
faulting directors  or  officers  as  trustees  has  been  violated, 
and  as  in  all  like  cases  the  cestui  que  trust  is  primarily 
the  only  party  to  sue  for  redress.  As  a  general  rule, 
courts  of  equity  will  not  interfere  with  the  internal  man- 
agement of  corporations  by  means  of  suits  brought  by 
stockholders  against  directors,  officers,  or  other  stockhold- 
ers.*    In  cases  belonging  to  this  class,  therefore,  whatever 

*  The   doctrine   is   concisely   stated  He  claims  to  recover,  not  only  for  the 

in  the  quite  recent  case  of  Greaves  v.  misappropriation     of     the     corporate 

Gouge,  69  N.  Y.   154,   157.     A  stock-  funds,   but  also  for  the   depreciation 

holder  sues  the  president  of  a  corpo-  in  the  value  of  his  own  stock.     The 

ration,    alleging   that   defendant   had  corporation  is  not  made  a  party,  and 

fraudulently  misappropriated  the  sur-  the  complaint  contains  no  averments 

plus  earnings  and   other   property  of  showing  why  the  suit  was  not  brought 

the   corporation,  and   that  plaintiff's  by  the  corporation.     In  short,  the  case 

stock  had  thereby  become  worthless,  illustrates  the  doctrine  in   the  most 


1625  CORPORATION   DIRECTORS.  §  1094 

be  the  nature  of  the  particular  wrong,  whether  intentional 
and  fraudulent,  or  resulting  from  negligence  or  want  of 
reasonable  prudence,  and  whatever  be  the  indirect  loss 
occasioned  to  individual  stockholders,  no  equitable  suit 
for  relief  against  the  wrong-doing  directors  or  officers  can 
be  maintained  by  a  stockholder  or  stockholders  individu- 
ally, nor  by  a  stockholder  suing  representatively  on  behalf 
of  all  others  similarly  situated,  unless  the  special  condition 
of  circumstances  exists  to  be  described  in  the  next  fol- 
lowing paragraph,  namely,  that  the  corporation  either 
actually  or  virtually  refuses  to  prosecute.  Even  if  the 
stockholder  alleges  that  the  value  of  his  own  stock  has 
been  depreciated  by  the  defendants*  acts,  or  that  he  has 
sustained  other  special  damage,  he  is  not  thereby  entitled 
to  maintain  the  suit.  The  reasons  for  this  doctrine  have 
already  been  explained.  The  stockholder,  having  no  es- 
tate, legal  or  equitable,  in  the  corporate  property,  has  no 
locus  standi  in  the  courts  while  the  corporation,  in  w^hich 
alone  are  vested  the  corporate  property  and  franchises,  is 
able  and  willing  to  sue  for  their  protection.*     Differing 

striking  manner.  The  court  say:  The  claim  of  the  plaintifiF  that  whea 
"  There  is  no  doubt  that  a  stockholder  the  stockholder  seeks  to  recover  hia 
has  a  remedy  for  losses  sustained  by  share  of  the  loss  wliich  might  be  ra- 
the fraudulent  acts,  and  for  the  mis-  covered  of  the  company,  and  only 
application  or  waste  of  corporate  funds  then,  the  company  must  be  made  a 
and  property  by  an  oflScer  of  a  corpo-  party,  is  not  sustained  by  the  author- 
ration;  but  the  weight  of  authority  is  ities,  and  those  cited  do  not  uphold 
in  favor  of  the  doctrine  that  an  action  the  doctrine  contended  for.  Tlie  same 
for  injuries  caused  by  such  misconduct  remark  is  also  applicable  to  the  posi- 
must  be  brought  in  the  name  of  the  tion  taken,  that  when  the  loss  is  pecu- 
corporation,  unless  such  corporation  liar  to  the  stockholder,  and  is  caused 
or  its  ofBcers,  upon  being  applied  to  by  the  depreciation  of  the  market 
for  such  a  purpose  by  a  stockholder,  value  of  the  stock,  that  the  loss  may 
refuse  to  bring  such  action.  In  that  be  recovered  against  a  director  or 
contingency,  and  then  only,  can  a  other  person  causing  it,  without  mak* 
stockholder  bring  an  action  for  the  ing  the  company  a  party." 
benefit  of  himself  and  others  similarly  '  In  most  of  the  following  cases  the 
situated,  and  in  such  an  action  the  doctrine  of  the  text  is  established  ia 
corporation  must  necessarily  be  made  an  express  and  positive  manner:  Fosa 
a  party  defendant.  When  a  stock-  v.  Harbottle,  2  Hare,  461,  491,  per 
holder  brings  such  an  action  the  com-  Wigram,  V.  C. ;  Mozley  v.  Alston,  1 
plaint  should  allege  that  the  corpora-  Phill.  Ch.  790,  per  Lord  Cottenliam; 
tion,  on  being  applied  to,  refuses  to  Lord  v.  Co.  of  Copper  Miners,  2  Phill. 
prosecute;  and  as  this  averment  con-  Ch.  740,  per  Lord  Cottenham;  Russell 
stitutes  an  essential  element  of  the  v.  Wakefield  Water  W.  Co.,  L.  R.  20 
cause  of  action,  the  complaint  is  de-  Eq.  474,  479,  per  Sir  George  Jessel, 
fective  and    insufficient   without    it.  M.  R.;   Gray  v.  Lewis,  L.  R.  8  Ch. 


§  1095  EQUITY    JURISPRUDENCE.  1626 

from  this  class  merely  in  form,  there  is  a  special  group  of 
cases  governed  by  the  same  doctrine.  If  the  corporation 
has  been  dissolved,  or  is  in  the  process  of  winding  up, 
then  the  suit,  which  would  otherwise  have  been  brought 
in  its  name,  may  be  maintained  by  the  receiver,  official 
liquidator,  or  other  official  representative  who  has  suc- 
ceeded to  its  property  and  franchises  for  the  purpose  of 
the  final  settlement.* 

§  1095.  Fourth  Class.  The  Same  Wrongful  Dealing 
with  Corporate  Property  —  The  Corporation  Refuses  to 
Sue. —  Although  the  corporation  holds  all  the  title,  legal 
or  equitable,  to  the  corporate  property,  and  is  the  imme- 
diate cestui  que  trust  under  the  directors  with  respect  to 
such  property,  and  is  theoretically  the  only  proper  party 
to  sue  for  wrongful  dealings  with  that  property,  yet  courts 
of  equity  recognize  the  truth  that  the  stockholders  are 
ultimately  the  only  beneficiaries;  that  their  rights  are 
really,  though  indirectly,  protected  by  remedies  given  to 
the  corporation;  and  that  the  final  object  of  suits  by  the 
corporation  is  to  maintain  the  interests  of  the  stock- 
holders. While,  in  general,  actions  to  obtain  relief  against 
wrongful  dealings  with  the  corporate  property  by  direc- 

1035,  1049,  1050;  MacDougall  v.  Gar-  lins,  13  Col.  22;  Bacon  v.  Irvine,  70Cal. 
diner,  L.  R.  1  Ch.  Div.  13;  Duckett  221.]  In  the  following  cases  the  same 
V.  Gover,  L.  R.  6  Ch.  Div.  82;  Forbes  doctrine  is  recognized  and  followed  as 
V.  Memphis  etc.  R.  R.,  2  Woods,  the  basis  of  decision,  although  the  ac- 
323;  Morgan  v.  R.  R.  Co.,  1  Woods,  tions  are  not  traybrm  the  same  as  in  the 
15;  Newby  v.  Oregon  Cent.  R.  R.,  1  preceding  cases :  Duncomb  v.  New  York 
Saw.  63;  Smith  v.  Poor,  3  Ware,  148;  etc.  R.  R.,  84  N.  Y.  190  (applied  de- 
Memphis  City  V.  Dean,  8  Wall.  64;  fensively  by  the  corporation);  Brooklyn 
Hawes  v.  Oakland,  104  U.  S.  450;  etc.  R.  R.  v.  Strong,  75  N.  Y.  591 
Huntington  v.  Palmer,  104  U.  S.  482;  (action  at  law);  Craig  v.  Gregg,  83 
Dannmeyer  v.  Coleman,  11  Fed.  Rep.  Pa.  St.  19;  Uuion  Pacific  R.  R.  v. 
97;  Greaves  v.  Gouge,  69  N.  Y.  154;  Durant,  3  Dill.  343;  Chetlain  v.  Re- 
Smith  V.  Rathbun,  22  Hun,  150;  Black  public  Life  Ins.  Co.,  86  111.  220.  See 
V.  Huggins,  2  Tenn.  Ch.  780;  Jones  also,  in  support  of  the  text,  the  cases 
V.  Johnson,  10  Bush,  649;  European  cited  under  the  next  following  par- 
etc.  R'y  V.  Poor,  59  Me.  277;  Henry  agraph,  §  1095. 

V.  Elder,  63  Ga.  347;  Booth  v.  Robin-         *  Land  Credit  Co.  v.  Lord  Fermoy, 

son,  55  Md.  419;  Evans  v.  Brandon,  L.  R.  8  Eq.  7,  II;  Joint  Stock  Co.  v. 

53    Tex.    56;    [Dunphy    v.    Traveller  Brown,  L.  R.  8  Eq.  381;  3  Eq.   139; 

.Newspaper    Union,    146    Mass.    495;  Hun  v.   Gary,  82  N.  Y.  65;  37  Am. 

Rathbone  v.  Gas  Co.,  31  W.  Va.  798;  Rep.  546;  Spering's  Appeal,  71  Pa.  St. 

Merchants'     and     Planters'    Line    v.  11;  10  Am.  Rep.  684;  Brinckerhoflf  v^ 

Waganer,  71  Ala.  581;  Byers  v.  Rol-  Bostwick,  88  N.  Y.  62. 


1627  CORPORATION    DIRECTORS.  §  1095 

tors  and  officers  must  be  brought  by  and  in  the  name  of 
the  corporation,  yet  if  in  any  such  case  the  corporation 
should  refuse  to  bring  a  suit,  the  courts  have  seen  that 
the  stockholders  would  be  without  any  immediate  and 
certain  remedy,  unless  a  modification  of  the  general  rule 
were  admitted.  To  that  end  the  following  modification 
of  the  general  rule  stated  in  the  last  preceding  paragraph 
has  been  established  as  firmly  and  surely  as  the  rule 
itself.  Wherever  a  cause  of  action  exists  primarily  in 
behalf  of  the  corporation  against  directors,  officers,  and 
others,  for  wrongful  dealing  with  corporate  property,  or 
wrongful  exercise  of  corporate  franchises,  so  that  the 
remedy  should  regularly  be  obtained  through  a  suit  by 
and  in  the  name  of  the  corporation,  and  the  corporation 
either  actually  or  virtually  refuses  to  institute  or  prosecute 
such  a  suit,  then,  in  order  to  prevent  a  failure  of  justice, 
an  action  may  be  brought  and  maintained  by  a  stock- 
holder or  stockholders,  either  individually  'or  suing  on 
behalf  of  themselves  and  all  others  similarly  situated, 
against  the  wrong-doing  directors,  officers,  and  other  per- 
sons; but  it  is  absolutely  indispensable  that  the  corpora- 
tion itself  should  be  joined  as  a  party,  —  usually  as  a 
co-defendant.  The  rationale  of  this  rule  should  not  be 
misapprehended.  The  stockholder  does  not  bring  such 
a  suit  because  his  rights  have  been  directly  violated,  or 
because  the  cause  of  action  is  his,  or  because  he  is  en- 
titled to  the  relief  sought;  he  is  permitted  to  sue  in  this 
manner  simply  in  order  to  set  in  motion  the  judicial  machin- 
ery of  the  court.  The  stockholder,  either  individually  or 
as  the  representative  of  the  class,  may  commence  the  suit, 
and  may  prosecute  it  to  judgment;  but  in  every  other 
respect  the  action  is  the  ordinary  one  brought  by  the 
corporation,  it  is  maintained  directly  for  the  benefit  of 
the  corporation,  and  the  final  relief,  when  obtained,  be- 
longs to  the  corporation,  and  not  to  the  stockholder- 
plaintiff.  The  corporation  is,  therefore,  an  indispensably 
necessary  party,  not  simply  on  the  general  principles  of 


§  1095  EQUITY   JURISPRUDENCE.  1628 

equity  pleading  in  order  that  it  may  be  bound  by  the  de- 
cree, but  in  order  that  the  relief,  when  granted,  may  be 
awarded  to  it,  as  a  party  to  the  record,  by  the  decree. 
This  view  completely  answers  the  objections  which  are 
sometimes  raised  in  suits  of  this  class,  that  the  plaintiff 
has  no  interest  in  the  subject-matter  of  the  controversy 
nor  in  the  relief.  In  fact,  the  plaintiff  has  no  such  direct 
interest;  the  defendant  corporation  alone  has  any  direct 
interest;  the  plaintiff  is  permitted,  notwithstanding  his 
want  of  interest,  to  maintain  the  action  solely  to  prevent 
an  otherwise  complete  failure  of  justice.  When  may 
such  an  action  be  brought?  I  have  already  stated  the 
rule  in  its  most  general  form,  that  a  stockholder  may  thus 
sue  whenever  the  corporation  either  actually  or  virtually 
refuses  to  permit  a  proceeding  by  itself.  These  are  two 
distinct  conditions  of  fact;  and  the  circumstances  must 
determine  whether  any  particular  case  belongs  to  one  or 
the  other  of  the  two  conditions.  In  general,  a  case  should 
come  within  the  first  condition;  and  it  should  appear 
that  the  board  of  directors  or  other  managing  body  has 
actually  refused  to  bring  or  permit  an  action  in  its  own 
name.  To  this  end  the  plaintiff  should  allege  an  appli- 
cation to  the  directors  or  managing  body,  a  reasonable 
notice,  request,  or  demand,  that  they  would  institute  pro- 
ceedings on  the  part  of  the  corporation  against  the  wrong- 
doers, and  their  refusal  to  do  so  after  such  reasonable 
request  or  demand.  These  allegations  are  material  and 
issuable;  if  controverted  by  the  defendant,  they  must  be 
proved.  If  the  proof  of  them  fails,  the  whole  founda- 
tion of  the  plaintiff's  action  is  gone.  This  condition  of 
fact,  however,  is  not  indispensable;  the  action  may  be 
maintainable  without  showing  any  notice,  request,  or  de- 
mand to  the  managing  body,  or  any  actual  refusal  by 
them  to  prosecute;  in  other  words,  the  refusal  may  be 
virtual.  If  the  facts  as  alleged  show  that  the  defendants 
charged  with  the  wrong-doing,  or  some  of  them,  consti- 
tute a  majority  of  the  directors  or  managing  body  at  the 


I 


1629 


CORPORATION    DIRECTORS. 


§  1095 


time  of  commencing  the  suit,  or  that  tlie  directors  or  a 
majority  thereof  are  still  under  the  control  of  the  wrong- 
doing defendants,  so  that  a  refusal  of  the  managing  body, 
if  requested  to  bring  a  suit  in  the  name  of  the  corpora- 
tion, may  be  inferred  with  reasonable  certainty,  then  an 
action  by  a  stockholder  may  be  maintained  without  al- 
leging or  proving  any  notice,  request,  demand,  or  express 
refusah^     In  like  manner,  if  the  plaintiff's  pleading  dis- 


*  These  conclusions  are  fully  sus- 
tained by  the  cases  which  have  ap- 
plied the  rule  under  a  preat  variety 
of  circumstances:  Atwool  v.  Merry- 
weather,  L.  R.  5  Eq.  464,  note;  Mason 
V.  Harris,  L.  R.  11  Ch.  Div.  97;  Mac- 
Dougall  V.  Gardiner,  L.  R.  1  Ch.  Div. 
13;  Duckett  v.  Gover,  L.  R.  6  Ch. 
Div.  82;  Menier  v.  Hooper's  Tel. 
Works,  L.  R.  9  Ch.  350;  Benson  v. 
Heathorn,  1  Younge  &  C.  326;  Daven- 
port V.  Dows,  18  Wall.  626;  Jackson 
V.  Ludeling,  21  Wall.  616;  Memphis 
City  v.  Dean,  8  Wall.  64;  Forbes  v. 
Memphis  etc.  R.  R.,  2  Woods,  323; 
Newby  V.  Oregon  Cent.  R,.  R.,  1  Saw. 
63;  Smith  v.  Poor,  3  Ware,  148; 
Heath  v.  Erie  R'y,  8  Blatchf.  347; 
Memphis  etc.  Gas-  Co.  v.  Williamson,  9 
Heisk.  314;  Hazard  v.  Durant,  11  R. 
I.  195;  Brinckerhoff  y.  Bostwick,  88 
N.  Y.  52;  Young  v.  Drake,  8  Hun,  61; 
Rogers  v.  Lafayette  etc.  Works,  52 
Ind.  296;  citing  March  v.  Eastern 
R.  R.,  40  N.  H.  548;  77  Am.  Dec.  732; 
Brewer  v.  Boston  Theatre,  104  Mass. 
378;  Peabody  v.  Flint,  6  Allen,  52; 
Hodges  V.  NewEng.  Screw  Co.,  1  R.  I. 
312;  53  Am.  Dec.  624;  Sears  v.  Hotch- 
kiss,  25  Conn.  171;  65  Am.  Dec.  557; 
Allen  V.  Curtis,  26  Conn.  456;  Robin- 
son V.  Smith,  3  Paige,  222;  24  Am. 
Dec.  212;  Goodin  v.  Cin.  etc.  Co., 
18  Ohio  St.  1G9;  9S  Am.  Dec.  95;  Bar- 
tholomew V.  Bentley,  1  Ohio  St.  37; 
Smith  V.  Prattville  M.  Co.,  29  Ala. 
503;  Wright  v.  Oroville  etc.  Co.,  40 
Cal.  20;  Dodge  v.  Woolsey,  IS  How. 
331;  Board  of  Commissioners  v. 
Lafayette  etc.  R.  R.,  50  Ind.  85; 
Jones  V.  Johnson,  10  Bush,  649;  Gray 
V.  New  York  etc.  Co.,  3  Hun,  383;  5 
Thomp.  &  C.  224;  O'Brien  v.  O'Con- 
nell,  7  Hun,  228;  Carpenter  v.  Rob- 
erts, 56  How.  Pr.  216;  Ryan  v.  Leav- 
enworth etc.  R'y,  21  Kan.  365;  Gardner 
V.  Butler,  .30  N.  J.  E'l.  702;  Deaderick 


V.  Wilson,  8  Baxt.  108;  Booth  v.  Rob- 
inson, 55  Md.  419;  Baldwin  v.  Canfield, 
26  Minn.  43;  Wilcox  v.  Bickel,  11 
Neb.  154;  Evans  v.  Brandon,  53  Tex. 
56;  Hawes  v.  Oakland,  104  U.  S.  450; 
Huntington  v.  Palmer,  104  U.  S.  482; 
Dannmeyer  v.  Coleman,  11  Fed.  Rep. 
97;  [Slattery  v.  St.  Louis  etc.  R.  K. 
Co.,  91  Mo.  217;  60  Am.  Rep.  245; 
Brinckerhoff  v.  Bostwick,  88  N.  Y. 
59,  per  Rapallo,  J.;  105  N.  Y.  567; 
Davis  V.  Gemmell,  70  M'l.  356;  Crnm- 
lish  V.  Shenandoah  Valley  R.  R.  Co., 
28  W.  Va.  623;  Tuscaloosa  Mis.  Co. 
V.  Cox,  68  Ala.  71;  Nathan  v.  Tomp- 
kins, 82  Ala.  437;  City  of  Chicago  v. 
Cameron,  120  111.  447;  Moyle  v.  Lan- 
ders, 83  Cal.  579;  Ashton  v.  Dashaway 
Ass'u,  84  Cal.  61.]  In  Atwool  v. 
Merryweather,  L.  R.  5  Eq.  404,  note, 
467,  note,  a  suit  by  a  stockholder  was 
sustained,  although  no  deinan<l  or  re- 
quest to  sue  had  been  made  to  the 
managing  body,  and  no  leave  to  sue 
had  been  obtained,  because  the  princi- 
pal defendant,  a  director,  by  means 
of  the  very  fraud  comjilained  of,  had 
control  of  a  majority  of  the  votes  in 
the  managing  body.  In  Mason  v.  Har- 
ris, L.  R.  11  Ch,  Div.  97.  107,  Sir 
George  Jessel,  M.  R.,  said:  "As  a 
general  rule,  the  company  must  sue 
in  respect  of  a  claim  of  this  nature, 
but  general  rules  have  their  excei>- 
tions,  and  one  exception  to  the  rule 
requiring  the  company  to  be  plaintiff 
is,  that  where  a  fraud  is  committed 
by  persons  who  can  command  a  ma- 
jority of  votes,  the  minority  can  sue. 
The  reas(5n  is  plain,  as,  unless  such  an 
exception  were  allowed,  it  would  be 
in  the  power  of  a  majority  to  defraud 

the  minority  with  impunity It 

appears  tliat  the  defendant  Harris 
holds  such  a  number  of  shares  that  lie 
can  outvote  those  who  wish  the  sale 
set  aside  [i.  e.,  the  sale  alleged  to  be 


1095 


EQUITY   JURISPRUDENCE. 


1630 


closes  any  other  condition  of  fact  which   renders  it  rea- 
sonably certain  that  a  suit  by  the  corporation  would  be 


fraudulent].  By  reason,  therefore, 
of  his  influence  with  the  directors 
and  his  number  of  votes,  he  has  the 
sole  control  of  the  company.  The 
case  is  precisely  within  the  rules  laid 
down  by  James,  L.  J.,  in  Menier  v. 
Hooper's  Tel.  Co."  In  Newby  v. 
Oregon  Cent.  R.  R.,  1  Saw.  63,  67, 
68,  plaintiff  had  averred  in  his  bill 
a  demand  made  upon  the  board  of 
directors  to  sue  in  the  name  of  the 
company,  and  their  refusal;  on  the 
hearing  it  was  conceded  that  this 
averment  could  not  be  proved,  and 
the  suit  was  therefore  dismissed,  upon 
the  authority  of  Memphis  City  v. 
Dean,  8  Wall.  64,  which  is  directly 
to  the  same  point.  The  American 
courts  fully  adopt  the  rules  as  settled 
by  English  judges.  In  Young  v. 
Drake,  8 Hun,  61,  it  was  said:  "Stock- 
holders have  a  right  to  maintain  an 
action  against  the  trustees  of  the  cor- 
poration for  a  fraudulent  breach  of 
trust,  when  it  is  apparent  that  the 
corporation  itself  will  not  sue  for  their 
benefit.  And  where  the  corporation 
is  still  controlled  by  the  same  trustees 
who  are  accused  of  the  fraud,  or 
where  such  accused  persons  are  a  ma- 
jority of  the  trustees,  that  is  sufficient 
evidence  that  the  corporation  will  not 
prosecute,  and  that  an  application  to 
the  trustees  to  direct  a  suit  to  be 
brought  against  themselves,  or  the 
derelict  majority  of  their  members, 
would  be  useless."  The  same  rule  is 
stated  in  the  clearest  manner  in  the 
important  and  well-considered  case  of 
Heath  v.  Erie  R'y,  8  Blatchf.  347. 
In  Wilcox  v.  Bickel,  11  Neb.  154, 
the  plaintiff  alleged  that  the  wrong- 
doing officials,  who  constituted  a  ma- 
jority of  the  directors,  had  absconded, 
and  their  whereabouts  was  unknown, 
and  these  facts,  it  was  held,  brought 
the  case  within  the  principle  and 
operation  of  the  rule.  In  Baldwin  v. 
Canfield,  26  Minn.  43,  the  action  was 
brought  by  a  person  to  whom  shares 
of  the  stock  had  been  assigned  as  col- 
lateral security,  and  the  court,  in 
sustaining  the  action,  held  that  a  per- 
son holding  stock  of  a  corporation, 
not  as  a  stockholder,  but  merely  as  a 
pledgee,  may  bring  an  action  on  his 
own  account  and    in  bis  own  name 


to  protect  his  rights  and  interests 
as  pledgee,  and  cannot  be  required 
to  act  through  the  corporation.  In 
the  very  recent  case  of  Hawes  v. 
Oakland,  which  was  an  action  by  a 
stockholder  suing  representatively 
against  the  board  of  directors,  the 
corporation,  and  others,  the  supreme 
court  of  the  United  States  summed 
up  the  general  results  of  the  English 
and  American-  authorities  as  follows: 
"There  must  exist  as  the  foundation 
of  the  suit  some  action  or  threatened 
action  of  the  managing  board  of  di- 
rectors or  trustees  of  the  corporation 
which  is  beyond  the  authority  con- 
ferred on  them  by  their  charter  or 
other  source  of  organization  [N^ote.  — 
This  is  identical  with  the  "second 
class  "  of  cases  described  in  the  text; 
what  follows  embraces  the  various 
conditions  of  fact  which  belong  to  the 
"fourth  class  "];  or  such  a  fraudulent 
transaction  completed  or  contem- 
plated by  the  acting  managers,  in 
connection  with  some  other  party, 
or  among  themselves,  or  with  other 
share-holders,  as  will  result  in  serious 
injury  to  the  corporation,  or  to  the 
interests  of  the  other  share-holders; 
or  where  the  board  of  directors,  or  a 
majority  of  them,  are  acting  for  their 
own  interests,  in  a  manner  destructive 
of  the  corporation  itself,  or  of  the 
rights  of  the  other  share-holders;  or 
where  the  majority  of  the  share-hold- 
ers themselves  are  oppressively  and 
illegally  pursuing  a  course  in  the 
name  of  the  corporation  which  is  in 
violation  of  the  rights  of  the  other 
share-holders,  and  which  can  only  be 
restrained  by  a  court  of  equity."  To 
these  general  conclusions  the  court 
adds  a  statement  of  very  minute  aver- 
ments which  must  be  made  by  the 
plaintiff,  tending  to  show  that  he  has 
used  all  possible  efiforts,  and  exhausted 
all  possible  means,  both  with  the 
managing  officers  and  with  the  other 
share-holders.to  obtain  redress  through 
corporate  action,  or  through  a  suit  by 
the  corporation  itself.  It  is  not 
claimed,  however,  that  these  specific 
and  extraordinary  allegations  are  de- 
manded by  the  general  course  of  Eng- 
lish and  American  decisions.  They 
are  intended   to   guard   the    federal 


1631  OTHER  QUASI  TRUSTEES.  §  1096 

impossible,  and  that  a  demand  therefor  would  be  nuga- 
tory, the  action  may  be  maintained  without  averring  a 
demand  or  any  other  similar  proceeding  on  the  part  of 
the  stockholder-plaintifiP. 

§  1096.  Special  Classes.  —  In  addition  to  the  forego- 
ing general  classes  of  suits,  there  are  certain  special 
classes,  analogous  to  the  former,  and,  like  them,  based 
upon  the  conception  of  an  existing  quasi  trust  relation, 
and  of  a  breach  of  the  fiduciary  duty  growing  out  of  such 
relation.  These  special  cases  should  be  mentioned,  in 
order  to  complete  the  view  of  partial  trusts  connected 
with  the  existence  and  management  of  corporations.  In 
the  first  place,  an  action  may  be  maintained  by  the  cor- 
poration against  its  promoters,  to  set  aside  a  transfer,  or 
to  rescind  an  agreement,  or  to  obtain  other  proper  relief, 
whenever,  in  the  organization  of  the  company,  there  has 
been  a  breach  of  the  fiduciary  duty  owed  by  the  promot- 
ers to  the  future  corporation.*  Secondly,  under  the  same 
general  circumstances  in  which  an  action  may  be  main- 
tained by  a  stockholder  against  wrong-doing  directors  or 
officers,  if  the  corporation  is  municipal,  or  the  trust  is 
public  and  charitable,  the  attorney-general  may  sue,  as 
a  representative  of  the  public  beneficiaries,  for  appropri- 
ate relief.^  Finally,  it  seems  that  a  person  who  has  shares, 
not  as  a  full  stockholder,  but  as  a  pledgee  or  assignee  for 
security,  may  bring  a  suit  against  defaulting  directors  or 
officers,  for  the  purpose  of  protecting  his  own  interests, 
without  calling  upon  the  corporation  itself  to  interfere.' 

jurisdiction   from  encroachment,    and  np,  the  snit  may,  of  course,  be  brought 

are  prescribed  by  a  rule  of  the  United  by  the  receiver  or  official  liquidator: 

States  supreme  court  (rule  94)  for  the  Emma  etc.   Mining  Co.  v.  Grant,  L. 

purpose    of    preventing   collusive   at-  R.  11  Ch.  Div.  918;  Taylor  v.  Salmon, 

tempts   to    bring    causes  within   that  4  Mylne  &  C.   184;  Benson   v.    Hea- 

jurisdiction.      To  the  same  effect  are  thorn,  1   Younge  &  C.  326;  Simons  v. 

Huntington  V.  Palmer  and  Dannmeyer  Vulcan   Oil  Co.,  61   Pa.  St.  202;  100 

V.  Coleman,  s«p)-a,- [and  see  Dimpfell  V.  Am.  Dec.   628;  McEUientiy's    Appeal, 

O.  &  M.  R'y  Co.,  110  U.  S.  209;  Tay-  61  Pa.   St.   188;  Union  Pac.  R.  R.  v. 

lor  V,  Holmes,  127  U.  S.  489;  Sqnair  Durant,  3  Dill.  343. 

V.  Lookout  Mt.  Co.,  42  Fed.  Rep.  7'29.1  ■'  Att'y-Gen.  v.  Wilson,  Craig  &  P. 

*  This  suit   is  clearly  analogous   to  1,9  Sim.  30,   is  an  example  of  such 

the    "third    general    class"    of     the  suits. 

text.     If  the  corporation   ia   winding  *  Baldwin  r.  Canfleld,  26  Minn.  43. 


§  1097  EQUITY   JURISPRUDENCBU  1632 

§  1097.  Guardians.  —  Guardians  of  infant  wards,  com- 
mittees or  guardians  of  persons  non  compotes  mentis,  and 
even  agents  where  the  agency  is  strictly  fiduciary,  stand 
in  the  relation  of  quasi  trustees  towards  their  wards  or 
principals.  It  is  true,  they  do  not  hold  the  title  to  the 
property  which  is  the  subject-matter  of  the  relation,  but 
their  position  and  obligations  are  wholly  fiduciary. 
Equity  has,  therefore,  a  general  jurisdiction,  at  the  suit 
of  the  wards  or  other  beneficiaries,  to  compel  a  perform- 
ance of  the  trust  duties,  to  relieve  against  violations  of 
these  trust  obligations,  to  direct  an  accounting  and  final 
settlement  of  the  quasi  trust,  and  to  grant  other  special 
relief  made  requisite  by  the  circumstances.  This  juris- 
diction exists  throughout  the  American  states,  except, 
perhaps,  in  a  very  few,  where  statutes  have  given  exclu- 
sive control  over  such  matters  to  some  particular  tribunal, 
to  be  exercised  in  some  prescribed  manner.* 

'  In  many  of  the  states  a  jurisdic-  of  insane  persons:  Stephens  v.  Mar- 
tion  over  guardians  is  given  to  the  shall,  23  Hun,  641;  Stumph  v.  Guard, 
probate  courts;  and  modes  of  annual  of  Pfeiffer,  58  Ind.  472;  Polis  v.  Tice, 
or  final  accounting  are  provided;  but  28  N.  J.  Eq.  432;  Cole's  Com.  v.  Cole's 
this  legislation  does  not  interfere  with  Adm'r,  28  Gratt.  365;  Moody  v.  Bibb, 
the  inherent  jurisdiction  of  equity,  as  50  Ala.  245.  Guardians  of  infants: 
a  part  of  its  general  supervisory  power  Lewis  v.  Allred,  57  Ala.  628;  overrul- 
over  trusts.  In  a  very  few  states,  it  ing  Spencer  v.  Spencer's  Ex'r,  50  Ala. 
seems,  the  legislation  has  gone  farther,  445;  Monnin  v.  Beroujon,  51  Ala.  196; 
and  has  conferred  an  exclusive  juris-  Corbett  v.  Carroll,  50  Ala.  315;  Chans- 
diction  over  guardians  and  their  ac-  lor  v.  Chanslor's  Trustees,  11  Bush,  663; 
counts  upon  these  probate  tribunals.  Tanner  v.  Skinner,  11  Bush,  120;  Wood 
For  cases  illustrating  the  text,  and  v.  Stafford,  50  Miss.  370;  Sledge  v. 
the  fiduciary  duties  of  guardians,  and  Boone,  57  Miss.  222;  McNeill  v. 
the  jurisdiction  of  equity  over  them,  Hodges,  83  N.  C.  504;  Lanier  v.  Grif- 
eee  ante,  §  961,  and  cases  cited.  With  fin,  11  S.  C.  565;  Smith  v.  Davis,  49 
respect  to  these  duties  and  this  juris-  Md.  470;  Sagev,  Hammonds,  27  Gratt. 
diction,  committees  or  guardians  of  651;  Wyckoff  v.  Hulse,  32  N.  J.  Eq. 
persons  non  compotes  mentis  sternd  u^on  697;  Wickiser  v.  Cook,  85  111.  6S; 
exactly  the  same  footing  as  guardians  Reed  v.  Timmins,  52  Tex.  84;  Hoyt 
of  infant  wards.  The  following  recent  v.  Sprague,  103  U.  S.  613;  Micou  v. 
cases  are  examples  of  the  mode  in  which  Lamar,  17  Blatchf.  378;  Bourne  v. 
the  jurisdiction  is  exercised:  Fiduciary  Maybin,  3  Woods,  724;  In  re  Dean, 
ar/ents:  Thornton  v.  Thornton,  31  86  N.  Y.  398  (assignee). 
Gratt.  212.     Committees  or  guardians 


1633        .  SEPABAT£    ESTATE    OF   MAKBIED   WOM£^\       ^  1098 


CHAPTER    SECOND. 

ESTATES  AND  INTERESTS   OF   MARRIED  WOMEN. 


SECTION   I. 

THE  SEPARATE  ESTATE  OF  MARRIED  WOMEN. 

ANALYSIS. 

S  1098.  Origin  and  general  nature. 

§  1099.  Statutory  legal  separate  estate  in  the  United  States. 

§  1100.  How  the  separate  estate  is  created;  trustees  not  neceasarj. 

§  1101.  The  same:  By  what  modes  and  instruments. 

S  1102.  The  same:  What  words  are  8u£Bcient. 

§  1103,  What  property  is  included. 

§  1 104.  Her  power  of  disposition. 

§1105.  The  same,  in  the  United  States. 

§  1106.  Her  disposition  under  a  power  of  appointment. 

§  1107.  Restraints  upon  anticipation. 

§  1108.  What  words  are  sufficient  to  create  a  restraint. 

§  1109.  EfiFect  of  the  restraint. 

§  1110.  End  of  the  separate  estate;  its  devolation  on  the  wife's  death. 

§  1111.  Pin-money. 

§  1112.  Wife's  paraphernalia. 

§  1113.  Settlement  or  conveyance  by  the  wife  in  frand  of  the  marriage. 

§  1098.  Origin  and  General  Nature.  —  The  married 
woman's  separate  estate,  as  recognized  by  equity,  and 
independently  of  any  statutory  legislation,  is  merely  a 
particular  instance  of  trusts,  and  the  jurisdiction  of 
equity  over  it  has  been  established  from  a  very  early 
day.*  As  the  wife's  interest  in  the  property  held  to  her 
separate  use  is  wholly  a  creature  of  equity,  the  equitable 
jurisdiction  over  it  is,  of  course,  exclusive.  The  notion 
of  an  equitable  separate  estate  free  from  the  claims  of 
the  husband  was  avowedly  introduced  in  order  to  evade 

'  fee  Drake  v.  Storr,  2  Freem.  205,     wife's  separate  estate  was  a  well-set- 
which  shows  that  in  A.  D.  1G95,  the     tied  doctrine  of  equity. 
2  Eq.  Job.  — 103 


§  1098 


EQUITY   JURISPRUDENCE. 


1634 


the  harsli  and  unjust  dogmas  of  the  law,  and,  in  direct 
antagonism  to  the  common-law  theory  which  completely 
merges  the  legal  personality  of  the  wife  in  that  of  her 
husband,  equity  regards  and  treats  the  married  woman, 
with  relation  to  such  separate  property,  in  many  respects 
as  though  she  were  unmarried.^     This  capacity  or  status 


'  The  doctrine  that  equity  regards 
a  married  woman  as  a  /eme  sole  has 
sometimes  been  stated  too  broadly. 
The  true  meaning  of  the  doctrine, 
with  its  limitations  and  restrictions 
and  the  extent  of  its  operation,  has 
been  explained  in  recent  English  oases, 
from  which  I  shall  quote  a  few  pas- 
sages. The  capacity  of  a  married 
woman  to  act  as  a  feme  sole  may  em- 
brace, among  other  elements,  a  power 
to  make  contracts,  a  power  to  dispose 
of  her  property,  and  a  freedom  from 
the  control  which  the  common  law 
gives  to  her  husband.  How  far  these 
elements  are  contained  in  the  equita- 
ble conception  of  the  wife's  condition, 
and  whether  with  or  without  limita- 
tion, is  the  question  to  be  determined. 
In  the  most  recent  case  of  Pike  v. 
Fitzgibbon,  L.  R.  17  Ch.  Div.  454, 
the  particular  question  was  as  to  the 
wife's  power  of  making  contracts. 
Cotton,  L.  J.,  said  (p.  463):  "I  think 
that  the  ingenious  and  able  argument 
on  the  part  of  the  plaintiflf  has  pro- 
ceeded on  one  or  two  fallacies  in  the 
use  of  language.  As  I  understand 
their  argument  it  is  this,  that  a  court 
of  equity  deals  with  a  married  woman 
who  has  a  separate  estate  as  if  she 
were  a  Jeme  sole.  Now,  is  that  cor- 
rect? First  of  all,  there  is  one  clear 
and  absolute  distinction.  Can  a  /eme 
sole,  or  can  a  man,  be  restrained  from 
anticipating,  or  disposing  by  way  of 
anticipation,  of  any  property  to  which 
she  or  he  is  entitled?  No.  A  mar- 
ried woman  under  coverture  can;  but 
how  and  why?  Simply  as  regards 
property  settled  to  her  separate  use, 
and  because  equity  can  modify  the 
incidents  of  separate  estate,  which  is 
the  creation  of  equity,  and  thus  the 
position  of  a  married  woman  having 
separate  property  differs  materially 
from  that  of  a  feme  sole.  Is  it  true 
that  she  is  regarded  in  equity  as  a 
feme  sole?  She  is  regarded  as  a  feme 
sole  to  a  certain  extent,  but  not  as  a 
fem^  sole  absolutely,  and  there  is  the 


fallacy.  She,  ia  my  opinion,  is  re- 
garded as  a  feme  sole  only  as  regards 
property  which,  under  the  trust,  she 
is  entitled  to  deal  with  as  if  she  were 
a  feme  sole;  but  as  regards  property 
which  she  is  restrained  from  antici- 
pating, she  is  not,  as  regards  persona 
other  than  her  husband,  in  the  posi- 
tion of  a  feme  sole.  As  regards  her 
husband,  no  doubt  she  isj  as  regards 
property  settled  to  her  separate  use 
(whether  there  is  a  restraint  upon  an- 
ticipation or  not),  treated  as  a  feme 
sole;  that  is  to  say,  she,  and  not  her 
husband,  is  the  person  who  alone  can 
receive  and  give  a  discharge  for  the 
money,  and  her  husband  is  absolutely 
excluded;  but  as  regards  the  outside 
world  she  is  not  regarded  as  a  feme 
sole  in  respect  of  property  subject  to 
a  restraint  upon  anticipation."  See 
also  p.  460,  per  James,  L.  J.,  and  pp. 
461,  462,  per  Brett,  L.  J.  In  the  very 
important  case  of  Johnson  v.  Galla- 
gher, 3  De  Gex,  F.  &  J.  494,  the  par- 
ticular question  was  as  to  the  wife's 
power  of  disposition,  connected  with 
her  power  of  contracting.  Turner, 
L.  J.,  said  (p.  509):  "Before  entering 
into  the  facts  of  the  case,  it  may  be  as 
well  to  consider  the  nature  and  extent 
of  the  rights  and  remedies  of  such 
creditors,  as  established  by  the  decis- 
ions of  the  courts  of  equity,  or  by  con- 
clusions which  may  fairly  be  drawn 
from  these  decisions.  It  is  to  be  ob- 
served, in  the  first  place,  that  the  sepa- 
rate estate,  against  which  these  rights 
and  remedies  exist  and  are  to  be  en- 
forced, is  the  creature  of  courts  of 
equity,  and  that  the  rights  and  rem- 
edies themselves,  therefore,  can  exist 
and  be  enforced  in  those  courts  only. 
The  courts  of  law  recognize  in  mar- 
ried women  no  separate  existence,  no 
power  to  contract,  and,  except  for 
some  collateral  and  incidental  pur- 
poses, no  possession  or  enjoyment  of 
property  separate  and  apart  from  their 
husbands.  The}'  deny  to  married  wo- 
men both  the  power  to  contract  and 


1635 


SEPARATE    ESTATE    OF    MARRIED    WOMEN*.       §  1098 


of  being  as  though  a  feme  sole  is,  however,  only  partial. 
As  regards  the  husband  and  his  common-law  rights  over 
the  property,  it  is  absolute;  as  regards  third  persons,  and 
her  power  of  disposing  and  contracting,  it  is  never  abso- 
lute, and  may  be  restricted  to  any  extent  by  the  terms  of 
the  trust  and  of  the  instrument  creating  the  separate 
estate.  It  should  be  carefully  observed  that  a  wife's  trust 
estate  and  her  separate  estate  are  not  synonymous  or 
convertible  terms.  The  separate  estate  of  a  married  wo- 
man must,  in  contemplation  of  equity,  be  a  trust  estate, 
but  an  estate  held  in  trust  for  her,  in  which  she  is  the 
cestui  que  trusty  is  not  necessarily  a  separate  estate.  The 
peculiar  doctrine  of  the  wife's  "  separate  estate  "  applies 
only  to  such  property  as,  being  in  contemplation  of 
equity  held  in  trust  for  her,  is,  by  the  terms  of  the  con- 
veyance or  agreement,  held  or  agreed  to  be  held  to  her 


the  power  to  enjoy.  Coarta  of  equity, 
on  the  other  hand,  have,  througli  the 
medium  of  trusts,  created  for  married 
women  rights  and  interests  in  prop- 
«rty,  both  real  an4  personal,  separate 
from  and  independent  of  their  hus- 
bands. To  the  extent  of  the  rights 
and  interests  thus  created,  whetlier 
absolute  or  limited,  a  married  woman 
has,  in  courts  of  equity,  power  to 
alienate,  to  contract,  and  to  enjoy; 
in  fact,  to  use  the  language  of  all  the 
cases  from  the  earliest  to  the  latest, 
she  is  considered  in  a  court  of  equity 
as  a  feme  sole  in  respect  of  property 
thus  settled  or  secured  to  her  separate 
use.  It  is  from  this  position  of  mar- 
ried women,  and  from  the  rights  and 
powers  incident  to  it,  that  the  claims 
of  creditors  against  separate  estates  of 
married  women  have  arisen."  In  Tay- 
lor V.  Meads,  4  De  Gex,  J.  &  S.  597, 
603,  604,  Lord  Westbury,  dealing  par- 
ticularly with  the  wife's  freedom  from 
the  control  of  her  husband,  and  con- 
sequent power  of  disposition,  said: 
"There  is  no  difficulty  as  to  the  prin- 
ciple. When  the  courts  of  equity  es- 
tablished the  doctrine  of  the  separate 
use  of  a  married  woman,  and  applied 
it  to  both  real  and  personal  estate,  it 
became  necessary  to  give  the  married 
woman,  with  respect  to  such  separata 


property,  an' independent  personal  ata- 
tus,  and  to  make  her  in  equity  ayewje  aok. 
It  is  of  the  essence  of  the  separate  use 
that  the  married  woman  shall  be  inde- 
pendent of  and  free  from  the  control 
and  interference  of  her  husband.  With 
respect  to  separate  property  the  feme 
covert  is  by  the  form  of  trust  released 
and  freed  from  the  fetters  and  disabil- 
ity of  coverture,  and  invested  with 
the  rights  and  powers  of  a  person  who 

is  sui  juris Tlie  violence  thus 

done  by  courts  of  equity  to  the  prin- 
ciples and  policy  of  the  common  law 
as  to  the  status  of  the  wife  during  cot- 
erture  is  very  remarkable,  but  the 
doctrine  is  established,  and  must  be 
consistently  followed  to  its  legiti- 
mate consequences."  See  also  Picard 
V.  Hine,  L.  R.  5  Ch.  274,  276,  277; 
Hulme  V.  Tenant,  1  Brown  Ch.  16;  1 
Lead.  Cas.  Eq.,  4th  Am.  ed.,  679,  684, 
732;  Owens  v.  Dickenson,  Craig  &  P. 
48;  Field  v.  Sowle,  4  Russ.  112;  Ay- 
lettv.  Ashton,  1  Myliie  &  C.  105,  112; 
Murray  v.  Barlee,  3  Mylne  &  K.  209; 
Lady  Arundell  V.  Phipps,  10  Yes.  139; 
Nantes  v.  Corrock,  9  Yes.  182,  189; 
Heatley  v.  Thomas,  15  Yes.  596; 
Grigby  v.  Cox,  1  Yes.  Sr.  517;  Owen 
V.  Homan,  4  H.  L.  Cas.  997;  McHeury 
v.  Da  vies,  L.  R.  10  Eq.  88. 


§  1099  EQUITY    JURISPRUDENCE.  163& 

separate  use}  The  separate  estate  may  include  every 
species  of  property,  real  or  personal,  and  the  trusts  upon 
which  it  is  held  may,  except  when  modified  or  restricted 
by  statute,  he  of  every  extent  or  variety,  but  must,  of 
course,  be  express.^  In  all  those  states  which  have  made 
the  sweeping  changes  in  the  system  of  trusts,  heretofore 
described,  trusts  of  property  held  to  the  separate  use  of 
married  women  must,  of  course,  conform  to  the  general 
statutory  regulations.' 

§  1099.  Statutory  Legal  Separate  Estate.  —  The  sepa- 
rate estate  thus  described  is  wholly  a  creature  of  equity; 
the  wife's  interest  is  purely  an  equitable  one,  since  the  le- 
gal title  is  either  vested  in  actual  trustees,  or  is  held  by  the 
husband  in  the  character  of  a  trustee;  and  the  jurisdic- 
tion over  it  is  exclusively  equitable.  Modern  statutes  in 
nearly  all  of  the  states  have  made  most  radical  changes 
in  the  common-law  relations  of  married  women  to  their 
property,  and  have  incidentally  enlarged  the  jurisdiction 
of  equity,  so  far  as  it  is  concerned  with  the  contracts  of 
married  women,  by  extending  it  to  their  legal  separate 
estates  created  by  statute.  These  statutes  do  not,  it  is 
true,  create  any  equitable  estate  in  the  property  of  wives;^ 
their  effect  is  to  vest  a  purely  legal  title  in  married  women, 
and  to  free  such  title  from  the  rights,  interests,  and  claims^ 
which  the  common  law  gave  to  husbands.  But  while  this 
legislation  empowers  married  women  to  acquire  and  hold 
property  separate  and  distinct  from  their  husbands,  and 

'  For  example,  if  land  is  conveyed  cited;  Taylor  v.  Meads,  4  De  Gex,  J. 
to  A  in  fee,  in  trust  for  a  married  wo-  &  S.  597,  604,  605,  per  Lord  West- 
man  and  her  heirs,  or  in  trust  for  a  bury. 

single  woman  and  her  heirs,  and  she         *  The  trust  estate  of  the  wife  may 

afterwards  marries,  thus  creating  an  be  in  fee,  for  life,  or  for  years;  it  mat/ 

ordinary  passive  trust  in  fee,  the  mar-  be  held  upon  a  mere  passive  trust;  or 

ried  woman's  equitable  estate  in  the  it  may  be  held  upon  an  active  trust, 

land  would  not  be  a  "separate  estate  ";  where  the  trustee  manages  the  corpus 

her  husband  would  be  entitled  to  cur-  of  the  property,  and   pays  over   the 

tesy  in  it;  her  power  of  conveying  it  rents,  profits,  and  income  to  the  wife, 
and  the  mode  of  conveying  would  be         '  See  ante,  §§  1003-1005,  New  York, 

governed    by   the   same   rules   which  Michigan,  Wisconsin,  Minnesota,  Cal- 

apply  to  her  legal  estates  in  fee;  her  ifornia,  Dakota.     In  all  these  states  ci^ 

capacity  to  contract  would  not  be  en-  passire  trust  in  land  for  the  separate- 

larged:  See  ante,  §§  989,  990,  and  cases  use  of  a  married  woman  is  forbidden. 


1637 


SEPARATE    ESTATE    OF    MARRIED    WOMEN.       §  1099 


while  it  renders  their  title  and  estate  entirely  legal,  and 
dispenses  with  the  necessity  of  trustees,  it  does  not,  in 
most  of  the  states,  entirely  remove  the  common-law  dis- 
abilities of  entering  into  contracts,  nor  clothe  married 
women  with  the  general  capacity  of  making  contracts 
which  are  personally  binding  at  law,  and  enforceable 
against  them  by  legal  actions  and  personal  pecuniary 
judgments.  The  matter  of  married  women's  contracts, 
and  of  their  enforcement  against  the  property  rather  than 
the  persons  of  wives,  is  therefore  left  exclusively  to  courts 
of  equity,  and  is  governed  by  equitable  doctrines.  The 
jurisdiction  of  equity  in  the  enforcement  of  married 
women's  liabilities  against  their  separate  property  has 
thus  been  enlarged,  since  it  has  been  extended  in  these 
states  to  all  the  property  which  a  wife  may  now  hold  by 
a  legal  title,  and  is  not  confined  to  such  equitable  estate 
as  is  held  by  trustees  for  her  separate  use.'    In  a  very  few 


*  These  states  may  be  divided  into 
two  groups,  the  legislatioa  of  each 
group  following  the  same  general 
type.  By  the  first  type  the  property 
of  a  married  woman  is  declared  to  be 
her  separate  property,  free  from  any 
interest  or  control  of  her  husband,  and 
not  liable  for  his  debts,  but  the  stat- 
utes contain  no  provisions  expressly 
authorizing  her  to  make  contracts. 
By  the  second  type  all  the  wife's 
property  is  likewise  declared  to  be 
her  own  separate  property,  free  from 
all  claims  of  her  husband;  she  further- 
more possesses  the  sole  power  to  man- 
age it;  may  sell  and  convey  it;  and 
may  make  contracts  in  relation  to  it, 
but  these  contracts  are  not  declared 
to  be  personally  binding  on  her  at 
law.  Of  course,  equity  is  not  con- 
cerned with  these  statutory  diflfer- 
ences  in  the  extent  of  the  wife's  legal 
separate  estate,  and  her  legal  powers 
over  it.  Equity  is  only  interested  in 
this  legislation  so  far  as  the  wife's  con- 
tracts relating  to  her  legal  separate 
estate  are  enforced  in  equity,  in  the 
same  manner  as  her  contracts  made 
upon  the  faith  of  her  equitable  separate 
estate.  The  states  which  have  adopted 
the  two  foregoing  types  of  legislation 
are  as  follows:  Alabama:  Code  1876, 
eecs.    2705,   2707.     LBut    l^y  statute, 


February  28,  1887,  Code  1886,  sees. 
2341-2351,  all  previous  legislation  on 
this  subject  was  repealed.  The  dis- 
tinction between  "equitable"  and 
"  statutory  "  estates  is  abolished,  and 
all  separate  property  of  married 
women  is  of  the  latter  description,  ex- 
cept such  as  is  conveyed  on  an  active 
trust  for  her  benefit.  The  wife  may 
contract  with  reference  to  her  statu- 
tory estate  only  in  writing,  and  with 
the  assent  of  the  husband  expressed 
in  writing;  and  may  alienate  the  same 
or  any  interest  therein  only  by  the 
husband's  joining  in  the  alienation  in 
the  manner  prescribed  by  law:  Rooney 
V.  Michael,  84  Ala.  585;  Knox  v. 
Childersburg  Land  Co.,  86  Ala.  180.1 
Arkansas:  Dig.  1874,  p.  756,  sees. 
4193,  4194;  Const.  1874,  art.  9,  sec. 
7;  [Dig.  of  Stats.  18S4,  sees.  46-->4. 
4625;  Bundy  v.  Cocke,  TJS  U.  S.  188.] 
ConneHknt:  Gen.  Stats.  (Rev.  1875), 
p.  186,  sees.  1-4,  6;  [Gen.  Stats. 
1888,  sees.  2790-2794.]  Ddaware: 
Laws  1874,  ])p.  478,  479.  Florida: 
McClellan's  Dig.  LS81,  p.  754,  sees.  1, 
3,  4.  Georgia:  Code  1873,  sees.  1754, 
1756,  1772,  1773,  1783.  5136;  [Const 
1877,  art.  3,  sec.  11.]  Illinois:  Kurd's 
Rev.  Stats.  1880.  p.  592,  sees.  6,  7,  9; 
[Rev.  Stats.  Ib89,  c.  68,  sees.  6,  7,  9.] 
Indiana:  1   Gavin    and    Hord's   Rev. 


§  1100 


EQUITY   JUEISPRUDENCE. 


163S 


states  the  legislation  has  removed  the  statutory  separate 
estate  of  married  women  entirely  out  of  the  equitable 
jurisdiction,  by  conferring  upon  them  the  power  of  mak- 
ing contracts  in  relation  to  it,  and  by  rendering  these 
contracts  personally  binding  upon  them  at  law,  and 
enforceable  against  them  personally  by  ordinary  legal 
actions,  pecuniary  judgments,  and  executions.^ 

§  1100.    How  the  Separate  Estate  is  Created — Trustees 
not  Necessary.  —  Although  the  wife's  separate  estate  is  an 


Stats,  1870,  p.  295,  note  2,  sec.  5;  pp. 
374-377;  Acts  of  1875,  p.  178;  Acts  of 
1879,  p.  160;  Act3  of  1881,  p.  528; 
[Rev.  Stats.  1888,  sees.  5115-5141,] 
Kansas:  Dassler's  Comp.  Laws  1881,  p. 
539,  c.  62,  sees.  1,  2.  Kentucky:  Rev. 
Stats.  1873,  p.  518,  c.  52,  art.  2,  sees. 
1,  5,  10.  Maine:  Rev.  Stats.  1871,  p. 
491,  c.  61,  sec.  1.  Maryland:  Rev. 
Code  1878,  p.  481,  sec,  19;  [1  Pub. 
Gen.  Laws  1888,  art.  45,  sec.  1.]  Mas- 
sachusetts: Gen.  Stats.  1860,  p,  637, 
Bees.  1,  3,  5;  Laws  1874,  c.  184,  sec.  1; 
[Pub.  Stats.  1882,  c.  147,  sees.  1-4, 
10.]  Michigan:  2  Comp.  Laws  1871, 
p.  1477,  sec.  1;  [Howell's  Stats.  1882, 
sec.  6295.]  Minnesota:  Stats,  1878,  p. 
769,  sees.  1,  2;  [Kelly's  Stats.  1891, 
sec.  3865.]  Missouri:  1  Rev.  Stats. 
1879,  sees.  3284-3286,  8295,  3296. 
Nebraska:  Brown's  Comp.  Stats,  1881, 
p,  343,  c,  53,  sees.  1,  2,  4,  New 
Hampshire:  Gen.  Laws  1878,  p,  434, 
sees.  1,  4,  12.  New  Jersey:  Rev. 
1877,  p.  636,  sees.  1-4;  p.  638,  sec.  6; 
^.  639,  sec.  18;  Ibid.,  p.  637,  sec.  5 
(gives  a  married  woman  power  to  con- 
tract as  a  single  woman,  enforceable 
against  her  alone  either  at  law  or.  in 
equity,  except  that  she  cannot  be  an 
accommodation  indorser,  guarantor, 
or  surety;  on  this  section  see  Hinkson 
v.  Williams,  41  N.  J,  L.  35;  Wilson  v. 
Herbert,  41  N.  J,  L.  454;  32  Am. 
Pi,ep.  243).  North  Carolina:  Battle's 
Rev.  1873,  p.  592,  sec.  29;  [Code  1883, 
sec.  1837;]  Const,,  art.  10,  sec.  6, 
Ohio:  1  Rer.  Stats.  1880,  pp.  806-809, 
sees.  3108,  3112.  [Repealed  March 
19,  1887.  Rev.  Stats.  1890,  sec.  3112: 
"A  husband  or  wife  may  enter  into 
any  engagement  or  transaction  with 
the  other,  or  with  any  other  person, 
which  either  might  if  unmarried." 
Sec.  3114:  "A    married   person    may 


take,  hold,  and  dispose  of  property, 
real  or  personal,  the  same  as  if  unmar- 
ried."] Oregon:  Gen.  Laws  1872,  p. 
663,  sees.  4,  5;  [2  Hill's  Laws  1887, 
sees.  2993,  2994;]  Const.,  art.  15,  sec. 

5.  Pennsylvania:  2  Brightly's  Pur- 
don's  Dig.,  p.  699,  sec.  11;  [ed.  of 
1883,  tit.  Marriage,  sec.  13.]  Rhode 
Island:  Pub.  Stats.  1882,  p.  422,  sees. 
1-7.  Tennessee:  Stats.  1871,  sees, 
2486  a-24S6  f;  [Code  1884,  sees.  3346- 
3351.]  Texas:  Rev.  Stats.  1879,  p. 
411,  sees,  2851,  2854;  Const.,  art.  16, 
Hec,  15.  Vermont:  Gen.  Stats,  1862, 
p.  471,  sec.  18;  [Rev.  Laws  1880,  sec, 
2324,  Virginia:  Code  1887,  c,  103.] 
West  Virginia:  Kelly's  Rev.  Stats. 
1879,  p.  773,  sees,  1-3;    Const.,  art. 

6,  sec,  49.  Wisconsin:  2  Rev,  Stats. 
1871,  p,  1195,  sees.  1-3;  [1  Sanborn 
and  Berryman'a  Stats.  1889,  sees. 
2340-2342.] 

'  Equity  cannot,  of  course,  deal 
with  cases  arising  under  this  legisla- 
tion. California:  Civ.  Code,  sees.  158, 
162,  171,  1556.  Colorado:  Gen.  Laws 
1877,  p.  614,  sec.  1;  p.  615,  sees.  1-3; 
[Mills's  Stats.  1891,  sees.  3007-3021; 
Connecticut:  See  Laws  1877,  c.  114; 
Gen.  Stats.  1888,  sees.  2796-2798.] 
Dakota:  Rev.  Code  1877,  sees.  78,  79, 
83.  Iowa:  Miller's  Rev.  Code  1880, 
sees.  2202,  2213.  Mississippi:  Rev. 
Code  1880,  sec.  1167.  Nevada:  I 
Comp.  Laws  1873,  p.  56,  sec.  1;  p.  58, 
sees,  17,  19;  [Gen.  Stats.  1885,  sees. 
499,  515,  517.]  New  Jersey:  Rev. 
1877,  p.  637,  sec.  5.  New  York:  Rev. 
Stats.  1875,  Banks's  ed.,  p.  159,  art.  6; 
[Rev.  Stats.,  8th  ed.,  pp.  2600-2606. 
Ohio:  Rev.  Stats.  1890,  sees,  3112, 
3114.]  South  Carolina:  Rev.  Stats. 
1873,  p.  482,  sees.  1-3;  [Rev,  Stats. 
1882,  sees,  2035-2037;]  Const,,  art,  14, 
sec,  8. 


1639 


SEPARATE    ESTATE    OF    MARRIED    "SVOMEN.       §  1100 


I 


equitable  one,  being,  in  conception  of  equity,  a  trust  es- 
tate with  the  legal  and  the  equitable  titles  separated,  and 
although  in  strict  theory  and  in  every  regular  and  for- 
mal settlement  the  legal  title  should  be  conveyed  to  or 
held  by  express  trustees,  yet  it  is  well  settled,  whatever 
doubts  may  have  once  existed,'  that  the  interposition  of 
actual  trustees  is  unnecessary.  If  property  is  in  any 
mode,  by  sufficient  and  apt  words  to  express  the  intention, 
given  directly  to  a  wife,  either  before  or  after  marriage 
for  her  sole  and  separate  use,  without  the  intervention 
of  trustees,  equity  will  carry  the  intention  into  effect, 
will  regard  the  property  as  her  separate  estate,  and  will 
protect  it  against  the  claims  of  her  husband  and  of  his 
creditors.  Equity  accomplishes  this  result,  in  the  ab- 
sence of  express  trustees,  by  declaring  and  holding  the 
husband  himself  as  a  trustee,  with  respect  to  such  prop- 
erty, for  his  wife.*     The  rationale  of  this  rule  is  very  clear. 


•  Some  early  eases  had  intimated 
that  trustees  were  necessary:  Harvey 
V.  Harvey,  1  P.  Wms.  125,  per  Lord 
Chancellor  Cowper. 

'This  rule  operates  in  the  clearest 
manner  when  a  husband  conveys  or 
agrees  to  convey  property  directly  to 
his  wife;  such  a  conveyance  or  agree- 
ment could  be  made  effective  in  no 
other  manner,  since  it  would  be  void 
at  the  common  law:  [Smith  v.  Seiber- 
ling,  35  Fed.  Rep.  677.]  As  illustrat- 
ing the  general  rule  given  in  the  text, 
see  Newlands  v.  Paynter,  4  Mylne  &  C. 
408;  Gardner  v.  Gardner,  1  Giff.  126; 
Parker  v.  Brooke,  9  Ves.  583;  Rich  v. 
Cockell,  9  Ves.  369,  375;  Rennet  v. 
Davis,  2  P.  Wms.  316;  Slanning  v. 
Style,  3  P.  Wms.  .334,  337-339;  Lucas 
V.  Lucas,  1  Atk.  270;  Darley  v.  Darlev, 
3  Atk.  399;  Lee  v.  Prieaux,  3  Brown 
Ch.  381,  385;  Major  v.  Lansley,  2  Russ. 
&  M.  355;  Woodmeston  v.  Walker,  2 
Russ.  &  M.  197;  McMillan  v.  Peacock, 
57  Ala.  127;  Miller  v.  Voss,  62  Ala. 
122;  Pepper  V.  Lee,  53  Ala.  33;  Crooks 
V.  Crooks,  34  Ohio  St.  610;  Pribble  v. 
Hall,  13  Bush,  61;  Thomas  v.  Hark- 
ness,  13  Bush,  23;  Jones  v.  Clifton, 
101  U.  S.  225;  Payne  v.  Twyinan,  68 
Mo.  339;  Loomis  v.  Brush,  36  Mich. 
40;   Holthaus  v.  Horubostle,  60  Mo. 


439;  Davis  v.  Davis,  43  Ind.  561;  City 
Kat.  Bank  v.  Hamilton,  '.ii  N.  J.  Eq. 
158;  Barron  v.  Barron,  24  Vt.  375; 
Porter  v.  Bank  of  Rutland,  19  Vt. 
410;  Shirley  v.  Shirley,  9  Paige,  363; 
Bradish  v.  Gibbs,  3  Johns.  Ch.  523, 
540;  Firemen's  Ins.  Co.  v.  Bav,  4  Barb. 
407;  Blanchard  v.  Blood,  2  Barb.  352; 
Varner's  Appeal,  80  Pa.  St.  140; 
Vance  v.  Nogle,  70  Pa.  St.  176,  179; 
Shonk  V.  Brown,  61  Pa.  St.  320;  Jami- 
son v.  Brady,  6  Serg.  &  R.  466;  9  Am. 
Dec.  460;  McKennan  v.  Phillips,  6 
Whart.  571;  37  Am.  Dec.  438;  Trenton 
Bank  Co.  v.  Woodruff,  2  N.  J.  Eq. 
117;  Steel  V.  Steel,  1  Ired.  Eq.  452; 
Ellis  V.  Woods,  9  Rich.  Eq.  19:  Boy- 
kin  V.  Ciples,  2  Hill  Eq.  200;  29  Am. 
Dec.  67;  Whitten  v.  Jenkins,  34  Ga. 
297;  Fears  v.  Brooks.  12  Ga.  195;  Ham- 
ilton V.  Bishop,  8  Yerg.  33;  29  Am.  Dec. 
101;  Long's  Adm'r  v.  Wliite's  Adm'rs, 
5  J.  J.  Marsh.  226;  Freeman  v.  Free- 
man, 9  Mo.  772;  fTempleton  v.  Brown, 
86  Tenn.  50.]  Tlie  husband  is  thus 
bound  if  the  property  has  been  set- 
tled or  given  to  the  wife's  separate 
use  before  marriage,  uidess  such  gift  to 
her  separate  use  has  been  destroyed 
by  a  marriage  settlement:  Ibid.; 
Tnllett  V.  Armstrong,  4  Mylne  &  C. 
377;  In  re  Gaffee,  1  Macn  &  G.  541;  and 


§  1101  BQUITY   JURISPRUDENCE.  1640 

By  the  equitable  conception,  in  order  to  the  existence  of 
a  trust,  there  must  be  a  separation  of  the  legal  and  equi- 
table titles.  Although  property  is  given  directly  to  a 
married  woman  in  such  a  way  that  she  would  hold  the 
perfect  legal  title  if  she  were  single,  still,  by  the  operation 
of  common-law  doctrines,  the  husband,  by  virtue  of  the 
marriage,  becomes  himself  vested  with  the  legal  estate  in 
such  property,  either  absolutely  or  for  his  life.  Equity 
does  not  abrogate  this  common-law  doctrine,  nor  deny 
the  legal  title  acquired  by  the  husband;  on  the  con- 
trary, it  admits  his  legal  title,  but  declares  that  he  shall 
hold  it  as  a  trustee  for  his  wife,  —  impresses  a  trust 
upon  it  in  her  favor.  In  this  manner  equity  effects  a 
separation  of  the  titles,  although  there  are  no  words  ex- 
pressly creating  a  trust,  or  expressly  vesting  the  legal  title 
in  a  trustee. 

§  1101.  The  Same.  By  What  Modes  and  Instruments. 
—  The  wife's  separate  estate  may  include  any  species  of 
property,  and  may  be  created  by  any  of  the  following 
modes  or  instruments:  1.  By  a  written  antenuptial  agree- 
ment with  her  intended  husband,  or  marriage  settlement, 
which  may  embrace  her  own  property,  or  that  of  her  in- 
tended husband,  or  that  of  third  persons,  and  may  cove- 
nant to  bring  in  after-acquired  property  of  either  herself 
or  her  husband.  2.  By  a  post-nuptial  agreement  with  her 
husband,  under  certain  circumstances.  3.  By  gifts  from 
her  husband  during  coverture,  if  made  absolutely,  and 
not  intended  as  mere  paraphernalia,  or  to  be  used  merely 
as  ornaments.  The  two  latter  modes  are,  however,  so  far 
subject  to  the  rights  of  the  husband's  creditors,  that  if 
made  with  intent  to  hinder,  delay,  or  defraud  such  credi- 
tors, they  would  be  void.  4.  By  gifts  from  strangers  made 
directly  to  the  wife  during  coverture.  5.  By  conveyance, 
devise,  or  bequest  of  property  expressly  limited  to  her 

interference  by  him,  or  persons  claim-  v.  Paynter,  4  Mylne  &  C.  408;  Green 
ing  under  or  tlirough  him,  may  be  v.  Green,  5  Hare,  400,  note;  Allen  v. 
restrained   by   injunction:    Newlands     Walker,  L.  K.  5  Ex.  187. 


1641  SEPARATE    ESTATE    OF    MARRIED   WOMEN.       §   1101 

separate  use,  made  to  her  directly,  either  hefore  or  during 
coverture.^ 


*  Antenuptial  agreements  and  mar- 
riage settlements.  —  A  mere  verbal  ante- 
nuptial agreement  is  not  binding,  and 
a  settlement  made  after  marriage  in 
conformity  with  it  would  be  voluntary, 
and  liable  to  be  impeached  by  the 
husband's  creditors:  Warden  v.  Jones, 
2  De  Gex  &  J.  76,  84;  Spurgeon  v.  Col- 
lier, 1  Eden,  55,  61;  still,  if  such  agree- 
ment is  acted  upon  by  the  property 
being  voluntarily  placed  under  the 
dominion  of  trustees,  and  treated  as 
separate  property,  it  may  be  effectual, 
at  least  as  against  the  husband:  See 
Simmons  v.  Simmons,  6  Hare,  352, 
359.  As  to  the  effect  of  a  covenant 
to  bring  in  and  settle  after-acquired 
property,  see  Smith  v.  Lucas,  L.  R. 
18  Ch.  Div.  531;  Dawes  v.  Tredwell, 
L.  R.  18  Ch.  Div.  354;  Kane  v.  Kane, 
L.  R.  16  Ch.  Div.  207;  Ex  parte  Bol- 
land,  L.  R.  17  Eq.  115;  Campbell  v. 
Bainbridge,  L.  R.  6  Eq.  269;  In  re 
Edwards,  L.  R.  9  Ch.  97;  In  re  Jones's 
Will,  L.  R.  2  Ch.  Div.  362;  In  re 
Campbell's  Policies,  L.  R.  6  Ch.  Div, 
686.  The  following  cases  illustrate 
the  text:  TuUett  v.  Armstrong,  1 
Beav.  1,  21;  4  Mylne  &  C.  377;  In  re 
Gaffee,  1  Alacn.  &  G.  541;  Hastie  v. 
Hastie,  L.  R.  2  Ch.  Div.  304  (agree- 
ment  to  settle);  Viret  v.  Viret,  L.  R. 
17  Ch.  Div.  365,  note  (the  same);  Coat- 
ney  r.  Hopkins,  14  W.  Va.  338;  Rad- 
ford  V.  Carwile,  13  W.  Va.  572;  Bank 
of  Greensboro'  v.  Chambers,  30  Gratt. 
202;  32  Am.  Rep.  661;  Herring  v. 
Wickham,  29  Gratt.  628;  26  Am.  Rep. 
405;  Brown  v.  Foote,  2  Teun.  Ch.  255; 
Reynolds  v.  Brandon,  3  Heisk.  593; 
Head  v.  Temple,  4  Heisk.  34;  Wallace 
V.  Wallace,  82  111.  530;  Tucker's  Ap- 
peal, 75  Pa.  St.  354;  Hardy  v.  Holly, 
84  N.  C.  661;  Caulk  v.  Fox,  13  Fla. 
148:  [Clay  v.  Walter,  79  Va.  92.] 

Post-nuptial  agreements  and  settle- 
tnents.  —  The  question  in  most  cases  is, 
whether  they  are  valid  as  against 
creditors  of  the  husband:  [See  §  973:] 
Warden  v.  Jones,  2  De  Gex  &  J.  76, 
84;  Pride  v.  Bubb,  L.  R.  7  Ch.  64; 
Payne  v.  Hutcheson,  32  Gratt.  812; 
Dukes  V.  Spangler,  35  Ohio  St.  119; 
Sproul  V.  Atchison  Nat.  Bank,  22 
Kan.  336  (a  verbal  post-nuptial  agree- 
ment executed  by  a  conveyance); 
Majors  v.  Everton,  89  111.  56;  31  Am. 


Rep.  65;  Jones  v.  Clifton,  101  U.  S.  225; 
Blakealee  v.  Mobile  Life  Ins.  Co.,  57 
Ala.  205;  Kilby  v.  Godwin,  2  Del.  Ch. 
61;  Perkins  v.  Perkins,  1  Tenn,  Ch. 
537;  [Moore  v.  Page,  111  U.  S.  117; 
Smith  V.  Bradford,  76  Va.  758;  San- 
ford  V.  Finkle,  112  111.  146.] 

Absolute  gifts  from  the  Iiushand.  — 
These  may  be  conveyances  of  land 
from  the  husband  directly  to  the 
wife,  which  would  be  nullities  by  the 
common  law,  or  gifts  of  per.-onalty; 
or  they  may  be  in  the  form  of  declara- 
tions of  trust  by  the  husband,  or  his 
assent  that  the  earnings  or  other 
property  of  the  wife  shall  be  regarded 
as  her  separate  estate,  which  assent 
would  be  equivalent  to  a  declaration 
of  trust.  1  he  evidence  of  such  asaent 
or  declaration  must  be  clear,  unequiv- 
ocal, and  convincing:  Graham  v, 
Londonderry,  3  Atk.  393;  Mews  v. 
Mews,  15  Beav.  529;  Grant  v.  Grant, 
34  Beav.  623;  Byain  v.  By  am,  19  Beav. 
58;  Rycroft  v.  Christy,  3  Beav.  2.38; 
McLean  v.  Longlands,  5  Ves.  71;  Rich 
V.  Cockell,  9  Ves.  369;  Hoyes  v,  Kin- 
dersley,  2  Smale  &  G.  195,  197;  Lloyd 
v.  Pughe,  L.  R.  14  Eq.  241;  L.  R.  8 
Ch.  88;  Marshal  v.  Crutwell,  L.  R. 
20  Eq.  328;  Ashworth  v.  Outram,  L.  R. 
5  Ch.  Div.  923;  In  re  Eykyn's  Trusts, 
L.  R.  6  Ch.  Div.  115;  Parker  v.  Lech- 
mere,  L.  R.  12  Ch.  Div.  256;  Linker 
V.  Linker,  32  N.  J.  Eq.  174;  McMillan 
V.  Peacock,  57  Ala.  127;  Helmetag  v. 
Frank,  61  Ala.  67;  Crooks  v.  Crooks, 
34  Ohio  St.  610;  Loomis  v.  Brush,  36 
Mich.  40;  Majors  v.  Everton,  89  111. 
56;  31  Am.  Rep.  65;  Thomas  v.  Hark- 
ness,  13  Bush,  23;  Irvine  v.  Greever, 
32  Gratt.  411:  [Chadbourne  v.  Gilman, 
64  N.  H.  353  (mortgage  of  land  by 
husband  to  wife);  Marshall  v.  .Taijuith. 
134  Mass.  138;  Thompson  V.  Allen,  103 
Pa.  St.  44;  49  Am.  Rep.  116;  Dutrger's 
Children  v.  Dugger,  84  Va.  130,  144: 
Richardson  v.  Hutchins,  68  Tex.  81; 
Templeton  v.  Brown,  86  Tenn.  50; 
Kellogg  V.  Hale,  108  1)1.  164;  Cuni- 
mings  V.  Friedman,  65  Wis.  183;  56 
Am.  Rep.  628;  Botts  v.  Gooch,  97  Mo. 
88;  10  Am.  St.  Rep.  286;  Miller  v. 
Miller,  17  Or.  423.]  Assent  to  use  of 
earnings,  etc.:  McCampbell  v.  Mc- 
Camphell.  2  Lea,  661;  31  Am.  Rep. 
623;  Pribble  v.  Hall,  13  Bush,  61;  Jones 


1102 


EQUITY    JURISPRUDENCE. 


1G42 


§1102.  The  Same:  What  Words  are  Sufficient.  — No 
particular  form  of  words  is  necessary  in  order  to  vest 
property  in  a  married  woman  for  her  separate  use,  and  to 
thus  create  a  separate  estate.  The  intention  to  do  so,  al- 
though not  expressed  in  terms,  may  be  inferred  from  the 
nature  of  tlie  provisos  annexed  to  the  gift.  The  intention, 
however,  must  be  clear  and  unequivocal,  not  merely  to 
confer  the  use  upon  the  wife  for  her  benefit,  but  also  to 
exclude  the  husband.  The  doctrine  was  very  concisely  and 
accurately  stated  by  Vice-Chancellor  Malins  in  a  recent 
case:  "There  must  be,  in  a  will,  or  in  any  other  instru- 
ment, an  intention  shown  that  the  wife  shall  take  and  that 
the  husband  shall  not."  ^     The  decisions  upon  particular  ex- 

V.  Reid,  12  W.  Va.  350;  29  Am.  Rep. 
455;  Haden  v.  Ivey,  51  Ala.  381; 
Mounger  v.  Duke,  53  Ga.  277;  Wood- 
ford V.  Stephens,  51  Mo.  443;  Brook- 
villa  Nat.  Bank  v.  Kimble,  76  Ind. 
195;  Syracuse  etc.  Co.  v.  Wing,  85 
N.  Y.  421 ;  Campbell  v.  Bowles's  Adm'r, 
30  Gratt.  652  (no  assent);  Kidwell  v. 
Kirkpatrick,  70  Mo.  214  (ditto); 
[Bailey  v.  Gardner,  31  W.  Va.  94;  13 
Am.  St.  Rep.  847  (land  purchased 
■with  her  earnings  subjected  to  pay- 
ment of  husband's  debts);  Roberts  v. 
Walker,  101  Mo.  597.] 

Gifts  from  third  persona:  Graham 
V.  Londonderry,  3  Atk.  393;  Steed- 
man  V.  Poole,  6  Hare,  193;  Haden  v. 
Ivey,  51  Ala.  381;  Holthaus  v.  Horn- 
bostle,  60  Mo.  439. 

Limitations  to  her  separate  use,  — 
These  may  be  by  conveyance  or  by 
will,  —  devises  or  legacies,  — made  di- 
rectly to  her,  or  to  trustees  for  her, 
while  she  is  single  or  during  the  cover- 
ture: Goulder  v.  Camni,  1  De  Gex, 
F.  &  J.  146;  In  re  Benton,  L.  R.  19 
Ch.  Div.  277;  Bland  v.  Dawes,  L.  R. 
17  Ch.  Div.  794;  Humphrey  v.  Hum- 
phrey, 1  Sim.,  N.  S.,  536  (gift  of 
income);  Gurney  v.  Goggs,  25  Beav. 
334  (ditto);  Troutbeck  v.  Boughey, 
L.  R.  2  Eq.  534  (ditto);  Radford  v. 
Willis,  L.  R.  7  Ch.  7;  Austin  v. 
Austin,  L.  R.  4  Ch.  Div.  233;  Miller 
v.  Voss,  62  Ala.  122;  Robinson  v. 
O'Neal,  56  Ala.  541;  Sprague  v. 
Shields,  61  Ala.  428;  Pepper  v.  Lee, 
53  Ala.  33;  Short  v.  Battle,  52  Ala. 
456;  Grain  v.  Shipman,  45  Conn.  572; 


Gray  v.  Robb,  4  Heisk.  74;  Buckalew 
V.  Blanton,  7  Cold.  214;  Robertson  v. 
Wilburn,  1  Lea,  633;  Morrison  v. 
Thistle,  67  Mo.  596;  Metropolitan 
Bank  v.  Taylor,  53  Mo.  444;  Musson 
V.  Trigg,  51  Miss.  172;  Prout  v.  Roby, 
15  Wall.  471.  As  to  effect  of  deser- 
tion by  the  husband,  independently 
of  statute,  see  Cecil  v.  Juxon,  1  Atk. 
278. 

'  In  re  Peacock's  Trusts,  L.  R.  10 
Ch.  Div.  490,  495,  496;  Bland  v. 
Dawes,  L.  R.  17  Ch.  Div,  794,  797;  to 
the  same  effect,  see  Stanton  v.  Hall,  2 
Russ.  &  M.  175,  180;  Darley  v.  Darley, 
3  Atk.  399;  Moore  v.  Morris,  4  Drew. 
33,  37;  Massy  v.  Rowen,  L.  R.  4  H.  L. 
288,  301;  Tyler  v.  Lake,  2  Russ. 
&  M.  183,  188;  Massey  v.  Parker,  2 
Mvlne  &  K.  174,  181;  Prout  v.  Roby, 
15  Wall.  471;  Wood  v.  Polk,  12  Heisk. 
220;  Buck  v.  Wroten,  24  Gratt.  250; 
Woodford  v.  Stephens,  51  Mo.  443; 
Charles  v.  Coker,  2  S.  C.  122.  The 
place  of  the  words  is  immaterial;  they 
need  not  be  in  the  granting  clause  nor 
in  the  habendum,:  the  intent  governs: 
Morrison  v.  Thistle,  67  Mo.  596;  com- 
pare Lippiacott  V.  Mitchell,  94  U.  S. 
767.  In  Nix  v.  Bradley,  6  Rich.  Eq.  43, 
48,  the  cases  in  which  a  separate  estate 
has  been  created  were  classified  as  fol- 
lows: 1.  Where  the  terhnical  words 
"  sole  and  separate  use,"  or  equivalent 
words,  are  used ;  2.  Where  the  h usl  >and's 
rightsare  expressly  excluded;  3.  Where 
the  wife  is  empowered  to  do  acts  con- 
cerning the  estate,  inconsistent  with 
the  disabilities  of  coverture.  See  also 


1643 


SEPARATE    ESTATE    OF    MARRIED    WOMEN. 


pressions  are  very  numerous,  and  somewhat  conflicting. 
From  a  comparison  of  the  cases  it  would  seem  that  the 
American  courts  have  been  more  liberal  than  the  Eng- 
lish in  giving  effect  to  language,  I  have  placed  in  the 
foot-note  some  examples  of  words  held  to  be  sufficient, 
and  of  those  held  to  be  insufficient.^ 


Bullock  V.  Menzies,  4  Ves.  79S;  Bar- 
row V.  Barrow,  18  Beav.  529;  Black- 
low  V.  Laws,  2  Hare,  40,  49;  Kadford 
V.  Willis,  L.  R.  7  Ch.  7;  Austin  v. 
Austin,  L.  R.  4  Ch.  Div.  233;  Night- 
ingale V.  Hidden,  7  R.  I.  115;  Jarvis 
V.  Prentice,  19  Conn.  272;  tStuart  v. 
Kissam,  2  Barb.  493;  Snyder  v.  Sny- 
der, 10  Pa.  St.  423;  Tritt's  Adm'r  v. 
Colwell's  Adm'r,  31  Pa.  St.  228;  Clev- 
enstine's  Appeal,  15  Pa.  St.  495,  499; 
Craig  V.  Watt,  8  Watts,  498;  Evans 
V.  Knorr,  4  Rawle,  66;  Turton  v.  Tur- 
ton,  6  Md.  375;  Brandt  v.  Mickle,  28 
Md.  436;  Carroll  v.  Lee,  3  Gill  &  J. 
504;  22  Am.  Dec.  350;  Nixon  v.  Rose, 
12  Gratt.  425;  Lewis  v.  Adams,  6 
Leigh,  320;  West  v.  West's  Ex'rs,  3 
Rand.  37.3,  378;  Goodrum  v.  Goodrum, 
8  Ired.  Eq.  313;  Heathman  v.  Hall,  3 
Ired.  Eq.  414;  Davis  v.  Cain's  Ex'r,  1 
Ired.  Eq.  304;  Rudisell  v.  Watson,  2 
Dev.  Eq.  430;  Ellis  v.  Woods,  9  Rich. 
Eq.  19;  Martin  v.  Bell,  9  Ricli.  Eq.  42; 
70  Am.  Dec.  200;  Tennant  v.  Ex'r  of 
Stoney,  1  Rich.  Eq.  222;  4t  Am.  Dec. 
213;  Ballard  v.  Taylor,  4  Desaus.  Eq. 
650;  Williams  v.  Avery,  38  Ala.  115; 
Ozley  V.  Ikelheimer,  26  Ala.  332;  Cuth- 
bert  V.  Wolfe,  19  Ala.  373;  Brown  v. 
Johnson,  17  Ala.  232;  Hale  v.  Stone,  14 
Ala.  803;  Cook  v.  Kennerly,  12  Ala. 
42;  Newman  v.  James,  12  Ala.  29; 
Williams  v.  Claiborne,  7  Smedes  &  M. 
488;  Warren  v.  Haley,  1  Smedes  &  M. 
Ch.  647;  Coatney  v.  Hopkins,  14  W. 
Va.  338;  Griffith's  Adm'r  v.  Griffith,  5 
B.  Mon.  113;  Bridges  v.  Wood,  4  Dana, 
610;  Hamilton  v.  Bishop,  8  Yerg.  33; 
29  Am.  Dec.  101;  Somers  v.  Craig,  9 
Humph.  467;  Beaufort  v.  Collier,  6 
Humph.  487;  44  Am.  Dec.  321;  Wood- 
rum  V.  Kirkpatrick,  2  Swan,  218; 
Eaves  v.  Gillespie,  1  Swan,  128;  Hous- 
ton V.  Embry,  1  Sneed,  480;  Garden- 
hire  V.  Hinds,  1  Head,  402;  Burnley 
V.  Thomas,  63  Mo.  390,  392;  Boal  v. 
Morgner,  46  Mo.  48;  Clark  v.  Maguire, 
16  Mo.  302;  Roane  v.  Rives,  15  Ark. 
328,  330;  Hulm*-  v.  Tenant,  1  Brown 
Ch.  16;  1  Lead.  Cas.  Eq.,  4th  Am.  ed., 
679,  709-713,  732-734;  [Vail  v.  Vail, 


49  Conn.  52;  Duke  v.  Duke,  81  Ky. 
."08;  Noland  v.  Cliambers,  84  Ky.  516; 
4  Am.  St.  Rep.  210;  Turner  v.  Shaw, 
96  Mo.  22;  9  Am.  St.  Rep.  319.1 

'  Expressions  held  "Ujiicient  to  create  a 
separate  estate.  —  It  will  be  seen  that 
some  of  the  earlier  English  decisions 
upon  the  words  "sole  use"  have  been 
overruled.  For  her  "  sole  use  and  dis- 
posal ":  Bland  v.  Dawes,  L.  R.  17  Ch. 
Div.  794;  "sole  benefit":  Green  v. 
Britten,  1  De  Gex.  J.  &  S.  649;  "for 
her  own  sole  use  and  benefit  abso- 
lutely ":  In  re  Tarsey's  Trust,  L.  R. 
1  Eq.  561;  "sole  use":  Adanison  v. 
Armitage,  19  Ves.  416  (overruled:  See 
Massy  v.  Rowen,  in^'ra);  "for  her  own 
use,  independent  of  her  husbaml ": 
Wagstatfe  v.  Smith,  9  Ves.  520;  "  for 
her  own  use  and  benefit,  independent 
of  any  other  person ":  Margetts  v. 
Barringer,  7  Sim.  482;  see  Glover  v. 
Hall,  16  Sim.  568;  "for  her  own  use 
and  at  her  OM'n  disposal  ":  Pritchard  v. 
Ames,  Turn.  &  R.  222;  "  for  her  own 
sole  use,  benefit,  and  disposition":  Ex 
parte  Ray,  1  Madd.  199;  Lindsell  v. 
Thacker,  12  Sim.  178;  Hobson  v.  Fer- 
raby,  2  Coll.  C.  C.  412;  "her  receipt  to 
be  a  sufficient  discharge  to  the  execu- 
tors": Lee  V.  Prieaux,  3  Brown  Ch. 
381;  Cooper  v.  Wells.  11  Jur..  N.  S., 
923;  "  to  enjoy  the  profits  ":  Tyrrell  v. 
Hope,  2  Atk.  558,  561;  "to  be  at  her 
disposal,  to  do  therewith  as  she  should 
think  fit  ":  Kirk  v.  Paulin,  7  Vin.  Abr. 
95,  pi.  43;  "according  to  her  appoint- 
ment, whether  covert  or  sole":  Lumb 
V.  Milnes,  5  Ves.  517;  "solely  ami  en- 
tirely for  her  own  use  and  bi-nefit  dur- 
ing her  life":  Inglcfield  v.  Coglilan,  2 
Coll.  C.  C.  247;  "to  be  delivered  to  her 
when  she  should  demand  it":  Dixon 
V.  Olmius,  2  Cox,  414;  "to  her  abso- 
lutely, if  living  apart  from  her  hus- 
band": Shewell  v.  Dwarris,  Johns. 
172;  for  her  "sole  and  separate  use  ": 
Parker  v.  Brooke,  9  Ves.  583;  for  her 
"sole  and  proper  use,  benefit,  and  be- 
hoof": Miller  v.  Voss,  62  Ala.  122; 
"sole  and  separate  use":  Roliinson  v. 
O'Neal,  56  Ala.  541;  to  a  trustee  "  for 


§1103 


EQUITY   JURISPRUDENCE. 


1644 


§  1103.  What  Property  is  Included.  —  Property  of  any 
kind,  real  or  personal,  and  any  interest  therein,  may  be 
conveyed,  settled,  or  held  to  the  wife's  separate  use.  Her 
equitable  separate  estate  may  therefore  include  estates 
in  fee  in  land,  in  possession  or  reversion,  life  estates, 
estates  for  years,  things  in  action,  securities,  specific 
chattels,  or  money .^     Where  a  wife  has  a  separate  estate, 


her  use  and  behoof ":  Sprague  v. 
Shields,  61  Ala.  428;  to  a  trustee  "for 
the  sole  use  and  benefit  of  my  wife 
during  her  natural  life":  Blakeslee  v. 
Mobile  Life  Ins.  Co.,  57  Ala.  205;  "to 
her  own  separate  use,  benefit,  and  be- 
hoof ":  Pepper  v.  Lee,  53  Ala.  33;  to  her 
"absolutely,  and  in  her  own  right, "to 
have  and  to  hold,  etc.,  "for  her  own, 
separate,  and  absolute  use  and  behoof 
forever  ":  Short  v.  Battle,  52  Ala.  456; 
"for  the  sole,  separate,  and  exclusive 
nse,  benefit,  and  behoof ":  Metropoli- 
tan Bank  v.  Taylor,  53  Mo.  444;  to 
her  "sole  aid  and  behoof":  Gray  v. 
Robb,  4  Heisk.  74;  conveyance  to  a 
trustee,  on  trust,  to  pay  the  income  to 
a  wife  "for  and  during  the  joint  lives 
of  her  and  her  husband,  taking  her  re- 
ceipt therefor ":  Charles  v.  Coker,  2 
S.  C.  122;  bequest  to  a  daughter,  "  and 
to  no  other  person,"  and  providing 
that  "  her  receipt  for  the  same  shall  be 
conclusive  evidence  of  its  payment ": 
Brookville  Nat.  Bank  v.  Kimble,  76 
Ind.  195;  conveyance,  in  trust,  "for 
use  of  his  wife  as  if  she  never  had  been 
married ":  Garland  v.  Pamplin,  32 
Gratt.  305;  "solely  for  her  own  use": 
Jamison  v.  Brady,  6  Serg.  &  R.  466;  9 
Am.  Dec.  460;  "for  the  use,  mainte- 
nance, and  support  of":  Good  v.  Har- 
ris, 2  Ired.  Eq.  630;  "to  be  paid  to 
her  when  she  is  divorced  from  her  hus- 
band or  voluntarily  withdraws  from 
him":  Perry  v.  Boileau,  10  Serg.  &  R. 
208;  "  for  her  sole  use,  benefit,  and 
behoof  ":  Williman  v.  Holmes,  4  Rich. 
Eq.  475,  479. 

Expressions  held  insufficient  to  create 
a  se-parate  estate.  —  "Into  their  own 
proper  and  respective  hands,  to  and 
for  their  own  use  and  benefit ":  Tyler 
v.  Lake,  2  Russ.  &  M.  I  S3;  "for  and 
under  their  sole  control ":  Massey  v. 
Parker,  2  Mylne  &  K.  174;  "to  pay 
to  a  married  woman  and  her  assigns  ": 
Lumb  V.  Milnes,  5  Ves.  517;  to  trus- 
tees, in  trust,  to  pay  income  to  a  wife 
"to  be  applied  by  her  to  and  for  the 


maintenance  of  herself  and  children": 
Wardle  v.  Claxton,  9  Sim.  524;  "to 
her  use":  Jacobs  v.  Amyatt,  I  Madd. 
376,  note;  "for  her  own  use":  Wills 
▼.  Sayers,  4  Madd.  409;  "for  her  own 
use  and  benefit ":  Roberts  v.  Spicer,  5 
Madd.  491 ;  "  to  her  own  use  and  bene- 
fit ":  Kensington  v.  DoUond,  2  Mylne 
&  K.  184;  "to  her  own  use":  Johnes 
V.  Lockhart,  3  Brown  Ch.  383,  note; 
"only  for  her":  Spirett  v.  Willows, 
11  Jur.,  N.  S.,  70;  "for  her  and  their 
own  sole  and  absolute  use  and  benefit": 
Lewis  v.  Mathews,  L.  R.  2  Eq.  177;  a 
devise,  without  trustees,  to  a  woman, 
"  for  her  sole  use  and  benefit ":  Gilbert 
V.  Lewis,  1  De  Gex,  J.  &  S.  38;  the 
precise  meaning  of  "sole"  was  deter- 
mined by  the  house  of  lords  in  Massy 
V.  Rowen,  L.  R.  4  H.  L.  288,  in  which 
it  was  held  (approving  of  Lord  Weat- 
bury's  decision  in  Gilbert  v.  Lewis) 
that  the  words,  per  se,  have  no  fixed, 
technical  meaning,  likethe  word  "sepa- 
rate," though  from  the  context  it  might 
be  so  construed;  words  vesting  the  fee 
in  the  wife,  but  containing  no  provision 
excluding  the  husband:  Paul  v.  Leav- 
itt,  53  Mo.  595;  "for  her  nse  and 
benefit ":  Fears  v.  Brooks,  12  Ga.  195, 
198;  "but  the  said  gift  to  extend  to 
no  other  person  ":  Ashcraft  v.  Little, 
4  Ired.  Eq.  236;  as  to  the  effect  of  a 
clause  that  the  property  "is  not  to  be 
liable  for  her  husband's  debts,  "giioere, 
see  Lewis  v.  Elrod,  38  Ala.  17;  Gilles- 
pie's Adra'r  v.  Burleson,  28  Ala.  651; 
Young  V.  Young,  3  Jones  Eq.  216; 
Martin  v.  Bell,  9  Rich.  Eq.  42;  70  Am. 
Dec.  200.  For  further  illustrations  of 
the  effect  of  particular  expressions,  see 
the  cases  cited  in  the  last  preceding 
note. 

'  As  to  property  to  be  acquired  in 
future  embraced  in  the  covenants  of  a 
settlement,  see  Forster  v.  Davies,  4  De 
Gex,  F.  &  J.  133;  Smith  v.  Lucas,  L. 
R.  18  Ch.  Div.  531;  Dawes  v.  Tred- 
well,  L.  R.  18  Ch.  Div.  354;  Kane  v. 
Kane,  L.  R.  16  Ch.  Div.  207. 


I 


1645  SEPARATE    ESTATE    OP    MARRIED    WOMEN.       §  1103 

the  rents,  income,  and  profits  thereof  are,  of  course,  her 
separate  property;  and  if  the  savings  of  such  income  are 
invested  by  her,  the  investment  so  made  will  also  be  her 
separate  property.^  In  general,  when  land  or  other  prop- 
erty is  purchased  by  or  on  behalf  of  the  wife  with  pro- 
ceeds of  her  separate  estate  it  becomes  impressed  with 
the  same  character.*  The  wife's  earnings  may  also,  by 
the  assent  of  her  husband,  be  her  separate  property.' 
While  equity  thus  provides  a  separate  property  for  a  wife 
free  from  the  control  of  her  husband,  still,  she  may  so 
deal  with  it  that  it  will  lose  that  character.  If  the  wife, 
acting  without  any  undue  influence,  expressly  authorize 
or  tacitly  permit  her  husband  to  receive  the  income  of 
her  separate  property  and  apply  it  to  his  own  uses  and 
purposes,  or  to  receive  it  and  apply  it  for  the  benefit  of 
the  family,  it  will  thereby  cease  to  be  her  separate  prop- 
erty and  become  his;  she  can  never  recall  it,  nor  claim 
any  reimbursement.* 

Kidwell  V.  Kirkpatrick,  70  Mo.  214; 
and  see  cases  cited  under  the  last  pre- 
ceding paragraph  [and  under  §  1101]. 
♦  Powell  V.  Hankey.  2  P.  Wms.  82; 
Milues  V.  Busk,  2  Ves.  488;  Caton  v. 
Rideout,  1  Macn.  &  G.  599,  601,  603; 
Rowley  v.  Unwin,  2  Kay  &  J.  138, 
142;  Gardner  v.  Gardner,  1  GiflF.  126; 
Payne  v.  Little,  26  Beav.  1;  Squire  v. 
Dean,  4  Brown  Ch.  326;  Parkes  t. 
White,  11  Ves.  209,  225;  Dalbiac  v. 
Dalbiac,  16  Ves.  116,  126;  Beresford 
V.  Archl)ishop  of  Armagh,  13  Sim.  643; 
Howard  v,  Digby,  8  Bligh,  N.  S., 
224;  2  Clark  &  F.  634;  Green  v. 
Carlill,  L.  R.  4  Ch.  Div.  882  (separate 
property  not  given  up);  Coleman  v. 
Seinmes,  56  Miss.  321;  Kidwell  v. 
Kirkpatrick,  70  Mo.  214;  Dunn  v.  Sar- 
gent,  101  Mass.  336;  Meth.  Epis.  Ch. 
V.  Jaques,  3  Johns.  Ch.  77,  90-92. 
[Tyson  v.  Tyson,  54  Md.  35;  Grover 
etc.  Sewing  Machine  Co.  v.  RadcliSF, 
63  Md.  496;  Bristor  y.  Bristor,  101 
Ind,  47;  Hauer'a  Estate,  140  Pa.  St. 
420;  23  Am.  St.  Rep.  245;  and  see 
McLure  v.  Lancaster,  24  S.  C.  273; 
5S  Am.  Rep.  259.]  In  Caton  v. 
Rideout,  supra,  Lord  Cottenham  thus 
stated  the  doctrine:  "  A  wife,  having 
projierty  settled  for  her  separate  use, 
ia  entitled  to  deal  with  the  money  as 


^  Gore  V,  Boiight,  2  Vern.  535;  Gage  v. 
Lister,  2  Brown  Pari.  C.  4;  Newlands  v. 
Paynter,  4  Mylne  &  C.  408;  Humpherv 
Y.  Richards,  2  Jur.,  N.  S.,  432;  Barrack 
V.  McCulloch,  3  Kay  &  J.  110;  Brooke 
V.  Brooke,  25  Beav.  342;  Muggeridge 
V.  Stanton,  1  De  Gex,  F.  &  J.  107; 
Askew  V.  Rooth,  L.  R.  17  Eq.  426; 
but  see  Ordway  v.  Bright,  7  Heisk. 
681. 

«  Justis  ▼.  English,  30  Gratt.  565; 
City  Nat.  Bank  v.  Hamilton,  34  N.  J. 
Eq.  158;  Beals's  Ex'r  v.  Storm,  26  N. 
J.  Eq.  372  (proceeds  of  a  sale  of  her 
contingent  dower);  but  it  must  clearly 
appear  that  the  purchase  was  actually 
made  with  the  proceeds  of  her  sepa- 
rate estate:  Joyce  v.  Haines,  33  N.  J. 
Eq.  99;  and  where  the  husband  was 
permitted  to  receive  the  income  or 
proceeds  of  his  wife's  separate  prop- 
erty, and  he  purchased  land  therewith 
in  his  own  name,  without  any  agree- 
ment or  understanding  with  her  that 
the  purchase  was  to  be  for  her  benefit, 
the  land  so  purchased  did  not  become 
her  separate  property:  Kidwell  v. 
Kirkpatrick,  70  Mo.  214.  [See  also 
Bristor  v.  Bristor,  101  Ind.  47.] 

»  Jones  V.  Reid,  12  W.  Va.  350;  29 
Am.  Rep.  455;  Prihble  v.  Hall,  13 
Bush,  61;  Hadenv.  Ivey,  51  Ala.  381; 


§  1104  EQUITY   JURISPRUDENCE.  1646 

§  1104.  Her  Power  of  Disposition. — The  general  doc- 
trine long  settled  by  the  English  court  of  chancery  is,  that 
a  feme  covert,  acting  with  respect  to  her  separate  property, 
is  competent  to  act  in  all  respects  as  if  she  were  a  feme 
sole}  Among  these  incidents  of  substantial  ownership  is 
the  jus  disponendi,  which  is  possessed  and  may  be  exer- 
cised by  the  married  woman  without  her  husband's 
assent,  unless  the  instrument  creating  the  separate  estate 
contains  restrictions  upon  the  power.  It  is  therefore 
well  settled,  that  so  far  as  the  separate  estate  embraces 
personal  property,  money,  chattels,  things  in  action,  chat- 
tels real,  rents  and  profits  of  land,  although  no  power  of 
disposition  is  given  to  her  in  express  terms,  she  may  dis- 
pose of  it  as  though  she  were  unmarried,  by  acts  inter 
vivos  or  by  will.'  Where  the  separate  estate  embraces 
land,  the  wife's  power  of  disposition  over  her  life  estates 
therein  has  never  been  doubted,  and  her  contracts  to  sell 
or  to  mortgage  such  life  estates  have  always  been  spe- 
cifically enforced  against  her.^     "With  respect  to  estates 

she  pleases.   If  she  directly  authorizes  haps  a  constructive,  trust  will  arise <in 

the  money  to  be  paid  to  her  husband,  her  favor,  so  that  she  can  follow  the 

he  is  entitled  to  receive  it,  and  she  can  property:    See  Darkin   v.    Darkin,   17 

never  recall  it.     If  the  husband  and  Beav.  57S;  Scales  v.  Baker,  28  Beav. 

wife,  living  together,  have  for  a  long  91,  and  cases  cited  in  note  1,  under 

time   so   dealt  with   the  separate   in-  §  1037. 

come  of  the  wife  as  to  show  that  they  '  Peacock  v.  Monk,  2  Ves.  Sr.  190; 

must  have  agreed  that  it  should  come  Hulme   v.    Tenant,    1  Brown  Ch.  16, 

to  the  hands  of  the  husband  to  be  used  per  Lord  Thurlow. 

by  him  (of  course  for  their  joint  pur-  *  Fettiplace   v.  Gorges,   1   Ves.  46; 

poses),  that  would  amount  to  evidence  3  Brown  Ch.  8;  Rich  v.  Cockell,  9  Ves. 

of  a   direction  on   her   part  that  the  309;   V^^'agstaff  t.   Smith,  9  Ves.  620; 

separate    income,    which     she    would  Sturgis  v.  Corp,    13   Ves.   190;   Lady 

otherwise   be  entitled   to,    should    be  Arundell  v.  Phipps,  10  Ves.  139;  An- 

received    by  him Separate  derson  v.    Anderson,   2  Mylne  &   K. 

money  of   the  wife  paid  to  the   hus-  427;  Calvert  v.  Johnston,  3  Kay  &  J. 

band,  with  her  concurrence  or  bj'  her  556;  Thackwell  v.  Gardiner,  5  De  Gex 

direct  authority,  to  be  inferred  from  &  S.  58;  Hodgson  v.  Hodgson,  2  Keen, 

their  mode  of  dealing  with  each  other,  704;  Hnniphery  v.   Richards,   2  Jur., 

cannot  be  recalled."     The  court  must  N.  S.,  432;  Lechmere  v.  Brotheridge, 

be  satisfied  that  the  husband  has  not  32  Beav.  353;  Winter  v.  Easum,  2  De 

unduly  influenced   the   action   of   his  Gex,  J.  &  S.  272;  Farington  v.  Parker, 

wife:   See  Hughes  v.   Wells,  9  Hare,  L.  R.  4  Eq.  116. 

749,  773;  and  see  cases  cited  in  note  ^  Stead    v.    Nelson,    2    Beav.    245; 

5,  under  §  963.     If  the  husband,  with-  Wainwright  v.  Hardisty,  2  Beav.  363; 

out  the  wife's  consent,  or  in  fraud  of  Major  v,  Lansley,  2  Russ.  &  M.  355, 

her   rights,    purchases   land   or  other  357;  Newcomen  v.  Hassard,  4  Ir.  Ch. 

property,  and  pays  for  the  same  with  Rep.  268,  274;  Wilcocks  v.  Hannyng- 

her  separate  estate  and  takes  the  title  ton,  5  Ir.  Ch.  Rep.  38;  Blatchford  V, 

in  his  own  name,  a  resulting,  or  per-  Woolley,  2  Drew.  &  S.  204. 


1647  SEPARATE    ESTATE   OP   MARRIED   WOMEN.       §  1104 


in  fee  settled  or  held  to  her  separate  use,  there  had  for- 
merly been  some  doubt  arising  from  conflicting  author- 
ities. The  general  rule  is  now  established,  however,  that 
the  wife's  power  of  disposition  as  a  feme  sole  extends  to 
estates  in  fee  in  lands  as  fully  as  to  life  estates  or  to  per- 
sonal property.^  It  seems  to  have  been  formerly  supposed 
that  a  difference  existed,  in  the  wife's  power  of  alienation 
or  disposition,  between  the  case  where  the  property  is 
actually  held  by  trustees  to  her  separate  use  and  the  case 
where  the  property  is  conveyed  directly  to  herself  for  her 
sole  and  separate  use.  All  notion  of  any  such  difference 
has  been  abrogated;  the  same  power  of  disposition  belongs 
equally  to  both  these  conditions  or  forms  of  the  separate 
estate.^  As  an  incident  of  her  general  power  of  disposi- 
tion, unless  she  is  expressly  restrained  from  anticipation, 
a  married  woman  renders  her  separate  property  liable 
for  a  breach  of  trust  by  her  trustees  in  which  she  has 
concurred,  and  for  a  breach  of  trust  which  she  herself 
commits.' 


'  The  doubt  wag,  whether  the  wife 
could  dispose  of  the  corpus  of  the 
land  held  in  fee  by  her  will,  without 
an  express  power  of  appointment,  or 
by  any  act  inter  vivos  other  than  a  fine 
or  recovery,  or  the  acknowledged  deed 
substituted  by  statute  in  the  place  of 
a  fine  or  recovery.  The  recent  de- 
cisions hold  that  she  may  thus  dispose 
without  any  express  power  of  appoint- 
ment, and  without  her  husband's  con- 
currence or  consent,  either  by  a  will 
or  by  an  instrument  not  acknowledged 
under  the  statute:  Taylor  v.  Meads,  4 
De  Gex,  J.  &  S.  597,  604-607,  per 
Lord  Westbury;  Hall  v.  Waterhouse, 
5  Gifif.  64;  11  Jur.,  N.  S.,  361;  Adams 
v.  Gamble,  12  Ir.  Ch.  Rep.  102;  Pride 
V.  Bubb,  L.  R.  7  Ch.  64;  and  see 
Cooper  v.  Macdonald,  L.  R.  7  Ch. 
Div.  288.  Where  the  gift  to  the  wife's 
separate  use  extends  merely  to  her  life 
interest,  she  has  no  power  to  dispose 
of  the  entire  corpus  of  the  estate,  and 
an  attempted  disposition  of  the  whole 
fee  would  be  invalid:  Troutbeck  v. 
Boughey,  L,  R.  2  Eq.  534. 

'  Where  the  property  is  actually 
held  by  trustees,  she  can  bind  or  dis- 


pose of  her  equitable  interest  without 
their  consent,  unless  the  instrument 
of  trust  makes  that  consent  neces- 
sary: Essex  V.  Atkins,  14  Ves.  542; 
Hodgson  V.  Hodgson,  2  Keen,  704. 
Where  the  property  has  been  con- 
veyed directly  to  her,  if  her  will  or 
transfer  inter  vivos  did  not  convey 
the  legal  estate,  it  would  certainly 
convey  her  equitable  estate,  and  either 
her  husband,  or  after  her  death  her 
heir,  would  b<j  a  trustee  holding  the 
legal  estate  for  the  person  beneficially 
entitled:  Hall  v,  Waterhouse,  5  Giff. 
64;  11  Jur.,  N.  S.,  3()1. 

*  Davies  v.  Hoilgson,  25  Beav.  177, 
186;  Crosby  v.  Church,  3  Beav.  485; 
Mantv.  Leith,  15  Beav.  524;  Hanchett 
V.  Briscoe,  22  Beav.  49(5;  Brewer  r. 
Swirles,  2  Smale  &  G.  219;  Jones  v. 
Higgius,  L.  R.  2  Eq.  538;  Clive  v. 
Carew,  1  Johns.  &  H.  199;  Pemberton 
V.  McGill,  1  Drew.  &  S.  26U;  but  the 
future  in'-ome  of  such  property  is  not 
so  liable:  Clive  v,  Carew;  Pemberton 
V.  McGill;  Jackson  v.  Hobhouse,  2 
Mer.  483,  488;  it  may  also  be  liable 
for  her  actual  fraud:  See  Sharpa  T. 
Foy,  L.  R.  4  Ch.  35. 


§  1105  EQUITY    JURISPRUDENCE.  1648 

§  1105.  Her  Power  in  This  Country.  —  Such  being  the 
rules  concerning  the  wife's  jus  disponendi  as  now  settled 
in  England,  I  shall  next  inquire  how  far  these  or  other 
rules  have  been  adopted  by  the  courts  of  the  various 
American  states.  One  or  two  preliminary  observations 
are  very  important  in  determining  the  present  condition 
of  the  law  upon  this  subject  in  our  own  country.  In  the 
first  place,  in  very  many  of  the  states,  under  modern 
statutes,  where  property  is  conveyed  or  given  to  the  wife 
directly,  she  now  takes  a  full  separate  legal  estate  therein, 
wholly  free  from  the  interests  and  claims  of  the  husband, 
and  has  over  it  the  power  of  disposition  given  by  the 
statute.^  In  the  second  place,  in  New  York  and  the  other 
states  w^hich  have  adopted  the  same  type  of  legislation, 
where  lands  are  given  to  trustees  upon  an  express  trust 
for  the  benefit  of  a  married  woman,  the  cestui  que  trust  ac- 
quires no  estate  in  the  trust  property,  and  she  is  prohibited 
from  aliening,  charging,  or  binding  her  own  interest.* 
AVith  regard  to  the  main  question  concerning  the  wife's 
power  of  disposition,  there  is  such  a  divergence  of  opin- 
ion among  the  American  decisions  that  it  would  be  very 
difiicult,  if  not  in  fact  impossible,  to  formulate  anj''  gen- 
eral rule  as  established  by  their  authority.'  It  may  be 
doubtful  whether  in  any  single  state  all  the  conclusions 
reached  by  the  English  courts  have  been  accepted  with- 
out limitation  or  modification.    The  American  states  may 

*  See  ante,  §  1099,  note  2.  In  many  one  of  enjoying  its  income.  These 
states  this  statutory  power  is  abso-  judges  have  forgotten  that  a  nominal 
lute,  as  though  she  were  unmarried.  ownership,  without  any  of  the  rights 

*  See  an(e,  §§  1003-1005.  Express  incident  to  ownership,  without  the 
trusts  in  personal  property  for  the  power  of  aliening,  managing,  or  in 
separate  use  of  wives  seem  to  be  left  any  way  binding  the  property,  is  in 
under  the  operation  of  the  doctrines  reality  no  ownership.  A  wife  hold- 
of  equity.  ing   a  so-called   separate   estate,   but 

^  Indeed,  in  some  instances  it  would  whose  hands  are  tied,  and  who  is 
be  a  difficult  task  to  reconcile  the  de-  completely  debarred  from  dealing 
cisiona  made  by  the  courts  of  the  same  with  it,  from  obtaining  credit  upon  it, 
state.  In  several  of  the  states  the  and  from  using  it  in  the  afiFairs  of  life, 
courts  seem  to  have  regarded  the  is  actually  in  a  worse  position  than 
wife's  separate  property,  instead  of  the  wife  under  the  operation  of  com- 
rendering  her  a  /erne  sole  with  respect  mon-law  rules,  whose  property  is  sub- 
to  its  use,  as  depriving  her  of  all  ject  to  the  control  and  disposition  of 
rights  of  ownership  except  the  single  her  husband. 


1649 


SEPARATE    ESTATE    OF    MARRIED    WOMEN.       §   1105 


be  broadly  separated  into  two  generic  classes;  the  decis- 
ions which  mark  the  existence  of  these  classes  differ  not 
in  any  matters  of  detail,  but  in  the  underlying  princi])le. 
In  the  first  class,  the  courts  have  accepted  the  principle 
of  the  English  doctrine.  They  regard  the  wife's  jus  dis- 
ponendi  as  resulting  from  the  fact  of  an  equitable  sepa- 
rate estate  over  which  she  is,  partially  at  least,  a,  feme  sole, 
and  not  as  resulting  from  the  permissive  provisions  of 
the  instrument  creating  such  separate  estate.  It  follows, 
therefore,  where  the  instrument  creating  the  separate  es- 
tate imposes  no  express  restrictions,  that  the  wife  has  a 
general  power  of  disposing  or  charging  it,  even  though  no 
such  authority  is  in  terms  conferred.  This  power  of  dis- 
position, however,  does  not  generally  extend  to  the  corpus 
of  the  land  held  for  her  separate  use  in  fee;  it  is  confined 
to  personal  property,  the  rents  and  profits  of  the  land, 
and  perhaps  to  her  life  estates  in  lands.^     In  the  states 


*  In  very  many  of  the  cases  the 
power  of  disposition  is  discussed  in 
connection  with  the  power  to  bind 
the  separate  estate  by  her  contracts 
or  debts.  In  some  decisions  the  two 
powers  are  treated  as  one  and  the 
same, —  the  same  in  extent,  and  subject 
to  the  same  limitations.  In  others,  a 
distinction  seems  to  be  drawn,  and 
the  power  of  disposing  regarded  as 
narrower  or  subject  to  greater  restric- 
tions than  that  of  binding  by  contract. 
The  recent  case  of  Radford  v.  Car- 
wde,  13  W.  Va.  572,  furnishes  an  ex- 
cellent illustration  of  this  first  class, 
and  I  briefly  state  the  poiats  which  it 
decides:  "A  married  woman,  as  to 
the  property  settled  to  her  separate 
use,  is  regarded  as  a  feme  sole,  and 
has  a  right  to  dispose  of  all  her  sepa- 
rate personal  estate,  and  the  rents 
and  profits  of  her  real  estate  accruing 
during  coverture,  as  if  she  were  a.  feme 
sole,  unless  restrained  by  the  instru- 
ment creating  the  estate.  The  re- 
straint upon  the  power  of  alienating 
the  property  settled  to  her  separate 
use  must  be  equivalent  to  an  express 
restraint;  U  will  not  he  implied  from 
her  b'ing  authorized  to  dispose  of  the 
properly  in  a  particular  manner. 
The  jus  disponendi  and  the  liability  to 
2  EQ.  JuR.  — 101 


payment  of  all  debts  incurred  are 
incidents  of  her  separate  estate,  and 
can  only  be  taken  away  or  limited  by 
express  words,  or  by  an  intent  so  clear 
as  to  be  equivalent  to  express  words. 
But  these  mcidents  extend  no  further 
than  to  all  her  separate  personal  prop- 
erty, and  the  rents  and  profits  of  her 
separate  real  estate  accruing  during 
coverture.  Tlie  corpnis  of  her  separate 
real  estate  is  in  no  manner  affected  by 
the  equitable  doctriyie  of  a  separate  es- 
tate." The  following  states  may  all  be 
properly  placed  in  this  first  class.  It 
should  be  observed,  .however,  tliat  in 
some  of  them  the  general  doctrine  of 
tiie  text  is  adopted  only  to  a  partial 
extent,  and  with  limits  which  ilo  not 
exist  in  otlier  states.  In  a  few  in- 
stances the  decisions  are  directly  con- 
flicting, the  later  cases  adopting  the 
doctrine  which  was  rejected  by  the 
earlier.  The  decided  cases  in  each 
state  should  be  separately  examined. 
Vermont:  To  a  partial  extent,  and  aa 
applied  to  contracts:  Frary  v.  Booth, 
37  Vt.  78;  Caldwell  v.  Renfrew,  33 
Vt.  213;  Dale  v.  Robinson,  51  Vt.  20; 
31  Am.  Rep.  G69.  Connecticut:  Imlay 
V,  Huntington,  20  Conn.  146;  fStaflFord 
Savings  Bank  v.  Underwood,  54  Cono, 
2.]    New  YoiL'  Juques  v.  Meth.  Epia. 


§  1105 


EQUITY    JURISPRUDENCE. 


1650 


composing  the  second  class,  the  courts  have  widely  de- 
parted from  the  principle  of  the  English  doctrine.  They 
regard  the  wife's  power  over  her  separate  estate  as  result- 
ing, not  from  the  existence  of  an  equitable  separate  estate 
itself,  but   from   the    permissive   provisions    of  the    in- 


ch., 17  Johns.  548;  8  Am,  Dec.  447; 
overruling  decision  of  Chancellor 
Kent  in  3  Johns.  Ch.  77;  Dyett  v. 
North  Am.  Coal  Co.,  20  Wend.  570; 
32  Am.  Dec.  598;  7  Paige,  9,  14;  Pow- 
ell  V.  Murray,  2  Edw.  Ch.  636,  643; 
Albany  F.  Ins.  Co.  v.  Bay,  4  N.  Y.  9; 
Wadhams  v.  Am.  Home  etc.  Soc,  12 
N.  Y.  415.  The  following  cases,  as 
well  as  some  of  the  preceding,  relate 
particularly  to  contracts:  Gardner  v, 
Gardner,  7  Paige,  112,  116;  Knowles 
V.  McCamly,  10  Paige,  342,  346;  Cum- 
ming  V.  Williamson,  1  Sand.  Ch.  17, 
25;  Curtis  v.  Engel,  2  Sand.  Ch.  287, 
289;  Mallory  v.Vanderheyden,  3  Barb. 
Ch.  10;  1  N.  Y.  452,  462;  Yale  v. 
Dederer,  18  N.  Y.  265;  72  Am.  Dec. 
503;  22  N.  Y.  450;  78  Am.  Dec.  216; 
Dickerman  v.  Abrahams,  21  Barb.  551; 
Coon  V.  Brook,  21  Barb.  546.  Under 
the  present  statutes  of  New  York 
these  questions  can  seldom  arise. 
2^etv  Jersey:  Leaycraft  v.  Hedden,  4 
N.  J.  Eq.  512,  551;  Perkins  v.  Elliott, 
23  N.  J.  Eq.  526;  Peake  v.  La  Baw, 
21  N.  J.  Eq.  269,  282;  Homoeopathic 
Mut.  Life  Ins.  Co.  v.  Marshall,  32  N. 
J.  Eq.  103;  [Union  Brick  etc.  Co.  v. 
Lorillard,  44  N.  J.  Eq.  1.]  Delaware: 
Kilby  V.  Godwin,  2  Del.  Ch.  61. 
Maryland:  Buchanan  v.  Turner,  26 
Md.  1,  5;  Cooke  v.  Husbands,  11  Md. 
492,  overruling  earlier  cases.  Virginia: 
The  doctrine  of .  the  text  is  adopted 
with  limitations;  great  weight  seems 
to  be  given  to  the  instrument  creat- 
ing the  separate  property;  the  wife's 
power  of  disposition  is  confined  to  per- 
sonal property  and  rents  and  profits: 
Bank  of  Greensboro'  v.  Chambers,  30 
Gratt.  202;  32  Am.  Rep.  661;  Justis  v. 
English,  30  Gratt.  565;  McChesney  v. 
Brown's  Heirs,  25  Gratt.  393;  Penn 
V.  Whitehead,  17  Gratt.  503;  94  Am. 
Dec.  478;  Nixon  v.  Rose,  12  Gratt. 
425;  Vizonneau  v.  Pegram,  2  Leigh, 
183.  [Later  decisions  seem  to  place 
Virginia  more  clearly  in  the  first  class. 
Thus  it  is  held  that  a  grant  of  special 
power  to  dispose  of  her  estate  in  a  par- 
ticular   manner  does  not,  in  general, 


divest  her  of  power  to  dispose  of  it  in 
any  other  manner:  Christian  v.  Keen, 
80  Va.  369;  Smith  v.  Fox's  Adm'r,  82 
Va.  763;  and  see,  in  general,  Finch  v. 
Marks,  76  Va.  207;  Averett  v.  Lips- 
combe,  76  Va.  404;  Green  v.  Clai- 
borne, 83  Va.  386;  Chapman  v.  Price, 
83  Va.  392;  Bailey  v.  Hill,  77  Va. 
492  (power  to  sell  and  reinvest  does 
not  include  power  to  mortgage).]  West 
Virginia:  Coatney  v.  Hopkins,  14  W. 
Va.  338;  Radford  v.  Carwile,  13  W. 
Va.  572;  Patton  v.  Merchants'  Bank, 
12  W.  Va.  587.  North  Carolina:  New- 
lin  V.  Freeman,  4  Ired.  Eq.  312;  Har- 
ris V.  Harris,  7  Ired.  Eq.  Ill;  53  Am. 
Dec.  393;  but  see  Hardy  v.  Holly,  84 
N.  C.  661.  Georgia:  Dallas  v.  Heard, 
32  Ga.  604;  Robert  v.  West,  15  Ga. 
122;  Fears  v.  Brooks,  12  Ga.  195,  100; 
Wylly  V.  Collins,  9  Ga.  223.  Florida: 
To  a  partial  extent:  Lewis  v.  Yale,  4 
Fla.  418.  Alabama:  Miller  v.  Voss, 
62  Ala.  122;  Sprague  v.  Shields,  61 
Ala.  428;  McMillan  v.  Peacock,  57 
Ala.  127;  Blakeslee  v.  Mobile  Life 
Ins.  Co.,  57  Ala.  205;  Robinson  v. 
O'Neal,  56  Ala.  541;  Short  v.  Battle, 
52  Ala.  456;  Denechaud  v.  Berrey,  48 
Ala.  591;  Glenn  v.  Glenn,  47  Ala.  204; 
Ozley  V.  Ikelheimer,  26  Ala.  332;  Jen- 
kins V.  McConico,  26  Ala.  213;  Brad- 
ford V.  Greenway,  17  Ala.  797,  805;  52 
Am.  Dec.  203.  Arkansas:  Collins  v. 
Wassell,  34  Ark.  17;  [Rudd  v.  Peters, 
41  Ark.  177;  Petty  v.  Grisard,  45  Ark. 
119.]  Missouri:  Metropolitan  Bank  v. 
Taylor,  53  Mo.  444;  Kimm  v.  Weip- 
pert,  46  Mo.  532;  2  Am.  Rep.  541; 
Whitesides  v.  Cannon,  23  Mo.  457; 
Segond  V.  Garland,  23  Mo.  547;  Coats 
V.  Robinson,  10  Mo.  757.  Kentucky: 
Burch  V.  Breckinridge,  16  B.  Mon. 
482;  63  Am.  Dec.  553;  Lillard  v.  Tur- 
ner, 16  B.  Mon.  374;  Bell  v.  Kellar,  13 
B.  Mon.  381;  Coleman  v.  Wooley's 
Ex'r,  10  B.  Mon.  320.  Minnesota: 
Pond  V.  Carpenter,  12  Minn.  430. 
Gali/ornia:  Miller  v.  Newton,  23  Cal. 
554.  District  of  Columbia:  Smith  v. 
Thompson,  2  McAr.  291;  29  Am.  P^ep. 
621. 


1651 


SEPARATE    ESTATE    OF    MARRIED    WOMEN. 


1106 


strument  creating  such  estate.  They  have  accordingly- 
adopted  the  general  rule  that  a  married  woman  has  only 
those  powers  of  disposing  or  charging  her  separate  prop- 
erty which  are  expressly  or  by  necessary  construction 
conferred  upon  her  in  the  instrument  conveying  the 
property  or  creating  the  trust,  and  that  in  determining 
the  extent  of  these  powers  the  terms  of  the  instrument 
are  to  be  strictly  construed.^ 

§  1106.  Disposition  under  a  Power  of  Appointment.  — 
If  a  married  woman  has  a  life  estate  in  property  to  her 
separate  use,  and  is  also  clothed  with  a  general  power  of 
appointment  over  the  corpus  of  the  property,  which  in 
default  of  an  appointment  by  her  goes  to  other  persons, 
and  she  exercises  the  power,  the  appointed  property  is 


*  According  to  this  theory,  not  only 
the  existence,  but  the  nature,  extent, 
and  mode  of  exercise  of  the  wife's 
powers,  are  to  be  determined  by  the 
afl&rmative  provisions  of  the  instru- 
ment creating  her  separate  property. 
This  remarkable  deviation  from  the 
general  doctrine  of  equity  jurispru- 
•dence  seems  to  have  been  first  made 
by  the  courts  of  South  Carolina,  and 
■was  followed  by  the  courts  of  the 
other  states  which  constitute  the  sec- 
ond class,  viz. :  Rhode  Island:  Metcalf 
V.  Cook,  2  R.  I.  S55;  but  see  Ives  v. 
Harris,  7  R.  I.  41.3.  New  Hampshire: 
Cutter  v.  Butler,  25  N.  H.  343;  57  Am. 
Dec.  330.  Pennsylvania:  Maurer's  Ap- 
peal, 86  Pa.  St.  380;  Hepburn's  Appeal, 
65  Pa.  St.  46S;  Wells  v.  McCall,  64  Pa. 
St.  207;  Jones's  Appeal,  57  Pa.  St.  369; 
McMuUin  v.  Beatty,  56  Pa.  St.  389; 
Shonkv.  Brown,  61  Pa.  St.  320;  Penn. 
Co.  for  Ins.  v.  Foster,  35  Pa.  St.  134; 
Wright  V.  Brown,  44  Pa.  St.  224;  Rog- 
ers V.  Smith,  4  Pa.  St.  93;  Lyne's  Ex'r 
V.  Grouse,  1  Pa.  St.  Ill;  W^allace  v. Cos- 
ton,  9  Watts,  137;  Thomas  v.  Folwell, 
2  Whart.  11,  16;  30  Am.  Dec.  230; 
Lancaster  v.  Dolan,  1  Piawle,  231;  18 
Am.  Dec.  625;  [MacConnellv.  Lindsay, 
131  Pa.  St.  476.]  Maryland  (the  ear- 
lier cases):  Miller  v.  Williamson,  5 
Md.  219;  Tarr  v,  Williams,  4  Md.  Ch. 
68.  These  cases  are  overruled  by  sub- 
sequent decisions:  See  last  preceding 
note.  Virginia:  Some  of  the  most  re- 
cent decisions  incline  towards  the  <loc- 
triuo  adopted  by  this  class  (see  last 


note).  North  Carolina:  Hardy  v.  Holly, 
84  N.  C.  661  (for  earlier  cases  see  the 
last  note);  [Clayton  v.  Rose,  87  N.  C. 
106.]  South  Carolina:  Ewing  v.  Smith, 
3  Desaus.  Eq.  417;  5  Am.  Dec.  557  (the 
leading  case  of  this  class);  Oliver  v. 
Grimball,  14  S.  C.  556;  Porcher  v.  Dan- 
iel, 12  Rich.  Eq.  349;  Adamsv.  Mackey, 
6  Rich.  Eq.  75;  Reid  v.  Lamar,  1  Strob. 
Eq.  27,  37;  Magwood  v.  Johnston,  1 
Hill  Eq.  228;  Robinson  v,  Ex'rs  of 
Dart,  Dud.  Eq.  128;  31  Am.  Dec.  569. 
Mississippi:  Doty  v.  Mitchell,  9  Smedes 
&  M.  435,  447;  Montgomery  v.  Agri- 
cultural Bank,  10  Smedes  &  M.  566, 
276;  Armstrong  v.  Stovall,  26  Miss. 
575;  Musson  v.  Trigg,  51  Miss.  172. 
Tennessee:  Hix  v.  Gosling,  1  Lea,  560; 
Robertson  v.  Wilburn,  1  Lea,  635; 
Brown  v.  Foote,  2  Tenn.  Ch.  253; 
Cheatham  v.  HufiF,  2  Tenn.  Ch.  616; 
Reynolds  v.  Brandon,  3  Heisk.  593; 
Head  v.  Temple,  4  Heisk.  34;  Gray  v. 
Robb,  4  Heisk.  74;  Kirby  v.  Miller.  4 
Cold.  3;  Ware  v.  Sharp,  I  Swan,  489; 
Marshall  v.  Stephens,  8  Huniph. 
159,  173;  47  Am.  Dec.  GOl;  but  see 
Young  V.  Young,  7  Cold.  461.  Ohio 
(partially):  Machir  v.  Burroughs  14, 
Ohio  St.  519.  Illinois:  Wallace  v. 
Wallace,  82  111.  530;  Bressler  v.  Kent, 
61  111.  426;  14  Am.  Rep.  67;  over- 
ruling Young  v.  Gratf.  28  III.  20; 
Cookson  v.  Toole,  59  111.  515;  Carpen- 
ter V.  Mitchell,  50  111.  470;  Rogers  v. 
Higains,  48  111.  211;  Cole  v.  Van 
Ripor.  44  111.  58;  Swift  v.  Castle,  23 
HI.  209. 


§  1107  EQUITY   JURISPRUDENCE.  1652 

not  thereby  made  applicable  to  the  payment  of  her  debts, 
excepting  only  those  which  are  fraudulent,  —  that  is,  her 
liabilities  arising  from  fraud.'  When  the  jus  disponendi 
is  conferred  by  means  of  a  power,  —  that  is,  when  the  wife 
has  only  a  life  estate  to  her  separate  use,  with  power  to 
appoint  the  principal  of  the  fund  or  the  corpus  of  the 
property,  —  she  can  only  dispose  of  such  capital  or  corpus 
through  an  execution  of  the  power  by  an  appointment.'' 

§  1107.  Restraint  upon  Anticipation. — The  large  pow- 
ers of  dealing  with  her  separate  property  as  though  she 
were  single,  thus  given  to  the  wife  by  the  English  courts 
of  equity,  tended  in  some  degree  to  defeat  the  very  object 
for  which  a  separate  estate  is  created.  Since  the  wife 
had  full  power  to  dispose  of,  charge,  or  bind  her  separate 
property  for  the  benefit  of  her  husband  as  well  as  of  her- 
self or  others,  and  since  she  was  necessarily  exposed  to 
the  moral  influence  of  her  husband,  there  was  danger 
lest  her  separate  estate  should  virtually  be  as  much  under 
his  control  and  liable  for  his  debts  as  though  no  settle- 
ment to  her  own  separate  use  had  been  made,  and  the 
property  were  left  under  the  operation  of  common-law 
rules.  Experience  showed  that  this  danger  was  actual. 
To  obviate  it,  the  plan  was  contrived  of  inserting  in  the 
settlement  or  conveyance  a  clause  in  restraint  of  antici- 
pation, the  object  of  which  was  to  prevent  the  wife  from 
aliening   or   charging   her   separate    property,   or   from 

1  It  13  a  settled  doctrine  of  the  Eng-  *  If  the  power  authorize  an  appoint- 
lish  equity  that,  under  the  same  cir-  ment  by  deed,  its  execution  by  her 
cumstances,  where  the  power  is  held  may  be  "immediate"  during  her  life- 
and  exercised  by  a  man,  the  appointed  time;  if  by  will  onlp,  then  the  dispo- 
property  is  liable  for  hia  debts.  The  sition  cannot  take  effect  until  after  her 
different  rule  in  case  of  a  married  wo-  death:  See  I  Lead.  Cas.  Eq.  690;  Brad- 
man  is  based  upon  the  distinction  be-  ly  v.  Westcott,  1 3  Ves.  445,  451 ;  Reid  v. 
tween  a  "power"  and  "property."  Shergold,  10  Ves.  370,  380;  Anderson 
A  power  of  appointment  conferred  on  v.  Dawson,  15  Ves.  532;  Heatley  v. 
a  married  woman  is  not  property  held  Thomas,  15  Ves.  596;  Richards  v, 
to  her  separate  use:  1  Lead.  Cas.  Eq.,  Chambers,  10  Ves.  580;  Sockett  v. 
4th  Am.  ed.,  690,  691 ;  Vaughan  v.  Van-  Wray,  4  Brown  Ch.  483;  Lee  v.  Mug- 
derstegen,  2  Drew.  165,  363;  Shattock  geridge,  1  Ves.  &  B.  118;  Nixon  v. 
V.  Shattock,  L.  R.  2  Eq.  182;  35Beav.  Nixon,  2  Jones  &  L.  416;  and  see 
489;  Hobday  v.  Peters,  28  Beav.  854,  Noble  v.  Willock,  L.  R.  8  Ch.  778; 
356;  Blatchford  v.  V^oolley,  2  Drew.  &  Bishop  v.  Wall,  L.  R.  3  Ch.  Div. 
S.  204;  but  see  London  Bank  of  Aus-  194. 
tralia  v.  Lempriere,  L.  R.  4  P.  C.  572. 


1653  SEPARATE    ESTATE    OF    MARRIED    WOMEN.       §  1108 


assigning  or  exercising  other  acts  of  dominion  over  the 
income  until  its  payment  was  due  and  actually  made. 
The  experiment  proved  successful.  The  courts  gave  full 
force  and  effect  to  the  clause  against  anticipation,  and  the 
rules  concerning  it  became  an  established  part  of  the  doc- 
trine concerning  the  wife's  equitable  separate  estate.' 

§  1108.  What  Words  are  SuBacient.  —  In  order  to  con- 
stitute an  effective  restraint,  the  intention  must  be  clear 
from  the  expressions  used  that  the  wife  was  to  be  re- 
strained from  anticipation.  If  such  intention  is  shown, 
no  particular  form  of  words  is  requisite,  nor  are  express 
negative  words  essential.''     In  the  American  states  which 


*  The  clause  is  said  to  have  been 
contrived  by  Lord  Tiiurlow,  and  to 
have  been  first  introduced  by  him  into 
the  settlement  of  a  Miss  Watson,  for 
whom  he  was  a  trustee:  Pybua  v. 
Smith,  3  Brown  Ch.  340,  340,  note  I; 
Jackson  V.  Hobhouse,  2  Mer.  483,  487; 
Baggett  V.  Meux,  1  Coll.  C.  C.  138;  1 
Phill.  Ch.  627;  Rennie  v.  Ritchie,  12 
Clark  &  F.  204;  Tullett  v.  Armstrong, 
1  Beav.  1,  22;  4  Mylne  &  C.  390,  405; 
In  re  Gafifee,  1  Macn.  &  G.  541;  1 
Lead.  Cas.  Eq.  713-722,  735-748,  7tJ5- 
772.  As  the  wife's  separate  estate  is 
wholly  a  creature  of  equity,  the  courts 
of  equity  had  the  power  to  impose 
upon  it  any  limitations  or  restrictions, 
even  though  they  might  contravene 
the  established  doctrines  which  regu- 
late the  use  of  property  in  general. 
An  attempt  to  impose  such  a  restraint 
upon  alienation  in  a  conveyance  to  a 
man  would,  of  course,  be  nugatory: 
Brandon  v.  Robinson,  18  Ves.  429. 

*  Moore  v.  Moore,  1  Coll.  C.  C.  54, 
57;  Harrop  v.  Howard,  3  Hare,  624; 
Brown  v.  Bamford,  1  Phill.  Ch.  620; 
In  re  Sarel,  10  Jur.,  N.  S.,  876;  Her- 
bert V.  Webster,  L.  R.  15  Ch.  Div. 
€10.  The  rule  was  very  accurately 
stated  in  the  recent  case  of  Radford 
V.  Carwile,  13  W.  Va.  572:  "The  re- 
straint upon  her  power  of  alienating 
property  settled  to  her  separate  use 
must  be  equivalent  to  an  express  re- 
straint; it  will  not  be  implied  from 
her  being  authorized  to  dispose  of  the 
property  in  a  particular  manner.  The 
)iis  disponendi,  and  the  liability  to  pav- 
ment  of  all  debts  incurred,  can  only 
be  taken  away  or  limited  by  express 


words,  or  by  an  intent  so  clear  as  to  be 
equivalent  to  express  words."  Tlie  op- 
eration of  this  general  rule  can  best 
be  illustrated  by  examples,  of  which 
I  add  a  few.  Words  and  ezpres.nona 
held  sufficient  to  constitute  a  restiaint:  A 
direction  to  pay  the  income  to  such 
person  as  the  wife  "shall,  by  writing, 
and  as  the  same  becomes  due,  but 
not  by  way  of  assignment,  charge,  or 
other  anticipation,  appoint":  Brown 
v.  Bamford,  1  Phill.  Ch.  620;  Harnett 
V.  Macdougall,  8  Beav.  187;  where 
the  gift  is  of  income  to  her  separate 
use,  not  to  be  sold  or  mortgaged: 
Steedmanv.  Poole,  6  Hare,  193;  Goul- 
der  V.  Camm,  1  De  Gex,  F.  &  J.  146; 
a  gift  or  trust  to  her  sole  and  separate 
use  with  a  direction  that  she  shall  not 
sell,  charge,  mortgage,  or  encumber 
the  property:  Baggett  v.  Meux,  1  Coll. 
C.  C.  138;  1  Phill.  Ch.  627;  per  contra, 
Medley  v.  Horton,  14  Sim.  222,  is  thus 
overruled;  where  the  property  is  di- 
rected to  be  a  separate,  personal,  and 
inalienable  provision  during  coverture: 
Spring  v.  Pride,  10  Jur.,  N.  S.,  646; 
In  re  Sarel,  10  Jur.,  N.  S.,  876;  where 
trustees  were  directed  to  receive  the 
income  "when  and  as  often  as  the 
same  should  become  due,"  and  to  pay 
it,  etc.,  and  that  her  receipts  for  such 
income  after  it  should  become  due, 
should  be  valid  discharges:  Baker  v. 
Bradley,  7  De  Gex,  M.  &  G.  597;  Field 
V.  Evans,  15  Sim.  375.  Words  and 
expressions  held  not  sufficient:  A  direc- 
tion to  pay  income  to  a  wife  as  she 
should,  from  time  to  time,  appoint,  and 
in  default  of  any  appointment,  into  her 
proper  hands  for  her  separate  use,  doea 


§  1109  EQUITY    JURISPRUDKNCK.  1654 

compose  the  first  class  heretofore  described,  the  same 
general  rule  would  necessarily  be  adopted.  In  the  states 
forming  the  second  class,  however,  a  material  modifica- 
tion of  this  rule  must  be  made.  Since  the  jus  disponendi 
in  those  states  is  derived  from  the  afiirmative  provis- 
ions of  the  instrument  creating  the  separate  property^ 
the  restraint  upon  the  power  of  disposing  or  binding  the 
property  would  be  inferred  from  the  whole  tenor  of  th& 
instrument,  or  from  the  absence  of  permissive  language.^ 
The  subject-matter  on  which  the  restraining  clause  is  to- 
operate  may  be  any  kind  of  property,  real  or  personal^ 
and  any  estate  therein,  absolute,  for  life,  or  for  years.'^ 

§  1109.  Effect  of  the  Restraint.  — The  restraint,  if 
valid,  prevents  the  wife  from  doing  any  act,  during  her 
coverture,  which  would  deprive  her  of  her  interest  in  the 
separate  property;  she  can  neither  alien  nor  charge  the 
corpus  nor  future  income.'  With  regard  to  the  time  dur- 
ing which  they  operate,  the  separate  use  itself  and  the 
restraint  upon  anticipation  stand  upon  exactly  the  same^ 
principle,  and  are  governed  by  exactly  the  same  rules. 
Property  may  be  given  to  a  woman  to  her  sole  and  sepa- 

not  create  a  restraint:  Pybus  v.  Smith,  Johns.  &  H.  415;  Pike  v.  Fitzgibbon, 
3  Brown  Ch.  340;  Witts  v.  Dawkius,  L.  R.  17  Ch.  Div.  454  (not  liable  for 
12Ve3.  501;  nor  a  declaration  that  her  her  contracts);  In  re  Ellis's  Trusts, 
receipts  shall  be,  or  shall  alone  be,  good  L.  R.  17  Eq.  409;  In  re  Benton,  L.  R. 
discharges:  Sturgis  v,  Corp,  13  Ves.  19  Ch.  Div.  277;  Kenrick  v.  Wood, 
190;  Acton  V.  White,  1  Sim.  &  St.  429;  L.  R.  9  Eq.  333;  Clive  v.  Clive,  L.  R. 
unless  there  is  also  a  direction  that  7  Ch.  433;  but  see  Cooper  v.  Macdon- 
said  receipts  shall  only  be  discharges  aid,  L.  R.  7  Ch.  Div.  288:  In  re  Rid- 
a/ter  the  income  hecomes  due:  See  Buker  ley,  L.  R.  11  Ch.  Div.  645  (restraint 
V.  Bradley  and  Field  v.  Evans,  supra;  held  void  in  this  case).  Where  in- 
ner a  direction  that  the  interest  shall  come  of  the  separate  property,  being 
be  paid  on  personal  appearance  and  re-  due,  has  been  actually  paid  to  the  wife, 
ceipt:  In  re  Ross's  Trust,  1  Sim.,  N.  S.,  the  restraint  clause  does  not  prevent 
196;  nor  that  it  shall  be  for  her  abso-  her  from  dealing  with  the  money  as 
lute  use,  free  from  all  marital  control:  she  pleases.  Arrears  of  income  over- 
Symonds  v.  Wilkes,  11  Jur.,  N.  S.,  due  are  treated  in  the  same  manner; 
659;  see  also,  as  illustrations  of  the  she  may  assign  them,  but  cannot,  by 
general  rule,  Perkins  v.  Hays,  3  Gray,  any  contrivance,  anticipate  income 
405;  Nixon  v.  Rose,  12  Gratt.  425;  not  yet  due:  See  In  re  Brettle,  2  De 
Nix  V.  Bradley,  6  Rich.  Eq.  43;  Weeks  Gex,  J.  &  S.  79.  The  restraint  can- 
V.  Sego,  9  Ga.  199.  not  even  be  overcome  by  making  the 
'  Nix  V.  Bradley,  6  Rich.  Eq.  43.  property  liable  for  her  breach  of  trust 
*  Baggett  V.  Meux,  1  PhiU.  Ch.  or  fraud:  Arnold  v.  Woodhams,  L.  R. 
627.  16  Eq.  29;  Clive  v.  Carew,  1  Johns.  & 
»  Horlock  v.  Horlock,  2  De  Gex,  M.  H.  199;  Stanley  v.  Stanley,  L.  R.  7 
k   G.    644;    In   re   Sykes's   Trusts,  2  Ch.  Div.  589. 


165{ 


SEPARATE    ESTATE    OF    MARRIED    WOMEN.       §  1109 


rate  use  while  she  is  single,  and  not  in  contemplation  of 
any  particular  intended  marriage,  and  the  gift  is  valid  in 
that  form;^  but  the  peculiar  qualities  of  the  separate 
estate  do  not,  and  cannot,  exist  until  she  is  married.  In 
like  manner,  and  for  the  same  reason,  since  they  are 
inseparable,  the  restraint  upon  anticipation  or  upon  the 
jus  disponendi  can  only  operate  during  coverture.  If, 
therefore,  she  is  single  at  the  time  of  the  gift  of  a  sepa- 
rate estate  with  restraint  upon  anticipation,  or  if  she  be- 
comes so  afterwards,  during  the  time  when  she  is  single 
or  is  a  widow,  she  may  alienate,  dispose  of,  or  charge  the 
property,  entirely  irrespective  of  the  clause  of  restraint. 
Her  power  over  the  property  will  then  depend,  not  in  the 
least  upon  the  special  clause  of  restraint,  but  upon  the 
general  nature  of  her  estate  in  it,  and  of  the  trust  upon 
which  it  is  held.^     It  is  also  settled,  that  unless  clearly 


*  TuUett  V.  Armstrong,  4  Mylne  & 
C.  377.  In  Massey  v.  Parker,  2 
Mylne  &  K.  174,  it  was  held  that  a 
trust  for  the  sole  and  separate  use  of 
a  single  woman,  not  in  contemplation 
of  a  particular  marriage,  would  be  in- 
effectual, and  that  no  separate  estate 
would  arise  on  her  subsequent  mar- 
riage. This  decision,  however,  has 
been  completely  overruled.  Partly  on 
the  authority  of  Massey  v.  Parker, 
and  partly  from  peculiar  views  of 
trusts,  the  courts  of  Pennsylvania 
have  established  the  rule  that  there 
can  be  no  valid  trust  for  the  separate 
use  of  a  woman  unless  she  is  married 
at  the  time  of  its  creation,  or  unless  it 
is  created  in  expectation  of  an  imme- 
diate intended  marriage:  Hamersley 
V.  Smith.  4  Whart.  126;  Snyder's  Ap- 
peal, 92  Pa.  St.  504;  In  re  Stirling,  11 
Phila.  150;  Pickering  v.  Coates,  10 
Phila.  65;  Ash  v.  Bowen,  10  Phila.  96; 
Ogden's  Appeal,  70  Pa.  St.  501;  Wells 
V.  McCall,  64  Pa.  St.  207;  Springer  v. 
Arundel,  64  Pa.  St.  218.  Similar  de- 
cisions have  been  made  in  one  or  two 
other  states:  See  Lindsay  v.  Harrison, 
8  Ark.  302,  311;  Apple  v.  Allen,  3 
Jones  Eq.  120;  but  spe  Bridges  v. 
Wilkins,  3  Jones  Eq.  342.  The  doc- 
trine of  the  text  has,  however,  been 
generally  followed  in  this  country:  See 
cases  ir\/'ra,  under  note. 


*  These  positions  are  now  thoroui:;lily 
settled  by  the  English  cases:  Tullett 
V.  Armstrong,  1  Beav.  ],  22;  4  Mylne 
&  C.  377,  392;  In  re  Gaffee,  1  Macn.  <k 
G.  541,547;  Barton  v.  Briscoe,  Jacob, 
603;  Wright  V.  Wright,  2  Johns.  &  H, 
647,  655;  Buttanshawv.  Martin,  Johns. 
89;  Woodmeston  v.  Walker,  2  Rusa. 
&  M.  197;  Brown  v.  Foote,  2  Tenn. 
Ch.  255;  Hepburn's  Appeal,  65  Pa.  St. 
468.  The  doctrine  was  stated  by  the 
master  of  rolls  in  Tullett  v.  Arm- 
strong, supra,  as  follows:  "If  the  gift 
be  made  for  her  sole  and  separate  use, 
without  more,  she  has,  during  her  cov- 
erture, an  alienable  estate  independent 
of  her  husband.  If  the  gift  be  made 
for  her  sole  and  separate  use,  without 
power  to  alienate,  she  has,  during  the 
coverture,  the  present  enjoyment  of  aa 
inalienable  estate,  independent  of  her 
husband.  In  either  of  these  cases  she- 
has,  when  discovert,  a  power  of  aliena- 
tion; the  restraint  is  annexed  to  the- 
separate  estate  only,  and  the  separate 
estate  has  its  existence  only  during 
coverture;  whilst  the  woman  is  dis- 
covert, the  separate  estate,  whether 
modified  by  restraint  or  not,  is  sus- 
pended, and  has  no  operation,  though 
it  is  capable  of  arising  upon  the  hap- 
pening of  a  marriage.  The  restriction 
cannot  be  considered  distinctly  from 
the  separate  estate,  of  which  it  is  only 


§  1109  EQUITY   JURISPRUDENCE.  1656 

restricted  to  one  coverture,  the  clause  in  restraint  of 
anticipation  annexed  to  a  gift  of  property  to  the  separate 
use  of  a  woman  will  operate  upon  all  her  covertures  and 
be  effectual,  unless  it  be  destroyed  by  her  own  act  in  alien- 
ing or  dealing  with  the  property  while  she  is  discovert, — 
that  is,  before  marriage  or  during  widowhood.^  The 
clause  in  restraint,  however,  like  the  trust  itself  for  sepa- 
rate use,  may  be  confined  in  its  operation  to  a  particular 
coverture,  but  the  words  must  be  clear  and  unequivocal.'' 
The  same  rules  have  generally,  though  not  uniformly, 
been  adopted  by  the  courts  of  this  country.'  It  follows,  as 
a  necessary  consequence  from  the  foregoing  conclusions, 
that  where  property  has  been  given  to  the  sole  and  sepa- 
rate use  of  a  woman,  even  coupled  with  a  restraint  against 
alienation,  she  may,  before  her  marriage  or  during  her 
widowhood,  terminate  both  the  separate  use  and  the 
restraint,  either  by  disposing  of  the  property  and  invest- 
ing its  proceeds  in  a  new  form,  or  by  settling  the  property 
in  a  different  manner  at  her  marriage.*    A  court  of  equity, 

a  modification;  to  say  that  the  restric-  v,    Tazewell,   9    Md.    291;    Fears   v. 

tioa  exists  is  saying  no  more  than  that  Brooks,    12   Ga.    195,   197;  Robert  v. 

tlae    separate   estate   is   so    modified.  West,  15  Ga.   122;    Staggers  v.  Mat- 

....  If  there  be  no  separate  estate,  thews,  13  Rich.  Eq.  14_',  154;  Nix  v. 

there  can  be  no  such  restriction  as  that  Bradley,  6  Rich.   Eq.   43;  Fellows  v. 

•which    is   now   under    consideration.  Tann,  9  Ala.  999;  Beaufort  v.  Collier, 

The   separate    estate  may,  and  often  6    Humph.    487;    44   Am.    Dec.    321; 

does,  exist  witliout  the  restriction,  but  Brown  v.  Foote,  2  Tenn.  Ch.  255.     In 

the   restriction    has    no    independent  Pennsylvania  and  the  few  states  which 

existence;  when  found,  it  is  a  modifi-  adopt  the  peculiar  theory  described  in 

cation  of  the  separate  estate,  and  in-  a  previous    note,    the   restraint  only 

separable  from  it."  operates   during   the  single    marriage 

1  Tullett  V.  Armstrong,  4  Mylne  &  for  which  the  separate  use  was  origi- 
C.  377;  1  Beav.  1;  In  re  GaflFee,  1  nally  created:  Hamersley  v.  Smith,  4 
Macn.  &  G.  541;  Scarborough  v.  Bor-  Whart.  126;  Kuhn  v.  Newman,  26  Pa. 
man,  4  Mylne  &  C.  378;  Anderson  v,  St.  227;  Dubs  v.  Dubs,  31  Pa.  St,  149 
Anderson,  2  Mylne  &  K.  427;  Hawkes  Freyvogle  v.  Hughes,  56  Pa.  St.  228 
V.  Hubback,  L.  R.  11  Eq.  5;  Newlands  Hepburn's  Appeal,  65  Pa.  St.  468 
v.  Paynter,  4  Mylne  &  C.  408.  Bush's  Appeal,  33  Pa.  St.  85;  McKee 

2  In  re  Gaffee,  1  Macn.  &  G.  541,  v.  McKinley,  33  Pa.  St.  92;  Lindsay 
545;  Moore  v.  Morris,  4  Drew.  S3;  v,  Harrison,  8  Ark.  302,  311;  Miller 
Hawkes  v.  Hublmck,  L.  R.  11  Eq.  5.  v.  Bingham,  1  Ired.  Eq.  423;  36  Am. 

^  The   decisions  are  few,  but    they  Dec.  58;  Apple  v.  Allen,  3  Jones  Eq. 

generally  have  followed  the  doctrine  120;  and  see  cases  ante,  in  note  1,  p. 

that   the   restraint   upon  anticipation  1651,  under  §  1105. 

operates    during   a   second   or  subse-  *  Wright  v.  Wright,  2  Johns.  &  H. 

quent  coverture,  unless  destroyed  by  647,    655;    Campbell    v.    Bainbridge, 

the  act  of  the  woman  while  discovert:  L.    R.   6  Eq.  269;    Brown  v.  Foote,  2 

Shirley  v.  Shirley,  9  Paige,  363;  Waters  Tenn.  Ch.  255. 


1657  SEPARATE    ESTATE    OF    MARRIED    WOMEN.       §   1111 

however,  has  no  power  to  disregard  the  restraint,  nor  to 
release  a  married  woman  from  its  operation,  however 
beneficial  that  course  might  be  in  any  particuhir  case.* 

§  1110.  End  of  the  Separate  Estate  —  Its  Devolution 
on  the  Wife's  Death,  —  The  trust  for  the  wife's  separate 
use,  like  the  restraint  upon  alienation,  may  be  terminated 
before  the  coverture  or  after  it  ends,  by  her  dealings  with 
the  property,  as  by  disposing  of  it,  and  investing  the  pro- 
ceeds in  other  property.^  The  adultery  of  the  wife  will 
not,  in  the  absence  of  statute,  afifect  her  rights  to  property 
settled  to  her  own  separate  use.'  When  a  married  woman 
holding  a  separate  estate  dies  without  making  a  disposi- 
tion by  will,  it  will  devolve,  subject  to  the  future  limita- 
tions, if  any,  in  the  settlement,  in  the  same  manner  and 
to  the  same  successors  as  her  legal  estates  and  her  other 
equitable  estates.  In  the  absence  of  statutory  regulations, 
the  real  estate  in  fee  descends  to  her  heirs,  subject  to  the 
husband's  life  interest  as  tenant  by  the  curtesy;  the  cash, 
personal  chattels,  and  chattels  real  will  belong  to  the  hus- 
band juri  mariti;  while  the  things  in  action  will  devolve 
upon  him  as  her  administrator.'* 

§  1111.  Pin-money.  —  Pin-money  is  a  yearly  allowance 
given  by  a  marriage  settlement,  made  by  the  husband  to 
the  wife,  for  the  purchase  of  her  clothes  or  ornaments,  or 

*  Robinson  V,  Wheelwright,  21  Beav.         'Roberts  v.   Dixwell,   1  Atk.  607; 

214;  6  De  Gex,  M.  &  G.  535;  In  re  Gas-  Pitt  v.  Jackson,  2  Brown  Ch.  51 ;  Mor- 

kell's  Trusts,  11  Jur.,  N.  S.,  780;  but  gan  v.  Morgan,  5  Madd.  408;  Follett 

see  Sanger  v.  Sanger,   L.   R.    11   Eq.  v.  Tyrer,  14  Sim.  1"_'5;  Harris  v.  Mott, 

470,  decided  under  a  statute.  14   Beav.    169;    Appleton    v.   Bowley, 

^  See  last  preceding  paragraph,  and  L.  R.  8  Eq.  139;  Molony  v.  Kennedy, 

cases  cited  in  note.  10  Sim.   254;  Johnstone  v.  Lunib,  15 

'  Seagrave  v.  Seagrave,  13  Ves.  439,  Sim.  308;  Proudley  v.  Fielder,  2  Mylno 

443:  Evans  v.  Carrington,  2  DeGex,  F.  &  K.  57;  Musters  v.  Wriglit,  2  De  Gex 

&  J.  481;  Duncan  v.  Campbell,  12  Sim.  &  S.  777;  Stewart  v.  Stewart,  7  Jolins. 

616;  and  in  the  absence  of  statute  it  Ch.  229;  Donnington  v.  Mitchell,  2  N. 

seems  the  rights  of  the  husband  under  J.  Eq.  243;  Cooney  v.  Woodburn,  33 

a  marriage  settlement  are  not  forfeited  Md.   320;  [Johnson  v.  Prairie,  91   N. 

or  destroyed  by  a  divorce  procured  by  C.     159.]      These    common-law   rules 

the   wife,    which   could   only   be    for  concerning      succession      have     been 

the  husband's  adultery:  Fitzgerald  v.  greatly  modified  in  many  of  the  states. 

Chapman,  L.  R.  1  Ch.  Div.  563;  Bur-  especially   concerning   the    husband's 

ton  v.  Sturgeon,  L.  R.  2  Ch.  Div.  318;  rights  as  his  wife's  successor.    In  each 

per  contra.  Swift  v.  Wenman,  L.  R.  10  state,  the  statutory  regulatioua  will, 

Eq.  15;  Fussell  v.  Dowding,  L.  R.  14  of  course,  goveru. 
Eq.  421. 


§  1112  EQUITY   JURISPRUDENCE.  1658 

for  her  other  personal  expenditure.  Gifts  or  payments 
made  by  the  husband  to  the  wife,  from  time  to  time,  after 
marriage,  for  the  same  purposes,  are  also  treated  as  pin- 
money.  Pin-money  resembles  the  wife's  separate  estate 
in  one  feature,  that  she  uses  and  disposes  of  it  herself; 
it  differs  from  her  separate  estate  in  not  being  an  ab- 
solute gift  to  her  own  use,  and  in  not  being  free  from 
the  jus  mariti.  The  only  object  of  pin-money  is  personal 
expenditure;  the  wife  is  not  entitled  to  have  her  personal 
expenses  otherwise  defrayed  by  her  husband,  without 
drawing  upon  the  pin-money  fund,  and  then  to  demand 
payment  of  its  arrears  as  a  debt  due  to  her  from  him  or 
from  his  estate.* 

§  1112.  The  Wife's  Paraphernalia.  —  The  wife's  para- 
phernalia include  the  wearing  apparel  and  ornaments 
given  to  her  by  her  husband,  reasonably  suitable  to  her 
condition  in  society,  with  the  express  design  of  being  worn 
by  her  as  clothing,  or  as  her  own  personal  ornaments.^ 

'  The  leading  case  upon  this  subject,  Ir.  Ch.  Rep.  215;  Edgeworth  v.  Edge- 
in  which  most  of  the  rules  conceruing  worth,  16  Ir.  Ch.  Rep,  348;  as  a  gen- 
it  are  laid  down,  is  Howard  v.  Digby,  eral  rule  she  cannot  claim  more  than 
8  Bligh,  N.  S.,  224,  245,  265-2(59;  2  the  arrears  for  one  year:  Lord  Town- 
Clark  &  F.  634;  and  see  I  Lead.  Cas.  shend  v.  Windham,  2  Ves.  Sr.  1,7; 
Eq.,  4th  Am.  ed.,  729.  Pin-money  Peacock  v.  Monk,  2  Ves.  Sr.  190;  As- 
does  not  include  the  purchase  of  jew-  ton  v.  Aston,  1  Ves.  Sr.  264,  267; 
els,  nor  the  cost  of  maintaining  the  Howard  v.  Digby,  supra;  finally,  her 
house,  grounds,  carriage,  and  the  like,  own  represeatatives  have  no  claim  for 
but  only  the  wife's  current  personal  arrears  upon  the  husband  or  his  estate: 
expenses.  The  wife  is  not  liable  to  Howard  v.  Digby. 
account  for  its  expenditure;  and  if  she  ^  See  Graham  v.  Londonderry,  3 
fulfills  the  duty  of  applying  it  to  her  Atk.  393;  1  Lead.  Cas.  Eq.,  4th  Am. 
dress  and  other  personal  expenses,  she  ed.,  730,  731.  Jewels  and  ornaments 
is  entitled  to  any  surplus  remaining  in  the  nature  of  heir-looms  in  her  hus- 
out  of  what  has  been  actually  paid  to  band's  family  are  not  paraphernalia: 
her:  Jodrell  v.  Jodrell,  9  Beav.  45;  Jervoise  v,  Jervoise,  17  Beav.  566,  570; 
Howard  v.  Digby,  supra;  if  the  bus-  Calmady  v.  Calmady,  11  Vin.  Abr. 
band  has  actually  paid  or  provided  181,  pi.  21;  but  where  the  husband 
for  all  her  personal  expenses,  she  can-  makes  presents  to  his  wife  of  jewels, 
not  claim  any  arrears  from  his  estate  ornaments,  and  the  like,  for  the  pur- 
at  his  death:  Fowler  v.  Fowler,  3  P.  pose  of  being  worn  by  her,  they  are 
Wms.  353,  355;  Thomas  v.  Bennet,  2  considered  as  paraphernalia:  Jervoise 
P.  Wms.  347;  Howard  v.  Digby;  ex-  v.  Jervoise,  17  Beav.  566,  571;  Gra- 
cept  that,  when  he  had  not  made  the  ham  v.  Londonderry,  3  Atk.  393,  394; 
stipulated  payments,  and  on  her  de-  see  Whiton  v.  Snyder,  88  N.  Y.  299; 
manding  them  he  had  promised  to  pay  jewels  and  such  articles  may  be  given 
ihein  in  full,  she  may  claim  all  the  by  the  husband  to  his  wife  absolutely 
arrears  from  his  estate:  Ridout  v.  bo  as  to  become  part  of  her  separate 
Lewis,  1  Atk.   269;  Foss  v.  Foss,  15  estate,    and    presents  which    become 


1659  SEPARATE    ESTATE    OP    MARRIED    WOMEN.       §  1113 

Paraphernalia  are  very  different  in  their  legal  incidents 
from  the  wife's  separate  estate.  "While  she  is  entitled 
to  their  possession  and  use,  and  may  under  some  circum- 
stances have  a  claim  with  respect  to  them  in  the  nature 
of  a  debt  against  her  husband's  estate,  she  is  not  their 
absolute  owner;  she  cannot  dispose  of  them;  on  the  con- 
trary, her  husband  may  dispose  of  them,  and  they  are 
liable  to  the  claims  of  his  creditors. 

§  1113.  Settlement  or  Conveyance  by  the  Wife  in 
Fraud  of  the  Marriage.  —  By  marriage  at  the  common 
law  the  husband  acquires  large  interests  in  the  wife's 
property.  Any  alienation  by  her  of  her  property  in  fraud 
of  her  husband's  marital  rights  would  therefore  be  set 
aside  by  a  court  of  equity  as  null  and  void.  In  accord- 
ance with  the  common-law  theory  of  marriage,  and  while 
that  theory  3'et  prevailed  unmodified  by  statute,  the  doc- 
trine on  this  subject  was  established  by  the  English  courts 
of  equity  as  follows:^  "A  conveyance  by  a  wife,  whatso- 

paraphernalia  should  be  distinguished  creditor   for   their   value   against   his 

from  such  gifts:  ftraham  v.  London-  personal  estate,  and  the  assets  will  he 

derry,   supra;   arid  articles  which,   if  marshaled   in   her   favor:    Aldrich   y. 

given  by  her  husband,  would  be  para-  Cooper,  8  Ves.  3S2,  397;  against  the 

phernalia,    when    given    by    a    third  heir  taking  land  by  descent:  Snelson 

person  will   rather   be  considered   as  v.  Corbet,  3  Atk.  3(39;  Tipping  v,  Tip- 

her    separate    property:    Graham    v.  ping,  1  P.  Wms.  729;  and  against  dev- 

Londonderry,  supra;  Lucas  v.  Lucas,  isees   of   land:    Boyntun  v.  Boyntun, 

1    Atk.    270.     The    husband    cannot  1  Cox,   106;  Incledon  v.  Nortlieote,  3 

bequeath  the  paraphernalia:  Tipping  Atk.    430,   436;   Tynt  v.   Tynt,  2   P. 

V.  Tipping,   1  P.  Wms.  729;  Seyniore  Wms.    542,    543;   but   see   Ridout   v. 

V.  Tresilian,  3  Atk.  358;  but  may  dis-  Earl  of  Plymouth,  2  Atk.  104;  Proberfc 

pose  of  them  by  gift  or  sale  during  v.  CliflFord,   Amb.  6.     The  husband's 

her  life:  Seymore  v.  Tresilian,  supra;  possession    of    the    paraphernalia    at 

they  are  liable  to  the  claims  of  his  the  time  of  his  death  is  immaterial: 

creditors,  even  though   given  to  her  Northey  v.  Northey,  2  Atk.  77,  79.   It 

before  marriage:  Boyntun  v.  Boyntun,  may  be  added,  that  as  the  legal  title 

1  Cox,  106;  Ridout  V.  Earl  of  Plymouth,  to  the  paraphernalia  is  held   by  the 

2  Atk.  104;  Snelson  v.  Corbet,  3  Atk.  husband,  he  is  the  proper  party  to 
369;  Campion  v.  Cotton,  17  Ves.  264,  bring  any  legal  action  for  their  loss  or 
273;  but  they  are  not  subject  to  the  for  injury  to  them. 

claims  of  his  legatees,  general  or  spe-  *  Countess  of  Strathmore  v.  Bowes, 
cific:  Graham  v.  Londonderry,  supra.  2  Brown  Ch.  345;  1  Ves.  22;  1  Lead. 
If  her  paraphernalia  have  been  pledged  Cas.  Eq.  605,611-617,618-623.  ladd 
by  her  husband  in  his  lifetime,  and  a  brief  abstract  of  the  points  settled 
there  are  sufficient  assets  after  pay  by  the  English  decisions.  A  woman, 
ment  of  his  debts,  she  is  entitled  to  prior  to  the  coinmencement  of  a  mar- 
have  them  redeemed  therewith:  Gra-  riage  negotiation,  may  make  such  dis- 
hara  v.  Londonderry.  If  the  para-  position  of  her  proj)erty  as  she  sees 
phernalia  have  been  used  in  payment  fit,  and  no  fraud  will  he  thereby  coni- 
of  her  husband's  debts,  she  will  be  a  mitted  upon  the  husband  whom  she 


§1113 


EQUITY   JURISPRUDENCE. 


1660 


ever  may  be  the  circumstances,  and  even  the  moment 
before  the  marriage,  is  'prima  facie  good,  and  becomes  bad 
only  upon  the  imputation  of  fraud.  If  a  woman,  during 
the  course  of  a  treaty  of  marriage  with  her,  makes,  without 
notice  to  the  intended  husband,  a  conveyance  of  any  part 
of  her  property,  it  should  be  set  aside,  though  good  prima 
facie,  because  affected  with  that  fraud."  The  rules  thus 
established  by  the  English  court  of  chancery  have  been 
repeatedly  approved  and  adopted  in  various  states  of  this 
country,  where  the  common-law  theory  concerning  the 
effect  of  marriage  still  prevailed.^  The  extensive  and 
radical  changes  made  by  modern  legislation  have  ren- 
dered these  rules  obsolete  in  a  majority  of  the  states.' 


finally  marries;  nor  is  it  necessary  that 
such  disposition  should  be  communi- 
cated to  him:  Countess  of  Strathmore 
V.  Bowes,  supra;  Cotton  v.  King  2  P. 
Wms.  358,  674;  Ball  v.  Montgomery, 
2  Ves.  191,  193;  England  v.  Downs,  2 
Beav.  522.  But  a  settlement  or  con- 
veyance by  the  intended  wife  after  the 
commencement  of  the  negotiation  for 
a  marriage,  which  afterwards  takes 
place,  made  without  notice  to  her  in- 
tended husband,  is,  in  general,  void  as 
against  him,  except  when  in  favor  of 
A  bona  fide  purchaser  for  value:  God- 
dard  v.  Snow,  1  Russ.  485;  Lance  v. 
Norman,  2  Ch.  Rep.  79.  A  disposi- 
tion made  to  a  bona  fide  purchaser  for 
value  cannot  be  impeached:  Blanchet 
V.  Foster,  2  Ves.  Sr.  264;  Lewellin  v. 
Cobbold,  1  Smale  &  G.  376.  The  rule 
is:  "  Deception  will  be  inferred  if,  after 
the  commencement  of  the  treaty  for  mar- 
riage the  wife  should  attempt  to  make 
any  disposition  of  her  property  with- 
out her  intended  husband's  knowledge 
or  concurrence  ":  Taylor  v.  Pugh,  1 
Hare,  608,  614;  Downes  v.  Jennings, 
32  Beav.  290;  Chambers  v.  Crabbe,  34 
Beav.  457;  but  see  St.  George  v.  Wake, 
1  Mylne  &  K.  610,  623;  De  Manne- 
ville  v.  Crompton,  1  Ves.  &  B.  354. 
There  can  be  no  such  presumption  of 
fraud  where  the  intended  husband  as- 


sents to  or  has  notice  of  the  disposi- 
tion: Hunt  V.  Matthews,  1  Vein.  408} 
Slocombe  v.  Glubb,  2  Brown  Ch.  545; 
Coantess  of  Strathmore  v.  Bowes,  su- 
pra; Ashton  V.  McDougall,  ft  Beav.  56; 
Wrigley  v.  Swainson,  3  De  Gex  &  S. 
458;  Griggs  v.  Staplee.  2  De  Gex  &  S. 
572;  Prideaux  v.  Lonsdale,  1  De  Gex, 
J.  &  S.  433;  and  the  husband's  acqui- 
escence to  the  disposition  would  bar 
any  relief:  Loader  v.  Clarke,  2  Macn. 
&  G.  382. 

'  Tucker  v.  Andrews,  13  Me.  124; 
Williams  v.  Carle,  10  N.  J.  Eq.  543; 
Robinson  v.  Buck,  71  Pa.  St.  386; 
Belt  V.  Ferguson,  3  Grant  Cas.  289; 
Duncan's  Appeal,  43  Pa.  St.  67;  Wal- 
ler V.  Armistead's  Adm'rs,  2  Leigh,  11; 
21  Am.  Dec.  594;  Fletcher  v.  Ashley, 
6  Gratt.  332,  339;  Linker  v.  Smith,  4 
Wash.  224;  Logan  v.  Simmons,  3  Ired. 
Eq.  487,  494;  Terry  v.  Hopkins,  1  Hill 
Eq.  1;  Ramsay  v.  Jovce,  1  McMuU. 
Eq.  236,  249;  37  Am."  Dec.  550;  Mc- 
Clure  V.  Miller,  Bail.  Eq.  108;  21 
Am.  Dec.  522;  Manes  v.  Durant,  2 
Rich,  Eq.  404;  46  Am.  Dec.  65;  Free- 
man V.  Hartmau,  45  111.  57;  92  Am. 
Dec.  193;  McAfee  v.  Ferguson,  9  B. 
Mon.  475;  Cheshire  v.  Payne,  16  B. 
Mon.  618;  overruling  Hobbs  v.  Bland- 
ford,  7  Mon.  469. 
^  >  See  anU,  %  1099,  note. 


1661  wife's  equity  to  a  settlement.         §  1114 


SECTION  II. 

THE  WIFE'S  EQUITY  TO  A  SETTLEMENT. 

ANALTSIS. 

§  1114.     General  nature. 

S  1115.     Extent  of  the  wife's  equity;  to  what  property  and  against  what  per- 
sons. 

5  1116.    When  the  equity  does  not  arise, 
§  1117.     Amount  of  the  settlement, 

§  1118.     Form  of  the  settlement. 
§  1119.     Maintenance  of  wife. 
§  1120.     Alimony. 

§  1114.  General  Nature.  —  The  origin  of  this  peculiar 
equity,  as  an  application  of  the  maxim,  He  who  seeks 
equity  must  do  equity,  has  been  fully  explained  in  a 
former  chapter.'  The  wife's  equity  to  a  settlement  does 
not  depend  upon  her  right  of  property  in  the  subject- 
matter,  for  it  must  be  enforced  for  the  benefit  of  herself 
and  her  children,  and  the  amount  is  wholly  discretionary 
with  the  court;  it  is  an  obligation  which  the  court  fast- 
ens, not  upon  the  property,  but  upon  the  right  to  receive  it, 
—  the  right  of  her  husband  and  those  claiming  under  him 
to  receive  it,  as  well  as  that  of  the  wife.*  The  doctrine 
was  first  applied  to  cases  only  where  the  husband  resorted 
to  the  jurisdiction  of  equity  in  order  to  enforce  his  jns 
mariti  and  reach  assets  belonging  to  his  wife.  Having 
been  established  in  this  application,  it  was  soon  extended 
to  cases  where  the  general  assignees  in  bankruptcy  or 
insolvency  of  the  husband  sought  the  aid  of  equity  in 
reaching  property  of  the  wife;  the  court  imposed  on  them 
the  same  conditions  which  it  would  impose  on  the  hus- 
band himself.'     The  next  step  was  soon  taken,  and  the 

^Seean^tf,  vol.  1,  quotation  from  opin-  *  Osborn   v.    Morgan,  9  Hare,  432, 

ion  of  Lord  Cottenham  in  the  leading  434. 

case  of  Sturgis  v.  Champneys,  5  Myltie  *  Oswell  v.  Probert,  2  Ves.  680,  682; 

6  C.  97.  101,  in  note  1,  under  §  385;  Dunkley  v.  Dunkley,  2  De  Gex,  M.  it 
also  §  389,  and  the  numerous  English  G.  390. 

and  American  cases  cited  under  it. 


§  1114  EQUITY   JURISPRUDENCE.  1662 

doctrine  was  applied  to  particular  assignees  of  the  hus- 
band for  a  valuable  consideration,  whenever  they  at- 
tempted to  enforce  tbeir  assignments  by  a  proceeding  in 
equity/  In  these  early  stages  of  the  doctrine,  the  court 
was  always  set  in  motion  by  the  husband  or  his  assignees, 
and  it  was  formerly  supposed  that  this  was  essential;  it  is 
now  settled,  however,  that  the  wife  may  herself  originate 
the  proceeding,  and  may  maintain  a  suit  for  a  settlement.^ 
A  court  of  equity  will  not,  therefore,  interfere  with  the 
purely  legal  rights  of  the  husband,  or  of  his  assignees, 
which  can  be  completely  enforced  at  law,  without  the  aid 
of  equity,  and  where  the  property  is  not  already  in  the 
custody  or  under  the  immediate  control  of  the  court  of 
equity.  The  general  doctrine  may  be  formulated  as  fol- 
lows: Where  the  husband,  or  some  person  claiming  un- 
der him,  is  suing  in  equity  to  reach  the  wife's  property; 
and  where  the  property  is  already  within  the  reach  of 
the  court, —  as  where  it  is  vested  in  trustees,  or  has  been 
paid  into  court,  or  is  in  any  other  situation  which  brings 
it  under  the  control  of  the  court,  —  the  court  of  equity 
will  not  grant  the  relief  in  the  first  instance,  nor  permit 
the  property  to  be  removed  out  of  its  jurisdiction  and  con- 
trol in  the  second,  until  an  adequate  provision  is  made  for 
the  wife,  unless  special  circumstances  exist  which  defeat 
her  right;  and  under  a  like  condition  of  the  property,  the 
wife  may  herself  institute  a  suit  and  obtain  the  relief.' 

>  Macaulay  y.  Philips,  4  Ves.  15,  19;  v.    Myers,    6    Johns.    Ch.     25,    178; 

Scott  V.  Spashett,  3  Macn.  &  G.  599;  Helms   v.  Franciscus,    2   Bland,  544; 

Haviland  v.  Bloom,  6  Johns.  Ch.  178,  20  Am.  Dec.  402;  Poindexter  v.  Jef- 

180.  fries,  15  Gratt.  363;  but  see  Jackson 

*  Lady  Elibank  v.  Montolieu,  5  Ves.  v.  Hill,  25  Ark.  223.     In  Duncombe 

737;  Ex  parte  Coysegame,  1  Atk.  192;  v.  Greenacre,  2  De  Gex,  F.  &  J,  509, 

Sturgis  V.  Champneys,  5  Mylne  &  C.  28  Beav.  472,  it  was  held  that  where  a 

97;  Duncombe  V.  Greenacre,  2  De  Gex,  legacy  to  a  wife  had  been  paid  into  the 

F.  &  J.  509,  517;  Wallace  v.  Auldjo,  court,  the  wife  could  maintain  a  suit  to 

1  De  Gex,  .T.  &  S.  643;  Giacometti  v.  restrain  the  husband's  assignee  from 

Prodgers,  L.  R.  14  Eq.  253;  8  Ch.  338;  enforcing  his   legal  remedies   for  the 

Kenny  v.  Udall,  5  Johns.  Ch.  464;  3  recovery  of  the  legacy.     Here  it  will 

Cow.  590;  Van  Epps  v.  Van  Deusen,  4  be  noticed    that    the    subject-matter 

Paige,  64,  74;  25  Am.  Dec.  516;  Van  was  already  within   the   control   and 

Duzer   v.  Van   Duzer,  6   Paige,    366,  custody  of  the  court. 
368;    31    Am.    Dec.    257;    Martin    v.         'Lady  Eliliank  v.  Montolien,  1  Lead. 

Martin,  1  Hofif.  Ch.  462,  467;  Haviland  Cas.   Eq.    623,    639-669,    670-679;  in 


16G3 


wife's  equity  to  a  settlement.         §  1115 


§  1115.  Extent  of  the  Wife's  Equity —  To  What  Prop- 
erty and  against  What  Persons. — The  rule  is  funda- 
mental that  the  wife's  equity  does  not  exist  where  the 
husband  is  only  exercising  his  legal  right  over  the  person- 
alty of  his  wife's  estate  which  vested  in  him  by  the  mar- 
riage, or  over  his  own  joint  life  interest  in  her  realty.* 
It  only  arises  where  the  wife's  interest  being  equitable, 
the  property  itself  is  originally  under  the  control  and 
jurisdiction  of  equity,  or  being  legal,  the  husband  or  his 
assignees  resort  to  courts  of  equity  in  order  to  enforce, 
protect,  or  perfect  their  claims.  Realty — Estates  in  fee: 
The  right  extends  to  her  equitable  estates  in  fee,  although 
the  husband's  possible  estate  by  the  curtesy  will  not  be 
interfered  with,  and  to  her  equitable  estates  in  tail,  with 
this  limitation,  however,  that  it  cannot  embrace  the  corpus, 

addition  to  the  English  and  American 
cases  illustrating  the  general  doctrine 
cited  under  §  389,  vol.  1,  p.  531, 
see  Duncombe  v.  Greenacre,  2  De  Gex, 
F.  &  J.  509;  Life  Association  v.  Sid- 
dal,  3  De  Gex,  F.  &  J.  271;  Smith  v. 
Matthews,  3  De  Gex,  F.  &  J.  139; 
Martin  v.  Foster,  7  De  Gex,  M.  &  G. 
98;  AUday  v.  Fletcher,  I  De  Gex  &  J. 
82;  Biddies  v.  Jackson,  3  De  Gex  & 
J.  544;  Wallace  v.  Auldjo,  1  De  Gex, 
J.  &  S.  643;  Johnson  v.  Lander,  L.  R. 
7  Eq.  228;  Croxton  v.  May,  L.  R.  9 
Eq.  404;  Aitchison  v.  Dixon,  L.  R. 
10  Eq.  589;  In  re  Carr's  Trusts,  L.  R. 
12  Eq.  609;  Giacometti  v.  Prodgers, 
L.  R.  14  Eq.  253;  8  Ch.  338;  Knight 
V.  Knight,  L.  R.  18  Eq.  487;  Ruffles 
V.  Alston,  L.  R.  19  Eq.  539;  In  re 
Cordwell's  Estate,  L.  R.  20  Eq.  644; 
Spirett  V.  Willows,  L.  R.  1  Ch.  520; 
In  re  Suggitt's  Trusts,  L.  R.  3  Ch. 
215;  In  re  Lush's  Trusts,  L.  R.  4  Ch. 
591;  Barnard  v.  Ford,  L.  R.  4  Ch.  247; 
Walsh  V.  Wason.  L.  R.  8  Ch.  48-';  In 
re  Mellor's  Trusts,  L.  R.  6  Ch.  Div. 
127;  Taunton  v.  Morris,  L.  R.  8  Ch. 
Div.  453;  11  Ch.  Div.  779;  In  re  Rob- 
inson's  Estate,  L.  R-.  12  Ch.  Div.  188; 
Ward  V.  Ward,  L.  R.  14  Ch.  Div.  506; 
In  re  Bryan,  L.  R.  14  Ch.  Div.  516; 
Shipway  v.  Ball,  L.  R.  16  Ch.  Div. 
376;  Pondv.  Skeen,  2  Lea,  126;  White 
V,  Gouldin's  Ex'rs,  27  Gratt,  491;  Can- 
by  V.  McLear,  13  Bank.  Reg.  22; 
Beals'a  Ex'r   v.  Storm,  26   N.  J.  Eq. 


872  (proceeds  of  sale  of  Trife's  contin- 
gent dower  in  her  husband's  lands  will 
be  secured  to  her);  McCaleb  v.  Crich- 
field,  5  Heisk.  288;  Jackson  v.  Hill, 
2.T  Ark.  223;  Atkinson  v.  Beall,  33  Ga. 
153;  Sabel  v.  Slingluff,  52  Md.  132; 
Moore  v.  Moore,  14  B.  Mou.  208;  Ben- 
nett v.  Dillingham,  2  Dana,  436;  Cop- 
pedge  V.  Threadyill,  3  Sneed,  577; 
Phillips  V.  Hasseil,  10  Humph.  197; 
Poindexter  v.  Jeffries,  15  Gratt.  363; 
Wiles  V.  Wiles,  3  Md.  1;  56  Am.  Dec. 
733;  Lay's  Ex'rs  v.  Brown,  13  B.  Mon. 
295;  Andrews  v.  Jones,  10  Ala.  401; 
Ward  V.  Amory,  1  Curtis,  419,  4.32; 
[Poulter  V.  Shackel,  39  Ch.  Div.  471.] 
In  a  few  states,  including  New  Hamp^ 
shire  and  North  Carolina,  the  doc- 
trine seems  to  have  been  expressly 
rejected.  The  modern  legislation  in 
80  large  a  portion  of  the  American 
states,  destroying  the  husband's  inter- 
est in  his  wife's  property,  and  making 
it  her  own  separate  legal  estate,  has, 
of  course,  taken  away  the  very  foun- 
dation for  this  equitable  doctrine,  and 
it  has  thus  been  rendered  virtually 
obsolete.  For  this  reason,  I  shall  not 
attempt  to  give  any  detailed  statement 
of  its  particular  rules  and  applications. 
'  Warden  v.  Jones,  2  De  Gex  &  J. 
76,  87;  Durham  v.  Crackles,  32  L.  J. 
Ch.  Ill:  Ward  v.  Ward,  L.  R.  14 
Ch.  Div.  506;  In  re  Bryan,  L.  R.  14 
Ch.  Div.  516;  Canby  v.  McLear,  13 
Bank.  Reg.  22. 


§  1115  EQUITY   JURISPRUDENCE.  1.664 

but  only  the  rents,  profits,  and  income.*  Even  where 
the  wife's  estate  in  land  is  wholly  legal,  if  the  husband 
or  his  assignee  comes  into  a  court  of  equity  as  plaintiff 
with  respect  to  it,  and  it  is  thus  brought  within  the 
equitable  jurisdiction,  the  wife's  equity  will  attach  and 
be  protected.^  Terms  of  years:  The  equity  extends  to  the 
wife's  leasehold  estates,  and  will  be  enforced  against  the 
husband  and  his  assignees,  unless  her  interest  and  his 
title  in  virtue  thereof  are  wholly  legal.'  Personalty  — 
Things  in  action:  That  the  equity  embraces  the  wife's 
equitable  personal  property,  and  especially  her  things  in 
action,  unless  "reduced  to  possession"  by  her  husband, 
and  will  be  enforced  against  him,  and  his  general  assign- 
ees, and  even  against  his  particular  assignees  for  a  valu- 
able consideration,  is  settled  beyond  dispute.*  Life  estates: 
It  was  formerly  supposed  that  a  radical  distinction  existed 
between  the  wife's  absolute  estates,  and  those  which  she 
held  only  for  her  life.^  The  latest  English  decisions, 
however,  have  established  the  rule  that  a  wife  has  the 
same  equity  to  a  settlement,  as  against  her  husband  or 
his  general  assignee,  out  of  property  in  which  she  has 

'  Smith  V.  Matthews,  3  De  Gex,  F.  M.  &  G.  782;  Burdon  v.  Dean,  2  Ves. 

&  J.  139;  Life  Association  v.  Sicldal,  3  607;   Beresford  v.    Hobson,    1   Madd. 

DeGex,  F.  &J.  271;  Wortham  v.  Pern-  362;  Ruffles  v.  Alston,  L.  R.   19  Eq. 

berton,  1  De  Gex  &  S.  644.     In  Life  5.39;  In  re  Mellor's  Trusts,  L.  R.  6  Ch. 

Association  v.  Siddal,  Turner,  L.  J.,  Div.   127   (a  life  policy).     As  to   the 

while  showing  that  the  equity  extended  right  against  a  particular  assignee  of 

only  to   the  income,  and   not  to   the  the  husband  for  a  valuable  considera- 

corpus,  of  the  land  in  such  estates,  laid  tiou,  see  Earl  of  Salisbury  v.  Newton, 

down  a  fundamental  rule  as  follows:  1  EJen,  370;   Macaulay  v.   Philips,  4 

"The  equity  for  a  settlement  attaches  Ves.  15,  19;  Wright  v.  Morley,  11  Ves. 

on  what  the  husband  takes  in  right  of  the  12,  16;  Elliott  v.  Cordell,  5  Madd.  149, 

wife,  and  not  on  what  the  wife  takes  156;  Carter  v.  Taggart,  1  De  Gex,  M. 

in  her  own  right."     A  legacy  to  the  &  G.  286;  5  De  Gex  &  S.  49;  Tidd 

wife  charged   on  lands  devised  to  a  v.  Lister,  3  De  Gex,  M.  &  G.  857. 

third  person  is  subject  to  her  equity:  ^  See  Tidd  v.  Lister,  3  De  Gex,  M. 

Duncombe  v.  Greenacre,  2  De  Gex,  F.  &  G.  857,   869,  870,   and  oases  cited. 

&  J.  509.  It  was  therefore  held  that  where  she  is 

*  Sturgis  V.  Champneys,  5  Mylne  &  living  with  and  maintained  by  her 
C.  97;  see  Atkinson  v.  Beall,  33  Ga.  husband,  although,  as  she  alleges,  in 
153;  Sabel  v.  Slingluff,  52  Md.  132.  a  manner  very  inadequate  to  her  for- 

^  Hanson  v.  Keating,  4  Hare,  1;  tune,  she  has  no  equity  to  a  settle- 
Clark  v.  Cook,  3  De  Gex  &  S.  333;  ment  out  of  her  life  estate:  Vaughaa 
Hill  V.  Edmonds,  5  De  Gex  &  S.  v.  Buck,  13  Sim.  404.  This  and  simi- 
603.  lar  cases  which  deal  with  her  right  as 

*  Scott  V.  Spashett,  3  Macn.  &  G.  against  her  husband  must  be  regaxded 
599,  603;  Barrow  v.  Barrow,  5  De  Gex,  as  overruled. 


1665  wife's  equity  to  a  settlement.  §  1116 

only  a  life  interest,  as  out  of  property  in  which  she  has 
an  absolute  interest;  and  the  court  will  make  no  distinc- 
tion between  the  two  cases  as  regards  the  amount  to  bo 
settled.^  The  following  general  conclusions  may  be  re- 
garded as  settled  by  a  comparison  of  all  the  decisions: 
The  wile's  equity  to  a  settlement  out  of  her  life  estate 
exists  against  her  husband  while  he  has  made  no  disposi- 
tion of  it;  and  against  his  general  assignees  or  trustees  in 
bankruptcy  or  insolvency  in  whom  it  has  vested;  but  not 
against  his  particular  assignee,  to  whom  he  has  trans- 
ferred it  for  a  valuable  consideration.  In  the  latter  case, 
however,  the  assignment  only  operates  during  coverture.'* 
The  wife's  right  does  not  extend  to  her  mere  reversionary 
personal  estate,^  nor  to  arrears  of  income  accruing  before 
she  made  a  claim.* 

§  1116.  When  the  Equity  does  not  Arise. — Although 
the  property  may  be  such  that,  under  ordinary  circum- 
stances, the  equity  would  attach,  still  the  wife's  own  acts, 
conduct,  or  situation  may  prevent  it  from  arising,  or  the 
husband's  ruode  of  dealing  with  the  property  may  defeat 
it.  The  wdfe's  equity  to  a  settlement  out  of  her  things  in 
action  does  not  embrace  those  which  the  husband  has 
fully  "reduced  into  his  own  possession."*     If  she  alien  or 

>  Taunton  v.   Morris,  L.   R.   8  Ch.  [Clark  v.  Hezekiah,  24  Fed.  Rep.  663.] 

Div.  453;  see  especially  the  observa-  Against   the  husband's  particular  as- 

tions  of  Malins,  V.  C,  on  p.  456,  criti-  signees  for  a  valuable  consideratioui 

cising  the  opinion  of  Lord  Cranworth  See  Tidd  v.  Lister,  3  De  Gex,  M.  &  G, 

in  Tidd  v.  Lister,  supra;  affirmed  on  857,  869,  870;  10  Hare,  140;  Wriglit  v. 

appeal,  L.  R.  11  Ch.  Div.  779,  780,  per  Morley,  11  Ves.  12,  22;  Elliott  v.  Oor- 

James,  L.  J.;781,  perBrett,  L.  J;Wil-  dell,  5  Madd.    149;   1  Russ.  71,  note; 

kinson  v.  Charlesworth,  10  Beav.  .324;  Stanton  v.  Hall,  2  Russ.  &  M.  175;  la 

Koeber  v.  Sturgis,  22  Beav,  688;  In  re  re  Duffy's  Trust,  28  Beav.  3SG. 

Ford,  32  Beav.  621.  *  Osborn  v.    Morgan,   9  Hare,   432; 

^  Against  the  husband:  See  Taunton  but  see  In  re  Robiuson's  Estate,  L.  R. 

V.  Morris,  swpra;  Wilkinson  V.  Charles-  12  Ch.   Div.    188;   McCaleb  v.   Crich- 

worth,  10  Beav.  324;  Koeber  v.  Stur-  field,  5  Heisk.  288. 

gis,  22  Beav.  588;  In  re  Ford,  32  Beav.  ♦  In  re  Carr'a  Trusts,  L.  R.  12  Eq. 

621;  per  contra,  Vaughan  v.  Buck,  13  609. 

Sim.     404,     is     virtually     overruled.  *  Purdew   v.    Jackson,    1    Ru?s.    1; 

Against     the    husband's    general    as-  Elliott  v.  Cordell,  5  Madd.  149;  Stan- 

signees:  See  Elliott  v.  Cordell,  5  Madd.  ton  v.   Hall,  2  Rusa.  &  M.   175,  182; 

149;  Pryor  v.  Hill,  4  Brown  Ch.  139;  In   re    Duffy's   Trust,    28   Beav.   386. 

Ex    parte    Coysegame,    1     Atk.    192;  What  amounts  to  a  reduction  into  his 

Jacobs  v.  Amyatt,  1  Madd.  376,  note;  possession   depends   largely  upon  tha 

Squires   v.    Ashford,    23    Beav.    132;  circumstancea  of  each  case.     Attemot- 
2  Eq.  Job.  — 105 


§1116 


EQUITY    JURISPRUDENCE. 


1666 


assign  her  property  in  such  a  manner  as  to  legally  bind 
herself,  she  is  thereby  precluded  from  asserting  her  equity 
as  to  such  property.^  The  equity  does  not  exist  where 
the  property  is  already  the  subject  of  or  affected  by  a 
settlement;'^  nor,  in  general,  where  she  is  already  other- 
wise well  provided  for;'  nor  where  the  property  is  governed 
by  a  foreign  law  in  which  the  equity  is  not  recognized.* 
The  wife's  own  misconduct  or  inequitable  acts  will  bar 
the  right  which  might  otherwise  exist.*  A  married 
woman  may  waive  any  agreement  in  respect  of  her 
equity,  unless  a  fixed  and  certain  provision  for  the  ben- 
efit of  her  children  would  be  thereby  abrogated.*  She 
may,  by  examination  and  consent  in  court,  waive  her 
equity,  and  permit  the  property  to  be  paid  or  transferred 
to  her  husband,  unless  she  is  an  infant.' 


ing  no  discussion  of  the  question,  I 
add  a  few  cases  merely  as  illustrations: 
Hornsby  v.  Lee,  2  Madd.  16;  Ellison 
V.  Elwin,  13  Sim.  309;  Le  Vasseur  v. 
Scratton,  14  Sim.  116;  Michelmore  v. 
Mudge,  2  Giff.  183;  Aitchison  v. 
Dixon,  L.  R.  10  Eq.  589,  597,  598; 
Ex  parte  Norton,  8  De  Gex,  M.  &  G. 
258;  AUday  v.  Fletcher,  1  De  Gex  & 
J.  82;  VVidgery  v.  Tepper,  L.  R,  7  Ch. 
Div.  423;  In  re  Barber,  L.  R.  11  Ch. 
Div.  442;  Heirs  of  Holmes  v.  Adm'r 
of  Holmes,  28  Vt.  765;  Dunn  v.  Sar- 
gent, 101  Mass.  336;  Howard  v.  Bry- 
ant, 9  Gray,  239;  Bartlett  v.  Van 
Zaudt,  4  Sand.  Ch.  396;  Burr  v. 
Sherwood,  3  Bradf.  85;  Needles's 
Ex'r  V.  Needles,  7  Ohio  St.  432;  70 
Am.  Dec.  85;  Corley  v.  Corley,  22  Ga. 
178;  Machem  v.  Machem,  28  Ala.  374; 
Lockhart  v.  Cameron,  29  Ala.  355;  Mc- 
Neill V.  Arnold,  17  Ark.  154;  Canby 
V.  McLear,  13  Bank.  Reg.  22  (a 
legacy). 

'  It  should  be  remembered,  how- 
ever, that,  under  the  common-law  in- 
capacities of  a  married  woman,  her 
joining  with  her  husband  in  an  assign- 
ment of  her  property  would  ordinarily 
be  nugatory:  Williams  v.  Cooke,  9 
Jur.,  N.  S.,  658;  Tuer  v.  Turner,  20 
Beav.  560. 

■'  Brett  V.  Forcer,  3  Atk.  403;  Pond 
V.  Skeen,  2  Lea,  126. 

^  Spicer  V.  Spicer,  24  Beav.  365; 
Green  v.  Otte,  1  Sim.  &  St.  250;  Giaco- 


metti  V.  Prodgers,  L.  R.  14  Eq.  253; 
8  Ch.  338. 

*  A  fund  of  money  in  England,  the 
parties  domiciled  in  Prussia:  Camp- 
bell V.  French,  3  Ves.  321,  323;  where 
the  fund  was  governed  by  Scotch  law: 
Anstruther  v,  Adair,  2  Mylne  &  K. 
513;  Hitchcock  v,  Clendinen,  12  Beav. 
534;  In  re  Todd,  19  Beav.  582;  Mc- 
Cormick  v.  Garnett,  5  De  Gex,  M.  Sc 
G.  278. 

'  Her  adultery  is,  in  general,  a  bar: 
Carr  v.  Eastabrooke,  4  Ves.  146;  un- 
less the  circumstances  are  very  special, 
as  her  want  of  any  other  means  of 
maintenance,  or  her  husband's  adul- 
tery: See  In  re  Le  win's  Trust,  20  Beav. 
378;  Greedy  v.  Lavender,  13  Beav.  62; 
Ball  V.  Montgomery,  2  Ves.  191;  see 
Eedes  v.  Eedes,  11  Sim.  569.  Her 
fraud  is  also  a  bar:  In  re  Lush's  Trusts, 
L.  R.  4  Ch.  591.  Her  debts  contracted 
be/ore  marriage,  if  unpaid,  may  pre- 
vent a  settlement:  Barnard  v.  Ford, 
L.  R.  4  Ch.  247;  Bonner  v.  Bonner,  17 
Beav.  86;  and  see  Knight  v.  Kuight, 
L.  R.  18  Eq.  487. 

«  Fenner  v.  Taylor,  2  Russ.  &  M. 
190;  Ex  parte  Gardner,  2  Ves.  Sr. 
671. 

'  Dimmoch  v.  Atkinson,  3  Brown 
Ch.  195;  Beaumont  v.  Carter.  32  Beav. 
586;  Shipway  v.  Ball,  L.  R.  16  Ch. 
Div.  376;  the  court  will  not  take  the 
consent  of  an  infant  wife;  Stubba  v. 
Sargon,    2    Beav.    496;    Abraham    v. 


1667      wife's  equity  to  a  settlement.     §§  1117,  1118 

§  1117.  Amount  of  the  Settlement. — With  respect  to 
the  amount  of  the  fund  settled  upon  the  wife,  there  is  no 
settled  rule.  Each  case  must  depend  upon  its  own  cir- 
cumstances. Sometimes  even  the  whole  of  the  fund  in 
question  is  allowed  to  her  as  against  assignees  of  the  hus- 
band.* One  half  of  the  fund  was  formerly  regarded  as 
the  general  rule,  and  that  amount  is  still  generally  given, 
in  the  absence  of  special  circumstances.  The  later  de- 
cisions declare  that  there  is  no  rule;  that  the  amount 
rests  in  the  sound  judicial  discretion  of  the  court,  which 
looks  at  the  total  situation  and  environment  of  both  the 
parties.^ 

§  1118.  Form  of  the  Settlement.  —  There  is  no  abso- 
lute rule  applicable  to  all  cases.  In  the  absence  of  special 
circumstances,  provision  is  made  for  the  Avife  for  her  life, 
and  on  her  death  the  fund  goes  to  the  issue,  if  any.  On 
default  of  issue,  the  alternate  limitation  should  be  to  the 
husband  or  wife,  whichever  should  be  the  survivor.     The 

Newcombe,  12  Sim.  566;  as  to  recall-  Hare,  388;  Laytonv.  Layton,  1  Smale 

ing   a   consent  given    by  mistake   or  &  G.  179;  Smith  v.  Smith,  3  GifiF.  121; 

otherwise,  see  Watson  v.  Marshall,  17  In  re  Kincaid'a   Trusts,   1  Drew.  326; 

Beav.  363;  Penfold  v.  Mould,  L.  R.  4  In  re  Cutler,  14  Beav.  220;  Marshall 

Eq.  562.     If  a  man  marries  an  infant  v.   Fowler,    16  Beav.  249;  Watson  v. 

ward  of  the  court  without  obtaining  Marshall,    17    Beav.    363;   Francis   v. 

the  consent  of  the  court,  the  property  Brooking,  19  Beav.  347;  Duucoinbe  v. 

belonging   to   her  in   custody  of   the  Greenacre,  29  Beav.  578;  In  re  Ford, 

court   will   not   be   paid   out   until   a  32  Beav.  621;  In  re  Lewiu's  Trust,  20 

settlement  is  made  on  her,  even  if  she  Beav.  378;  Johnson  v.  Lander,  L.  R. 

should    assent    to    such    a  payment:  7  Eq.  228;  In  re  Cordwell's  Estate,  L. 

Martin  v.  Foster,  7  De  Gex,  M.  &  G.  R.    20   Eq.  644;  White    v.    Gouldin's 

98;  Biddies  v.  Jackson,  3  De  Gex  &  J.  Ex'rs,  27  Gratt.  491;  [Boxall  v.  Box- 

544.     [See  also  §  1310,  as  to  the  mar-  all,  27  Ch.   Div.  220;  Fowke  v.   Dray- 

riage  of  iufant  wards.]  cott,  29  Ch.  Div.  996;  Reid  v.   Reid, 

*  The  circumstances  must  be  special,  33  Ch.  Div.  220.] 

in  order  that  the  whole  should  be  set-  *  Brown  v.    Clark,  3  Ves.   166;   Ex 

tied;   the  smallness  of   the  fund,  the  parte  Pugh,  1  Drew.  202,  203;  Carter 

entire  absence  of  other  means  of  sup-  v.  Taggart,   1  De  Gex,   M.  &  G.  286, 

port,  the  misconduct  of  the  husband,  289;  Spirett  v.   Willows,  L.  R.  1   Ch. 

his  adultery,  desertion,  etc.,  have  been  520;  In  re  Suggitt's  Trusts,   L.  R.   3 

important    facts    in    such    cases,   on  Ch.  215;  Giacometti  v.    Prodgers,  L. 

which  the  court  has  exercised  its  dis-  R.   14  Eq.  253;  8   Ch.  338;   Green  v. 

cretion:    Taunton    v,    Morris,    L.    R.  Otte,  1  Sim  &  St.  250:  In  re  Erskine's 

8  Ch.  Div.  453;  11  Ch.  Div.  779;  Scott  Trusts,  1    Kay  &   J.    .302;    Coster   v. 

v.  Spashett,  3  Macn.  &  G.  599;  Gil-  Coster,  9  Sim.  597;  Napier  v.  Napier, 

Christ  V.  Cator,   1  De  Gex  &  S.   188;  1  Dm.  &  War.  407;  Ex  parte  Pugh,  1 

Dunkley  v.  Dunkley,  2  De  Gex,  M.  &  Drew.  20.;   In   re   Grove's  Trusts,  3 

G.  390;  Barrow  v.  Barrow,  5  De  Gex,  Giff.  575;    White  v.  Gouldia's  Ex'rs, 

M.  &  G.  782,  794;  Gent  v.  Harris,  10  27  Gratt.  491. 


I  1119  EQUITY   JURISPRUDENCE.  1665 

latest  decisions  have  settled  the  rule  that  the  husband's 
marital  rights  should  not  he  interfered  with  any  further 
than  is  necessary  to  protect  the  wife's  equity  for  herself 
and  her  children.' 

§  1119.  Maintenance.  —  The  power  of  courts  of  equity 
to  compel  a  provision  to  be  made  for  the  maintenance  of 
a  married  woman  by  her  husband  is  somewhat  analo- 
gous to  that  of  enforcing  her  equity  to  a  settlement,  but 
still  not  identical;  it  is  only  exercised  under  special  cir- 
cumstances of  her  actual  need,  and  then  without  regard  to 
any  equity  to  a  settlement  on  her  part;  it  is  confined  to 
her  property,  and  does  not  extend  to  the  property  origi- 
nally and  exclusively  belonging  to  the  husband.  If  a 
husband  has  deserted  his  wife,  leaving  her  unprovided  for^ 
a  court  of  equity  will  order  her  maintenance  out  of  her 
fortune,  though  neither  settled  nor  agreed  to  be  settled, 
—  that  is,  although  the  husband's  common-law  rights 
over  it  remain  unrestricted.^  When  the  husband  ha& 
deserted  his  wife,  or  has  by  his  cruelty  compelled  her  to 
leave  him,  the  court  will  order  her  maintenance  out  of 
the  interest  of  her  fortune,  even  though,  by  the  marriage 
settlement,  it  was  payable  to  him  for  his  life.*  There  is 
no  jurisdiction  in  courts  of  equity  to  compel  a  husband 
generally  to  maintain  his  wife  out  of  his  own  property  or 

'  Carter  v.  Taggart,  1  De  Gex,  M.  Hodgens  v.  Hodgens,  4  Clark  &  F. 
&  G.  286;  Croxtoa  v.  Ma}^  L.  R.  9  323,  372;  Wallace  v.  Auldjo,  1  De 
Eq.  404;  Spirett  v.  Willows,  L.  R.  1  Gex,  J.  &  S.  643;  McCaleb  v.  Crich- 
Ch.  520;  4  Ch.  407;  In  re  Sug^itt's  field,  5  Heisk.  288. 
Trusts,  L.  R.  3  Ch.  215;  Walsh  v.  =*  Watkyns  v.  Watkyns,  2  Atk.  96, 
Wason,  L.  R.  8  Ch.  482.  Where  a  98;  Cecil  v.  Juxoa,  1  Atk.  278;  Guy 
settlement  under  the  wife's  equity  is  v.  Pearkes,  18  Ves.  196;  Coster  v. 
ordered,  provision  will  always  be  made  Coster,  1  Keen,  199;  Newsome  v. 
for  the  children  of  the  marriage:  Mur-  Bowyer;  3  P.  Wms.  37;  NichoUa  v. 
ray  v.  Lord  Elibank,  13  Ves.  1;  14  Danvers,  2  Vern.  671;  Dumoad  v. 
Yes.  496;  Johnson  v.  Johnson,  1  Jacob  Magee,  4  Johns.  Ch.  318,  322, 
&  W.  472,  475;  and  this  rule  includes  *Ibid. ;  Oxenden  v.  Oxenden,  2 
the  wife's  children  by  any  former  Vern.  493;  Williams  v.  Callow,  2 
marriage:  Croxton  v.  May,  supra.  Vern.  752;  Eedes  v.  Eedes,  II  Sim. 
But  where  no  settlement  had  been  5G9;  Peters  v.  Grote,  7  Sim.  238.  If 
directed  during  the  lifetime  of  the  the  wife  refuses  to  live  with  her  hus- 
wife, her  children  have  no  indepen-  band,  who  is  willing  to  receive  her,  or 
dent  right  to  enforce  her  equity  and  if  she  elopes  from  him,  she  is  not  enti- 
to  claim  a  settlement  after  her  death:  tied  to  any  such  maintenance:  Bullock 
Lloyd  V.  Williams,  I  Madd.  450;  De  v.  Menzies,  4  Ves.  798;  Watkyna  v. 
la  Garde  v.   Lempri^re,  6  Beav.  344;  Watkyns,  2  Atk.  96. 


1669  wife's  equity  to  a  settlement.  §  1120 

by  his  own  labor.  Such  power,  if  it  existed  at  all,  be- 
longed to  the  ecclesiastical  courts,  or  was  regulated  by 
statute. 

§1120.  Alimony. —  The  subject  of  maintenance  nat- 
urally suggests  that  of  alimony,  although  the  two  have 
really  nothing  in  common,  except  their  being  granted  for 
the  benefit  of  a  wife.  In  its  proper  and  only  true  sense, 
*'  alimony  "  is  not  a  separate  estate,  nor  is  it  a  provision 
for  maintenance  generally,  as  described  in  the  preceding 
paragraph.  It  is  an  incident  of  divorce;  it  is  merely  a 
provision  for  maintenance  from  day  to  day,  decreed  by  a 
competent  court  to  a  wife  legally  separated  from  her  hus- 
band, either  by  a  divorce  a  mensa  et  thoro  or  ex  vinculis. 
Under  the  judicial  system  originally  prevailing  in  Eng- 
land, it  was  granted  and  regulated  solely  by  the  ecclesi- 
astical courts,  which  had  exclusive  jurisdiction  of  divorce.' 
It  is  very  clear  that  the  original  jurisdiction  of  equity  did 
not  include  the  power  to  decree  alimony  as  an  incident  of 
divorce;  nor  is  there  any  jurisdiction  to  grant  alimony  to 
a  wife  as  a. provision  to  be  made  by  her  husband  for  her 
maintenance,  unconnected  with  proceedings  for  a  divorce." 
The  American  courts  have  generally  conformed  to  this 
view,  and  have  denied  the  existence  of  any  jurisdiction 
to  award  alimony  as  a  provision  for  the  maintenance  of 
a  wife  by  her  husband.'     In  several  states,  however,  such 

*In  many  of  the  states,  jurisdiction  'Trotter  v.  Trotter,  77  111.  510;  Par- 
over  divorce  has  been  given  by  stat-  sons  v.  Parsons,  9  N.  H.  309;  32  Am. 
ute  to  the  courts  of  equity,  and  the  Dec.  362;  Pomeroy  v.  Wells,  8  Paige, 
suit  for  a  divorce  is  treated  as  a  suit  406;  Rees  v.  Waters,  9  Watts,  90; 
in  equity.  The  jurisdiction  to  grant  Yule  v.  Yule,  10  N.  J.  Eq.  J  38,  143 
alimony  as  an  incident  of  divorce  may,  (but  see  Paterson  v.  Paterson,  5  N.  J. 
perhaps,  have  been  sometimes  con-  Eq.  389);  Peltier  v.  Peltier,  Harr. 
founded  with  the  general  jurisdiction  (Mich.)  19,  29;  McGee  v.  McGee,  10 
of  equity.  This  may  explain  some  Ga.  477,  482;  Fischli  v.  Fischli,  1 
American  decisions  concerning  ali-  Blackf.  360;  12  Am.  Dec.  251;  Doyle 
mony  cited  in  a  subsequent  note.  v.   Doyle,  26   Mo.    545,  549;  Shannon 

'Ball  V.  Montgomery,  2  Ves.   191,  v.    Shannon.  2   Gray,  28.J;   Sheafe   v. 

195;  Vandergucht  v.   De  Blaquiere.  8  Sheafe,  24  N.  H.  564,  567;  Chapman 

Sim.  315;  5    Mylne   &   C.    229.     The  v.  Cliapman,  13  In.l.  396.  .S97:  Lawson 

only  jurisdiction   which  the  court   of  v.    Shotwell,  27    Miss.  630,  633;  Cory 

chancery  exercises  is  to  issue  a  writ  v.  Cory,  11  N.  J.   Eq.  400;  Helms  v. 

of  tie  exeat,  where  a  husband  who  has  Franciscus,  2  Bland,  544,  568;  20  Am. 

been    ordered     by    the    ecclesiastical  Dec.  402 ;    Wallin.'sford  v.   VVallings- 

court  to  pay  alimony  is  about  to  leave  ford,  6  Har.  &  J.  485. 
the  country. 


§  1121  EQUITY   JURISPRUDENCE.  167(> 

a  power  has  been  asserted  and  exercised  as  belonging  to 
the  general  jurisdiction  of  equity/ 


SECTION  III. 

THE  CONTRACTS  OF    MARRIED  WOMEN. 

ANALYSIS. 

§  1121.  The  general  doctrine. 

§  1122.  Rationale  of  the  doctrine. 

§  1123.  Extent  of  the  liability. 

§  1124.  For  what  contracts  her  separate  estate  is  liable. 

§  1125.  The  same;  the  American  doctrine. 

§  1126.  To  what  contracts  the  American  doctrine  applies. 

§  1121.  The  General  Doctrine.  —  At  the  common  law 
the  contracts  of  married  women  are  absolutely  void. 
Equity  has  never  attempted  to  invade  this  fundamental 
policy  of  the  law;  it  has  never  clothed  married  women 
with  the  capacity  to  bind  themselves  personally  by 
contract.  Their  contracts,  as  recognized  by  equity,  are 
only  contracts  sub  viodo;  the  indebtedness  which  they 
create  is  not  a  legal  indebtedness,  but  only  an  equitable 
liability,  enforced  in  a  peculiar  manner  by  courts  of 
equity.  After  it  was  settled  that  a  married  woman  might 
hold  property  as  a  separate  estate  to  her  own  separate  use, 
free  from  the  claims  and  interest  of  her  husband,  for 
some  time  the  common-law  incapacity  of  contracting  was 
still  applied  to  her.  The  glaring  injustice  of  this  condi- 
tion soon  became  apparent.     To  permit  a  wife  to  hold 

*  Garland  v.  Garland,  50  Miss.  694;  Farland  v.  McFarland,  64  Misa.  449; 

Almond  v.  Almond.  4  Rand.  662;  15  Finn  v.  Finn,  62  Iowa,  482;  Farber  v. 

Am.  Dec.  781;   Purcell  v.   Purcell,  4  Farber,  64  Iowa,  362;  Platner  v.  Plat- 

Hen.  &  M.  507;  Prather  v.  Prather,  4  ner,  66  Iowa,  378;  Earle  v.  Earle,  27 

Desaus.  Eq.  33;  Rhame  v.  Rhame,  1  Neb.  277.1     This  conclusion  seems  to 

McCord's  Eq.  197;  16  Am.  Dec.   597;  have  been  reached  by  a  mistaken  view 

Glover   v.  Glover,   16   Ala.   440,  446;  as  to  the  extent  of  the  power  to  grant 

Butler  V.  Butler,  4  Litt.  201;  Logan  maintenance  described  in  the  preced- 

V.  Logan,  2  B.  Mon.   142;  Graves  v.  ing  paragraph,  by  regarding  it  as  in- 

Graves,   36  Iowa,  310;  14  Am.   Rep.  eluding  the  husband's  property  as  well 

525;  Galland  v.  Galland,  38  Cal.  265,  as  the  wife's.     In  fact,  these  decisions 

Sanderson  and  Sprague,  JJ.,  dissent-  seem  to  grant  "maintenance"  under 

ing;  [Hinds    v.    Hinds,  80  Ala.    225;  the  improper  name  of  "alimony." 
Verner  v.  Verner,  62  Miss.  260;  Mc- 


1671  CONTRACTS    OF    MARRIED    WOMEX.  §  1121 

separate  property  to  lier  own  use,  to  enjoy  its  benefits,  to 
deal  with  it  in  many  respects  as  though  she  were  a.  feme 
sole,  and  thus  to  be  clothed  with  many  indicia  of  complete 
ownership,  but  at  the  same  time  to  withhold  from  her  credi- 
tors all  claim  against  it  or  against  her,  was  in  the  highest 
degree  inequitable.  The  wife  might,  by  her  own  act, 
directly  dispose  of  her  separate  estate,  and  for  the  same 
reasons  she  ought  to  be  able  to  render  it  liable  for  her 
obligations.  Influenced  by  these  considerations,  the 
courts  of  equity  gradually,  by  progressive  steps,  intro- 
duced and  developed  the  doctrine,  that  although  a  mar- 
ried  woman  can  create  no  personal  liability  against  herself, 
her  separate  estate  may  be  liable  for  her  contracts  made 
with  reference  to  it.  Her  contracts  thus  become  equi- 
table obligations,  and  may  be  enforced  in  equity  against 
her  separate  estate.  No  other  doctrine  of  equity  jurispru- 
dence better  illustrates  its  wonderful  freedom  and  power 
in  modifying  legal  dogmas.  Without  attempting  to  trace 
the  progress  of  the  general  doctrine  through  its  whole 
course  of  development  as  it  is  now  settled  by  the  English 
courts,  it  is  correctly  formulated  as  follows:  "If  a  married 
woman,  having  separate  property,  enters  into  an  engage- 
ment, which  if  she  was  a  feme  sole  would  constitute  a  per- 
sonal obligation  against  her,  and  in  entering  into  such 
engagement  she  purports  to  contract,  not  for  her  husband 
[i.  e.,  not  on  behalf  of  her  husband  as  his  agent],  but  for 
herself,  and  on  the  credit  of  her  separate  estate,  and  it 
was  so  intended  by  her,  and  so  understood  by  the  person 
with  whom  she  is  contracting,  that  constitutes  an  obliga- 
tion for  which  the  person  with  whom  she  contracts  has 
the  right  to  make  her  separate  estate  liable."  ^ 

*  Mrs.  Matthewman's  Case,    L.   R.  shonld  be  remarked  that  the  doctrine 

3  Eq.  781,  787.  per  Kindersley,  V.  C. ;  is  here  stated  in  its  most  general  form. 

Johnson  v.  Gallagher,  3  De  Gex,  F.  &  Hou)   the  wife   must  purport  to  cou- 

J.  494,    509-5-0,   per  Turner,    L.    J.  tract  on  the  credit  of  her  estate,  and 

SeeHuhne  v.  Tenant,  1  Brown  Ch.  16;  hoio  she  must  show  such  an  intention, 

1    Lead.  Gas.   Eq.  679,  692-700,  703-  I  do  not  now  inquire.     These  requi- 

705,  735-7G5.   and    the  elaborate    col-  sites,    however,    must   exist,  in    order 

lection    of      Eiif;lish      and     American  that    her    separate    estate     shall    be 

authorities   in  the  editors'  notea.     It  liable.     Upon  this  point  all  the  cases. 


§  1122 


EQUITY   JURISPRUDENCE. 


1672 


§  1122.  Rationale  of  the  Doctrine.  —  It  was  once  sup- 
posed that  the  doctrine  was  properly  explained  by  regard- 
ing the  wife's  contract  as  in  reality  the  execution  of  her 
power  of  appointment,  so  that  the  contract,  being  an  ap- 
pointment, created  an  equitable  charge  or  lien  in  the 
nature  of  a  disposition  upon  her  separate  estate.  This 
theory  has  been  abandoned  as  utterly  untenable.^     The 


English  and  American,  are  agreed. 
Whenever  her  separate  estate  is  liable 
for  her  bond,  note,  or  other  written 
engagement,  although  the  instrument, 
in  terms,  is  her  own  personal  obliga- 
tion, and  makes  no  reference  to  her 
separate  property,  this  is  so  held  be- 
cause the  writing  conclusively  im- 
plies the  intention,  and  purports  to 
be  made  on  the  credit  of  her  separate 
estate.  The  marked  difference  be- 
tween the  conclusions  reached  by  the 
English  cases  and  a  large  class  of  the 
American  decisions  does  not  arise 
from  any  dispute  as  to  the  general 
doctrine,  which  they  all  alike  adopt; 
it  relates  solely  to  the  proper  mode  of 
applying  this  doctrine;  it  turns  only 
upon  the  question  whether  the  intent 
to  deal  upon  the  credit  of  her  sep- 
arate property  must  expressly  appear 
in  the  very  terms  of  the  contract  or 
from  its  essential  nature,  or  whether 
it  may  be  implied  from  the  mereyb?'W 
of  the  contract  as  being  under  seal  or 
in  writing,  or  be  inferi-ed  from  the 
circumstances  of  the  case. 

^  Owens  V.  Dickenson,  Craig  &  P.  48, 
53,  54,  per  Lord  Cottenham;  Murray 
V.  Barlee,  3  Mylne  &  K.  209,  223. 
The  true  rationale  of  the  doctrine  has 
been  admirably  explained  by  eminent 
English  judges  in  several  recent  cases, 
and  I  add  a  few  extracts  from  their 
opinions.  In  the  very  recent  and 
most  carefully  considered  case  of  Pike 
V.  Fitzg.bbon,  L.  R.  17  Ch.  Div.  454, 
Brett,  L.  J.,  said  (p.  461):  "At  com- 
mon law,  for  reasons  of  high  social 
policy,  a  married  woman  is  not  al- 
lowed to  make  any  contract  binding 
upon  herself  or  upon  any  property  of 
hers;  in  fact,  the  common  law  did  not 
recognize  that  she  had  any  property, 
or  could  do  any  act  binding  herself. 
It  seems  to  me  that  it  is  not  true  to 
eay  that  equity  has  recognized  or  in- 
vented a  status  of  a  married  woman 
to   make   contracts;    neither   does    it 


seem  to  me  that  equity  has  ever  said 
that  what  is  now  called  a  contract  is 
a  binding  contract  upon  a  married 
woman.  What  equity  seems  to  me  to 
have  done  is  this:  it  has  recognized  a 
settlement  as  putting  a  married  wo- 
man into  the  position  of  having  what 
is  called  a  separate  estate,  and  has 
attacJied  certain  liabilities,  not  to  her,  but 
to  that  estate.  The  decisions  appear 
to  me  to  come  to  this,  that  certain 
promises  (I  use  the  word  '  promises ' 
in  order  to  show  that,  in  my  opinion, 
they  are  not  contracts)  made  by  a 
married  woman,  and  acted  upon  by 
the  persons  to  whom  they  are  made 
on  the  faith  of  the  fact,  known  to 
them,  of  her  being  possessed  at  the 
time  of  a  separate  estate,  will  be  en- 
forced against  such  separate  estate  as 
she  was  possessed  of  at  that  time,  or 
so  much  of  it  as  remains  at  the  time 
of  judgment  recovered."  In  the  same 
case,  James,  L.  J.,  said  (p.  460):  "It  is 
said  that  a  married  woman  having 
separate  estate  has  not  merely  a 
power  of  contracting  a  debt  to  be 
paid  out  of  that  separate  estate,  but, 
having  a  separate  estate,  she  has 
acquired  a  sort  of  equitable  status  of 
capacity  to  contract  debts,  not  in  re- 
spect only  of  that  separate  estate,  but 
in  respect  of  any  separate  estate  which 
she  may  thereafter  in  any  way  acquire. 
It  is  contended  that  because  equity 
enables  her,  having  estate  settled  to 
her  separate  use,  to  charge  that  estate 
and  to  contract  debts  payable  out  of 
it,  therefore  she  is  released  altogether, 
in  the  contemplation  of  equity,  from 
the  disability  of  coverture,  and  is  en- 
abled in  a  court  of  equity  to  contract 
debts  to  be  paid  and  satisfied  out  of 
any  estate  settled  to  her  separate  use, 
which  she  may  afterwards  acquire. 
In  my  opinion,  there  is  no  authority 
for  that  contention."  In  Shattock  v. 
Shattock,  L.  R.  2  Eq.  182,  Lord  Rom- 
illy,  M.  R.,  stated  the  general   doc- 


1673 


CONTRACTS    OF    MARRIED    WOMEN. 


§  1122 


true  rationale  of  the  doctrine  is,  that  the   liahility  of  a 
wife's  separate  property  for  her  engagements  is  a  mere 


trine  and  its  rationnU,  as  it  seems  to 
me,  in  a  most  admirable  mauuer,  ac- 
curately giving  not  only  its  grounds, 
but  its  exact  extent  and  limits  (pp. 
188,  189):  "The  principle  of  the 
courts  of  equity  relating  to  this  sub- 
ject, in  my  opinion,  is,  that,  as  regards 
her  separate  estate,  a  married  woman 
is  a/<?me  sole,  and  can  act  as  such,  but 
only  so  far  as  is  consistent  with  the 
other  principle,  namely,  that  a  mar- 
ried woman  cannot  enter  into  a  con- 
tract. These  principles  are  reconciled 
in  this  way:  Equity  attaches  to  the 
separate  estate  of  the  married  woman 
a  quality  incidental  to  that  property, 
viz.,  a  capacity  of  being  disposed  of 
by  her;  in  other  words,  it  gives  her  a 
power  of  dealing  with  that  property 
as  she  may  think  fit;  but  the  power  of 
disposition  is  confined  to  that  prop- 
erty, and  the  property  must  be  the 
eubject-matter  that  she  deals  with; 
and  therefore,  if  she  makes  a  con-  ^ 
tract,  the  contract  is  nothing,  unless 
it  has  reference,  directly  or  indirectly,  ' 
to  that  property.  This  is,  in  my  opin-  ^ 
ion,  the  extent  of  the  doctrine  of 
equity  relating  to  the  separate  estate  1 
of  a  married  woman.  It  is  on  this 
principle  that  every  bond,  promissory 
note,  and  promise  to  pay  given  by  a 
married  woman  has,  for  the  reason  I 
have  already  stated,  been  held  to  be  a 
charge  made  by  her  on  her  separate 
estate;  that  is  to  say,  it  is  a  dis- 
posal of  so  much  of  her  property,  the 
whole  of  which,  if  she  pleased,  she 
might  give  away.  But  if  equity  goes 
beyond  this,  it  appears  to  me  that  it  is 
laying  down  this  principle,  that  where 
a  married  woman  has  separate  estate, 
she  may  bind  herself  by  contract  ex- 
actly as  if  a  feme  sole;  or  in  other 
words,  that  the  possession  of  separate 
property  takes  away  the  distinction 
between  a  feme  covert  and  a  feme 
sole,  and  makes  them  equally  able  to 
contract  debts."  In  Ex  parte  Jones, 
L.  K  12  Ch.  Div.  484,  the  nature  of 
the  liability  was  very  clearly  explained 
by  the  court  of  appeal.  The  question 
for  decision  was,  whether  a  married 
woman,  having  a  separate  estate,  could 
be  proceeded  against  as  a  bankrupt, 
and  the  answer  turned  upon  the  fur- 
ther   question    whether    she    was    a 


"debtor."  James,  L.  J.,  said  (p.  488): 
"In  equity,  the  liability  was  to  have 
her  separate  estate  taken  from  her  for 
the  benefit  of  a  person  with  whom  she 
had  contracted  on  the  faitli  of  it.  That 
was  a  special  equitable  remedy  arising 
out  of  a  special  equitable  right.  But 
the  married  woman  who  contracts  in 
that  way  is  not  a  debtor, in  any  sense  of 
the  word."  Brett,  L.  J.,  said  (p.  489): 
"  The  procedure  of  courts  of  equity  for 
making  tlie  separate  estate  of  a  mar- 
ried woman  available  to  satisfy  her 
engagements  did  not  enable  any  one 
to  sue  a  married  woman  as  upon  and 
for  a  debt  in  a  court  of  equity,  and 
certainly  not  in  a  court  of  common 
law.  It  was  a  peculiar  remedy  against 
the  separate  properly  of  the  married 
woman,  but  it  was  not  a  remedy 
against  her  as  upon  and  for  a  debt. " 
Cotton,  L.  J.,  said  (p.  490):  "  A  debtor 
must  be  a  person  who  can  be  sued  per- 
sonally for  a  debt,  and  who  is  liable  to 
all  the  consequences  of  a  personal  judg- 
ment against  him.  But  that  is  not  at 
all  the  position  of  a  married  woman, 
even  though  she  has  separate  estate; 
proceedings  cannot  be  taken  against 
her  personally  to  enforce  payment 
of  a  debt.  Formerly,  courts  of  equity 
compelled  the  satisfaction  of  her  gen- 
eral engagements  out  of  her  separate 
property,  and  now  that  is  done  by  all 
the  divisions  of  the  high  court.  But 
it  is  only  a  preceeding  to  compel  the 
satisfaction  out  of  her  separate  prop-. 
erty  of  engagements  made  wil/i  refen-ence 
to  and  upon  the  credit  of  it.  As  Lord 
Justice  James  said  in  London  Char- 
tered Bank  of  Australia  v,  Lempri6re, 
L.  R.  4  P.  C.  597:  '  The  married  woman 
intended  to  contract  so  as  to  make 
herself  —  that  is  to  say,  her  separate 
property  —  the  debtor.'  It  is  not  the 
woman,  as  a  woman,  who  becomes  a 
debtor,  but  her  emja(jement  has  made 
that  particular  part  of  her  property 
which  is  settled  to  her  separate  use  a 
debtor,  and  liable  to  satisfy  the  engage- 
ment." In  the  great  and  leading  case 
of  Johnson  v.  Gallagher,  3  De  Gex,  F. 
&  J.  494,  Turner,  L.  J.,  after  an  elabo- 
rate examination  of  authorities,  speak- 
ing of  the  effect  of  the  wife's  contracts 
upon  her  separate  property,  said 
(p.  519):  "The   doctrine  of   appoint* 


§  1123  EQUITY   JURISPRUDENCE.  1674 

equitable  incident  of  her  separate  estate,  which  is  itself  a 
creature  of  equity.  In  the  language  of  Lord  Justice 
James:  "In  equity,  the  liability  is  to  have  her  separate 
estate  taken  from  her  for  the  benefit  of  a  person  with 
whom  she  has  contracted  on  the  faith  of  it.  It  is  a  special 
equitable  remedy,  arising  out  of  a  special  equitable  right." 
In  the  pointed  language  of  Lord  Justice  Cotton:  "  It  is  not 
the  woman,  as  a  woman,  who  becomes  a  debtor,  but  her 
engagement  has  made  that  particular  part  of  her  property 
which  is  settled  to  her  separate  use  a  debtor;  and  liable  to 
satisfy  the  engagement."  The  same  theory  is  more  fully 
expressed  in  the  words  of  Lord  Cottenham:  "The  view 
taken  of  the  matter  by  Lord  Thurlow  in  Hulme  v.  Tenant 
is  correct.  According  to  that  view,  the  separate  property 
of  a  married  woman  being  a  creature  of  equity,  it  follows 
that  if  she  has  a  power  to  deal  with  it,  she  has  the  other 
power  incident  to  property  in  general,  namely,  the  power 
of  contracting  debts  to  be  paid  out  of  it;  and  inasmuch 
as  her  creditors  have  not  the  means  at  law  of  compelling 
payment  of  those  debts,  a  court  of  equity  takes  upon 
itself  to  give  effect  to  them,  not  as  personal  liabilities,  but 
by  laying  hold  of  the  separate  property  as  the  only 
means  by  which  they  can  be  satisfied."  ^ 

§  1123.     Extent  of  the  Liability.  —  The  restraint  upon 
anticipation,  when  inserted  in  the  instrument  creating  the 

ment  seems  to  me,  however,  to  be  ex-  execution  against  the  property  of 
ploded;  and  it  is  scarcely  less  clear  other  debtors."  See  also  Hooton  v. 
that  the  transactions  do  not  create  any  Ransom,  6  Mo.  App.  19;  [Warren  v. 
lien  or  charge  on  the  separate  es-  Freeman,  85  Tenn.  513.] 
tate.  It  may  well  be  asked,  then  ^  Owens  v.  Dickenson,  Craig  &  P. 
how  do  they  operate?  I  think  the  an-  48,  54,  per  Lord  Cottenham,  The 
swer  to  this  question  is  to  be  found  in  mistaken  notion  that  the  wife's  con- 
Hulme  V.  Tenant,  1  Brown  Ch.  16.  tract  creates  an  equitable  lien  or 
When  a  man  contracts  debt,  both  his  distinct  charge  upon  her  separate  prop- 
person  and  his  property  are,  by  law,  erty  is  found  in  some  of  the  Ameri- 
liable  to  the  payment  of  it.  A  court  can  decisions,  but  is  wholly  rejected 
of  equity,  having  created  the  separate  by  others.  This  notion  is  utterly  in- 
estate,  has  enabled  married  women  to  consistent  with  the  well-settled  rules 
contract  debts  in  respect  of  it.  Her  concerning  the  extent  of  the  liability 
person  cannot  be  made  liable  either  at  and  its  enforcement.  If  there  were  a 
law  or  in  equity,  but  in  equity  her  prop-  lien,  it  would  follow  the  property  into 
erty  may.  This  court,  therefore,  as  I  the  hands  of  purchasers  with  notice 
conceive,  gives  execution  against  the  from  the  wife:  [See  Eckerly  v.  Mc- 
property  just  as  a  court  of  law  gives  Ghee,  85  Tenn.  661.] 


1675  CONTRACTS    OF    MARRIED    WOMEN.  §  1123 

separate  estate,  applies  to  the  wife's  contracts  as  well  as  to 
her  alienations.  The  separate  property,  therefore,  which 
she  holds  subject  to  the  restraint  upon  alienation  or  an- 
ticipation is  not  liable  for  any  contracts  or  engagements 
which  she  may  make.*  Furthermore,  it  is  now  settled 
that  her  contracts  can  only  be  enforced  against  the  sepa- 
rate estate,  free  from  such  restraint,  which  she  held  at  the 
time  of  entering  into  the  engagement,  or  so  much  thereof 
as  remains  in  her  ownership  at  the  time  when  the  judg- 
ment is  rendered,  and  not  against  separate  estate  which 
she  acquired  after  the  time  of  making  the  engagements.^ 
It  is  also  now  settled,  contrary  to  the  view  which  formerly 
prevailed,  that  when  the  wife  has  a  life  interest  only  to 
her  own  separate  use,  with  power  of  appointment  over  the 
corpus,  either  by  deed  or  by  will,  such  separate  property 
is  liable  for  her  contracts,  as  well  as  when  her  interest  is 
absolute,'  With  regard  to  the  remedy,  of  course  no  per- 
sonal decree  can  be  made  against  a  married  woman.*  So 
far  as  the  separate  estate  is  personalty,  its  corpus  may  be 
reached  by  the  decree,  and  applied  in  discharge  of  the 
wife's  engagement;  so  far  as  it  is  land,  the  remedy  was 
confined  by  the  earlier  cases  to  the  rents  and  profits,  un- 
less the  contract  enforced  be  a  specialty;  and  this  is  the 
ordinary  form  of  the  decree  in  England.* 

'  Pike  V.  Fitzgibbon,  L.  R.   17  Ch.  not  been  adopted  by  some  of  the  Amer- 

Div,  454,    459,    462,    463;    overruling  lean  courts,  at  least  in  regard  to  the 

L.  R.   14  Ch.  Div.  837;  In  re  Sykes'a  liability  of  the  wife's  legal  separate  ea- 

Trusts,  2  Johns.   &  H.  415;    Roberts  tate  under  the  statutes. 

V.  Watkins,  46  L.  J.  Q.  B.  552.     By  *  London  Chartered  Bank  of  Austra- 

parity   of   reasoning,  in   those   states  lia  v.  Lemprifere,  L.  R.  4  P.  C.  572; 

where   the    separate    estate    itself   is  Godfrey  v.  Harben,  L.  R.  13  Ch.  Div. 

regarded  as  a  restraint  upon   aliena-  216;    Hughes  v.  Wells,  9  Hare,  749, 

tion,  and  the  wife  can  only  dispose  of  772;  Mayd  v.  Field,  L.  R.  3  Ch.  Div. 

it  when   and  in  the  manner   affirma-  587;  [ante,  §  HOG.] 

tively   permitted   by   the   instrument  *  Francis  v.  Wigzell,   1  Madd.  258, 

creating  it,  it  should  also  follow  that  264. 

her  separate  property  is  only  liable  for  *Hulme  v.  Tenant,  1  Brown  Ch.  16, 

her  contracts  when  and  to  the  extent  per  Lord  Tluirlow;  Francis  v.  Wigzell, 

as  affirmatively  provided  for  in  such  1    Madd.    258;    Aylelt   v.    Ashton,    1 

instrument.  Myliie  &  C.  105,  112;  Radford  v.  Car- 

aPike  V.  Fitzgibbon,  L.  R.   17  Ch.  wile,  13  W.  Va.  572;  Frank  v.  Lilien- 

Div,  454,  460,  462,  465;   In  re  Sykes'a  feld,  33  Gratt.  377.    Since  the  modern 

Trusts,  2  Johns.  &  H.  415;  Roberts  v.  decisions  that  the  wife  may  alieu  her 

AVatkins,  46  L.  J.  Q.  B.  552;  [Crockett  separate  real  estate  by  an  informal  in- 

V.  Doriot,  85  Va.  240.]     This  view  has  strumeut,  there  seems  to  be  no  reason 


§  1124  EQUITY   JURISPRUDENCE.  1676 

§  1124.  For  What  Contracts  her  Separate  Estate  is 
Liable.  —  Although  the  fundamental  doctrine  of  liability- 
is  that  the  contract  purported  or  was  intended  to  be  made 
ou  the  credit  of  the  separate  estate,  yet  this  intention  need 
not  be  expressed  in  the  terms  of  the  contract  itself.  The 
rule  is  firmly  settled,  and  may  be  regarded  as  the  peculiar 
feature  of  the  English  law  on  this  subject,  which  distin- 
guishes it  from  that  prevailing  in  many  of  our  states,  that 
the  intent  to  contract  on  the  credit  of  the  separate  estate 
is  conclusively  inferred  from  the  very  form  and  nature 
of  many  kinds  of  engagements,  including  at  least  all  those 
in  the  form  of  written  instruments.^  It  is  thus  settled 
beyond  dispute,  by  the  English  decisions,  that  the  wife's 
separate  estate  is  liable  for  her  contracts  under  seal;^  for 
her  bills  of  exchange  and  promissory  notes;^  and  for  all 
her  written  agreements.*  Finally,  after  some  fluctuation 
in  the  decisions,  the  liability  is  extended  to  her  ordinary 
general  verbal  engagements  and  implied  promises,  if  it 
appear  that  they  were  made  with  reference  to  and  on  the 
faith  and  credit  of  her  separate  property;  and  whether 
so  made,  will  be  determined  by  a  consideration  of  all  the 
surrounding  circumstances.* 

•why  the  coi-pus  of  the  laud  held  to  her  1  Brown  Ch.  16;  Heatley  v.  Thomas, 

separate  use  should  not  be  liable  to  be  15  Vea.  596;  Pike  v,  Fitzgibbon,  L.  R. 

taken  and  sold  under  a  decree  in  satis-  14  Ch.  Div.  837;  17  Ch.  Div.  454  (her 

faction  of  all  her  engagements,  when-  covenant). 

ever    necessary.     The    early    English  '  Bullpin   v.  Clarke,    17   Ves.    365; 

rule,  as  given  in  the  text,  is  followed  Stuart  v.  Lord  Kirkwall,  3  Madd.  387; 

in  some  of  the  American  states,  espe-  Field  v.  Sowle,  4  Russ.  112;   Vander- 

cially  in  those  which  treat  the  wife's  gucht  v.  De  Blaquiere,  5  Mylne  &  C. 

general  power   of   alienation   as  only  229;   Owen   v.  Homan,  4   H.  L.  Cas. 

limited  and   partial.     In  those  states  997;  McHenry  v.  Davies,  L.  R.  10  Eq. 

where  the  wife's  contracts  are  enforced  88;  Davies  v.  Jenkins,  L.  R.  6  Ch.  Div. 

in  equity  against  her  legal  statutory  728  (note  by  herself  and  husband  for 

separate  property,  land  which  she  thus  money  loaned  him). 

owns  in  fee  is  generally  liable  to  be  *  Master  v.  Fuller,  4  Brown  Ch.  19; 

sold  under  the  decree,  and  the  proceeds  1  Ves.  513;  Owens  v.  Dickenson,  Craig 

applied  in  satisfaction  of  the  demand.  &  P.  48;  Murray  v.  Barlee,  3  Mylne 

'  In  other  words,  although  the  wife's  &  K.  209;   Owen  v.  Homan,  4  H.  L. 

contract  be  in  the  ordinary  form,  with-  Cas.  997;  Picard  v.  Hine,  L.  R.  5  Ch. 

out  mentioning  or  referring  to  her  sep-  274;    Morrell  v.  Cowan,  L.  R.  6   Ch. 

arate  property,  it  is  enforceable  against  Div.  166  (her  guaranty  for  her  hus- 

Buch  property.  band), 

'  And  this,  although  her  husband  or  *  This  conclusioH  is  sustained  by  the 

a  stranger  may  have  joined  with  her  most  recent  decisions.     If,  at  the  time 

in  the  instrument:  Hulme  v.  Tenant,  when  her  engagement  was  made,  there 


f 


1677  CONTRACTS    OF    MARRIED    WOMEN.       §§  1125,   1 1 2G 

§  1125.  The  American  Doctrine. —  The  general  doc- 
trine established  by  the  English  court  of  chancery,  that 
the  wife's  separate  estate  is  liable  for  her  engairements 
which  purport  to  be  with  reference  to  it,  and  are  intended 
to  be  made  upon  its  faith  and  credit,  has  been  accepted 
in  all  the  American  states  where  the  system  of  equity  ju- 
risprudence prevails.  The  divergence  in  many  of  the 
states  from  the  conclusions  reached  by  the  Englisli  courts 
relates,  not  to  this  general  doctrine,  but  to  its  applications; 
it  is  wholly  confined  to  the  question  what  kinds  and  forms 
of  contracts  do  thus  purport  to  be  entered  into  with  ref- 
erence to  the  separate  estate,  and  are  intended  to  be  made 
on  its  faith  and  credit?  As  described  in  a  preceding  par- 
agraph, the  equitable  jurisdiction  in  enforcing  the  con- 
tracts of  married  women  has  been  greatly  enlarged  by 
modern  legislation  in  this  country.  Wherever  the  stat- 
utes have  declared  that  the  wife's  property,  real  and  per- 
sonal, belonging  to  her  in  her  own  right,  and  by  a  legal 
title,  shall  constitute  her  legal  or  statutory  separate  estate, 
but  have  not  further  provided  that  her  contracts  shall  cre- 
ate personal  liabilities  against  her  to  be  enforced  by  or- 
dinary legal  actions  and  judgments,  it  is  settled  that  her 
contracts  shall  be  enforced  in  equity  against  this  legal 
separate  estate  in  the  same  manner  and  subject  to  the 
same  rules  as  against  an  equitable  separate  estate.* 

§  1126.  To  What  Contracts  the  American  Doctrine  Ap- 
plies. —  It  should  be  observed  that,  under  the  New  York 

was  no  other  means  from  which  pay-  ^  This  was  undoubtedly  a  remarkable 
ment  could  reasonably  be  expected  but  extension  of  the  equitable  jurisdiction, 
her  separate  estate,  then  the  intent  to  but  it  was  necessary  to  prevent  a  fail- 
contract  on  its  credit  will  be  presumed:  ure  of  justice.  It  is  a  most  instruct- 
Johnson  v.  Gallagher,  3  De  Gex,  F.  &  ive  example  of  the  mode  in  which 
J.  494;  Mrs.  Matthewman'sCase,  L.  li.  established  pfrinciples  and  doctrines 
3  Eq.  781;  Shattock  v.  Shattock,  L.  R.  may  be  applied  to  entirely  new  condi- 
2  Eq.  182;  Butler  v.  Cumpston,  L.  R.  tions  of  fact:  Colvin  v.  Currier,  22 
7  Eq.  16;  Wainford  v.  Heyl,  L.  R.  20  Barb.  371;  Yale  v.  Dederer.  18  N.  Y. 
Eq.  321,  324;  Picard  v.  Hine,  L.  R.  5  205;  72  Am.  1)qc.  503;  22  N.  Y.  450; 
Ch.  274,  277;  Mayd  v.  Field.  L.  R.  3  78  Am.  Dec.  216;  68  N.  Y.  329;  Oe- 
Ch.  Div.  587;  Hodgson  v.  Williamson,  den  v.Guice,  56  Miss.  330;  Levi  v.  Earl, 
L.  R.  15  Ch.  Div.  87  (money  loaned  to  30  Ohio  St.  147;  and  see  collection  of 
her  for  her  support  when  living  apart  cases  in  the  last  note  under  §  1126, 
from  her  husband).  Tpost. 


§  1126  EQUITY    JURISPRUDENCE.  1678 

type  of  legislation  concerning  express  trusts  in  land, 
where  the  express  trust  which  is  permitted  for  the  benefit 
of  a  wife  is  created,  the  beneficiary  takes  no  estate,  has  no 
power  of  disposition,  and,  as  a  consequence,  cannot  charge 
her  interest  by  contract,  however  express/  With  regard 
to  the  applications  of  the  general  doctrine  there  is  a 
great  variety  of  opinion  and  wide  divergence  of  decision 
among  the  American  cases.'^  These  cases,  however,  when 
classified  according  to  broad  lines  of  division,  will  be 
found  to  fall  under  three  general  types.  First  type:  This 
includes  a  comparatively  few  states,  in  which  the  wife  has 
no  power  of  disposition  over  her  separate  estate,  except 
such  as  is  expressly  or  by  necessity  given  in  the  instru- 
ment creating  it.  Her  separate  estate  is  liable  for  those 
contracts  which  are  made  for  its  benefit,  and  for  those 
which  benefit  the  wife,  if  expressly  and  in  terms  charged 
upon  it  or  made  upon  its  credit,  but  is  not,  in  general, 
liable  for  her  contracts  of  suretyship  made  entirely  for 
the  benefit  of  another.*     In  order,  however,  that  any  con- 

^  See  ante,    vol.    2,    §§    1003-1005;  tions,    unless   where  a  provision   for 

Noyes  v.  Blakeman,  6  N.   Y.  567;  3  that  purpose  is  contained   in  the  in- 

Sand.    531;    Bramhall    v.    Ferris,    14  strument   creating    the   separate    es- 

N.  Y.  41;  67  Am.  Dec.  113.  tate."     I  would  remark  that  the  fore- 

'  The  decisions  are  so  very  numer-  going  statement  that  this  narrow  view 
ous,  and  the  conclusions  which  they  is  adopted  by  most  of  the  courts  in  the 
reach  are  so  various,  that  I  shall  make  United  States,  and  is  supported  by 
no  attempt  to  analyze  them  and  to  the  general  current  of  the  American 
formulate  distinct  rules  for  each  state  authorities,  is  clearly  and  entirely 
or  class  of  states.  Indeed,  it  would  be  erroneous  as  a  matter  of  fact.  On  the 
impossible  to  arrange  the  states  in  any  contrary,  as  shown  in  previous  para- 
general  classes.  I  have,  therefore,  graphs,  the  great  majority  of  the  state 
collected  the  most  important  cases  in  courts  have  adopted  the  English  doc- 
each  state,  and  have  placed  them  in  trine  that  a  wife  has  a  power  of  dis- 
order in  a  subsequent  note.  position   over  her  separate  property, 

*  The  view  which  belongs  to  this  unless  such  power  is  taken  away  or 
type  is  clearly  expressed  in  Willard  V.  curtailed  by  the  instrument  creating 
Eastham,  15  Gray,  328,  77  Am.  Dec.  it.  The  Massachusetts  court  is,  in 
366,  as  follows:  "The  rule  adopted  by  reality,  uttering  the  sentiments  of  a 
most  of  the  courts  in  the  United  States  comparatively  very  small  minority  of 
has  been  materially  different  from  that  the  state  tribunals.  The  opinion  fur- 
established  in  England;  and  the  gen-  ther  proceeds:  "We  think,  upon 
eral  current  of  American  authorities  mature  and  full  consideration,  that 
supports  the  principle  that  a  married  the  whole  doctrine  of  the  liability  of 
woman  has  no  power  in  relation  to  her  her  separate  estate  to  discharge  her 
separate  estate  but  such  as  is  expressly  general  engagements  rests  upon 
conferred  in  the  creation  of  the  estate;  grounds  which  are  artificial,  and 
and  that  her  separate  estate  is  not  which  depend  upon  implications  which 
chargeable  with   her  debts  or  obliga-  are  too  subtile  and  refined.     Our  con- 


1679  CONTKACTS    OF    MARRIED    WOMEN.  §  1126 

tract  may  be  thus  enforceable,  it  must  be  within  the  ex- 
press or  necessarily  implied  permission  of  the  instrument 
creating  the  estate.  Second  type:  In  the  states  belonging 
to  this  type,  with  perhaps  a  very  few  exceptions,  the  Eng- 
lish doctrine  concerning  the  wife's  power  of  alienation  is 
substantially  adopted.  The  peculiar  feature  which  distin- 
guishes the  type  is,  that  the  intent  to  contract  upon  the 
faith  and  credit  of  the  separate  estate,  and  thus  to  render 
it  liable,  must  affirmatively  and  expressly  appear,  and 
will  not  be  implied  or  presumed  from  any  mere  external 
form  of  the  engagement.  The  separate  property  is  liable 
for  all  contracts  of  the  wife  made  directly  for  its  benefit, 
for  all  her  contracts  made  for  her  own  benefit,  if  expressly 
and  in  terms  purporting  to  be  on  its  faith  and  credit,  and 
for  her  contracts  of  suretyship  for  the  benefit  of  another, 
if  the  intention  to  charge  the  separate  property  thereby  is 
clearly  and  unequivocally  expressed.^  Third  type:  In  the 
states  of  this  type  the  conclusions  reached  by  the  English 
courts  have  been  more  closely  followed.     Its  distinguish- 

clusion  is,  that  when,  by  the  contract,  learning  and  high  ability  of  the  court 

the  debt  is  made  expressly  a  charge  may   sometimes   render   its   decisions 

upon   the   separate   estate,    or   is  ex-  only  the    more   dangerous   as   guides 

pressly  contracted  upon  its  credit,  or  and   precedents.     See  also  Rogers  v. 

when   the   consideration   goes   to  the  Ward,  8  Allen,  3S7;  86  Am.  Dec.  710; 

benefit  of  such  estate,  or  to  enhance  Tracy  v.  Keith,  11  Allen,  214;  Heburu 

its  value,  then  equity  will  decree  that  v.  Warner,    112   Mass.    271;  17  Am. 

it  shall  be  paid  from  such  estate  or  its  Rep.  86;  Adams  v.   Mackey,  6  Rich, 

income  to  the  extent  to  which  the  poioer  Eq.  75;  James  v.  Mayrant,  4  Desaus. 

of  disposal  by  the  married  woman  may  Eq.    591;   6    Am.  Dec.   630;   Cater  v. 

go.     But  where  she  is  a  mere  surety,  Eveleigh,  4   Desaus.    Eq.   19;   6  Am, 

or  makes  the  contract  for  the  accom-  Dec.    596;   Magwood   v.    Johnston,    1 

modation  of  another,  without  consid-  Hill    Eq.  228;   for  other  examples  of 

eration  received  by  her,  the  contract  this  type,  see  the  decisions  in  ^lissis- 

being  void  at  law,  equity  will  not  en-  sippi  and  Tennessee,  cited  post,  in  the 

force  it  against  her  estate,  unless  an  last  note  under  this  paragrapli. 
express  instrument  makes  the  debt  a         '  If  the  contract  is  in  writing,  and 

charge  upon  it."     The  general   tenor  is  not  directly  for  the  benefit  of  the 

of  this  passage  is  one  example,  among  separate  estate,  the  intention  to  make 

very  many,  of  the  tendency  often  ex-  it  liable  should  appear  in  the  writing 

hibited  by  the  Massachusetts  court  to  itself:  Yale  v.  Dederer,  18  N.  Y.  265; 

limit,  and  even  abrogate,  well-settled  72  Am.  Dec.  503;  22  N.  Y.  450.  456; 

doctrines  of  equity,  sometimes  even  to  78  Am.  Dec.  216;  68  N.    Y.   329;  for 

emasculate  equitable  principles  which  further  illustrations  of  thi.s  type,  see 

areelementary  and  fundamental.    The  the  decisions  in    Indiana,  Kentucky, 

Massachusetts  decisions  would  often,  Maryland,  New  Jersey,  Rhode  Island, 

therefore,  be  very  misleading  in  other  and  Vermont,  cited  in  the  last  foot* 

states  where  the  equity  jurisprudence  note  under  this  paragraph, 
prevails  in  its  entirety,  aud  the  great 


§  1126  EQUITY    JURISPRUDENCE.  1680 

ing  feature  is,  that  the  intent  to  deal  on  the  credit  of  the 
separate  estate  need  not  be  expressed,  but  will  be  inferred 
from  the  nature  or  form  of  the  contract.  The  wife's  sep- 
arate estate  is  liable  for  all  her  contracts  entered  into  for 
its  own  benefit,  and  for  all  her  written  contracts  made  for 
her  own  benefit,  such  as  her  bonds,  notes,  bills  of  ex- 
change, and  the  like,  even  though  no  intention  to  bind  it 
is  expressed  in  their  very  terms.  In  many,  and  probably 
most,  of  the  states  belonging  to  this  class,  the  wife's  con- 
tracts of  suretyship  must  be  expressly  charged  upon  her 
separate  property,  in  order  to  bind  it,  and  her  general 
verbal  engagements  must  likewise  appear  in  some  aflBrm- 
ative  manner  to  be  made  on  its  faith  and  credit;  with  re- 
gard to  such  contracts  no  intent  is  generally  presumed.* 
As  it  would  be  impossible  to  determine  with  accuracy 
the  rules  on  this  subject  which  prevail  in  any  particular 
state  without  examining  the  decisions  of  its  own  courts, 
I  have  collected  the  more  recent  and  important  cases,  and 
have  arranged  them  in  the  foot-note  under  their  respect- 
ive states.''     It  has  been  uniformly  held  that  the  wife's 

•  As  illustrations  of  this  type,  see  Shields,  61  Ala.  428;  Lee  v.  Tannen- 

the   decisions   in  Alabama,  Missouri,  baum,  62  Ala.  501;  Sliulman  v.  Fitz- 

Ohio,  Virginia,    and   West    Virginia,  patrick,  62  Ala.  571;  Short  v.  Battle, 

cited  in  the  next  following  note.  52  Ala.  456;  Williams  v.  Baldridge,  66 

2  The  reader  will  be  able   from  an  Ala.  338;  Paul k  v.  Wolfe,  34  Ala.  541; 

examination  of  these  cases  to   ascer-  Fry  v.  Hammer,  50  Ala.  52;  Riley  v. 

tain   the   exact  position  occupied  by  Pierce,  50  Ala.  93;  Booker  v.  Booker's 

the  courts  of  each  state.     I  have  not  Adm'r,  32  Ala.  473;  Drake  v.  Glover, 

attempted  to  distinguish  between  de-  30  Ala.  382;  Gunter  v.   Williams,  40 

cisious  relating  to  a  married  woman's  Ala.  561,  572;  Smyth  v.  Oliver,  31  Ala. 

equitable  separate  property,  and  those  39;  Canty  v.   Sanderford,  37  Ala.  91; 

relating  to  her  legal  statutory  separate  Rogers  v.  Boyd,  33  Ala.  175;  Pickens 

property,  since  both  are  governed  by  v.  Oliver,  29  Ala.  528;  Ozley  v.  Ikel- 

the  same  rules.     The  latter  class  have  heimer,    26    Ala.    332;     Bradford    v. 

became  much  the  more  numerous.     In  Greeiiway,   17  Ala.  797;  52  Am.  Dec. 

several  of  the  states  I  have  cited  de-  203.     [By  statute  of   Feb.    28,    1887^ 

cisions  rendered  prior  to  their  recent  Code  1886,  sees.  2341-2351,  she  may 

statutes  which    make    her    contracts  contract  with   reference  to  her  sepa- 

personally  binding  upon  the  wife,  and  rate  estate  only  in  writing,  with  the 

enforceable  by  ordinary  legal  actions  assent  or  concurrence  of  her  husband 

and  judgments.  expressed  in  writing:   Rooney  v.  Mi- 

Alabama:  Sprague  v.  Tyson,  44  Ala.  chael,  84  Ala.  585;  Knox  v.  Childers- 

338  (her  bill  of  exchange);  Brame  v.  burg  Land  Co.,  86  Ala.  180.] 
McGee,  46  Ala.  170  (her  note);  Jones         Arkansas:  Collins  v.  Underwood,  33 

V.  Reese,  65  Ala.  134  (her  mortgage  to  Ark.  265  (must  be  for  her  own  bene- 

secure  a  debt  of  her  husband);  Miller  fit,  or  for  that  of  the  separate  estate); 

V.    Voss,    62    Ala.    122;     £pr;igue    v.  Still  well  v.  Adams,  29  Ark.  346;  Col- 


1681 


CONTRACTS    OF    MAKKIKD    WOMEN. 


1126 


equitable  separate  estate,  and  the  equitable  rules  which 
govern  it,  do  not  come  within  the  purview  of  the  recent 


lins  V.  Wassell,  34  Ark.  17;  Roberta 
V.  Wilcoxon,  36  Ark.  Sa-"!;  Wanl  v. 
Estate  of  Ward,  36  Ark.  5SG;  Scott  v. 
Wanl,  35  Ark.  4S0;  Dyer  v.  Arnolcl, 
37  Ark.  17;  Henry  v.  Blackburn,  1^2 
Ark.  445;  [Buudy  v.  Cocke,  l'_'S  U.  S. 
188.] 

California  (prior  to  present  statute): 
Drais  v.  Hogan,  50  Cal.  I'Jl,  128; 
Friedberg  v.  Parker,  50  Cal.  103; 
Terry  v.  Hammonds,  47  Cal.  32;  Mil- 
ler V.  Newton,  23  Cal.  554;  Maclay  v. 
Love,  25  Cal.  367.  For  cases  under 
present  statute,  see  post. 

Connecticut:  Donovan's  Appeal,  41 
Conn.  551  (money  borrowed  and  used 
by  her  for  the  benefit  of  her  separate 
property,  on  her  verbal  promise  to  re- 
pay); Hitchcock  V.  Kiely,  41  Conn. 
611;  Gore  v.  Carl,  47  Conn.  291;  Whit- 
ing V.  Beckwith,  31  Conn.  596;  Jen- 
nings v.  Davis,  31  Conn.  1.S4;  Jackson 
V.  Hubbard,  36  Conn.  10;  Imlay  v. 
Huntington,  20  Conn.  146,  175. 

Ddaiuare:  State  v.  Gorman,  4  Houst. 
624;  Rossv.  Singleton,  1  Del.  Ch.  149; 
12  Am.  Dec.  86  (a  contract  made  by  a 
wife  through  fraud,  enforced  against 
her  after  she  became  a  widow). 

Florida:  Alston  v.  Howies,  13  Fla. 
117;  Tison  v.  Mattair,  8  Fla.  107; 
Liguoski  v.  Bruce,  8  Fla.  269;  Sander- 
son V.  Jones,  6  Fla.  430;  6:i  Am.  Dec. 
217;  Maiben  v.  Bobe,  6  Fla.  J8I; 
Lewis  V.  Yale,  4  Fla.  418;  Adm'r  of 
Smith  v.  Poythress,  2  Fla.  92;  48  Am. 
Dec.  176;  [Thrasher  v.  Doig,  18  Fla. 
809;  Staley  v.  Hamilton,  19  Fla.  275; 
Schnabel  v.  Betts,  23  Fla.  178.] 

Georgia:  Dallas  v.  Heard,  32  Ga. 
604;  Robert  v.  West,  15  Ga.  123; 
Cherokee  Lodge  v.  White,  63  Ga.  742; 
Kent  v.  Plumb,  57  Ga.  207;  Humph- 
rey V.  Copeland,  54  Ga.  54o;  Clark  v. 
Valentino,  41. Ga.  143;  Huff  v.  Wright, 
39  Ga.  41;  [Howard  v.  Simpkins,  70 
Ga.  322;  Wingfield  v.  Rhea,  73  Ga. 
477.] 

Illinois:  Patterson  v.  Lawrence,  90 
111.  174;  32  Am.  Rep.  22  (her  con- 
tracts concerning  her  separate  real  es- 
tate, void  at  law,  may  be  enforced  in 
equity);  Thompson  v.  Scott,  1  111. 
App.  641  (her  own  mortgage  on  land 
is  void  at  law,  but  the  lien  may  be 
enforced  in  equity);  McCullougli  v. 
Ford,  96  III.  439;  Rol)insou  v.  Breins, 
2  Eq.  Jur.  — 106 


90  111.  351;  Erumert  v.  Hays,  89  III. 
11;  Elder  V.  Jones,  85  111.  .SS4;  Whit- 
ford  V.  Daggett,  84  111.  144;  Yazel  v. 
Palmer,  81  111.  82;  Husband  v.  Kplinv', 
81  111.  172;  25  Am.  Rep.  273;  Harrer 
v.  Wallner,  80  111.  197;  Doyle  v.  Kelly, 
75  III.  574;  McDavid  v.  Adams,  77  111. 
155;  Kase  v.  Painter,  77  111.  543;  Irt- 
dianapolis  etc.  R'y  v.  McLaughlin,  77 
111.  275;  Bauman  v.  Street,  76  111.  526; 
Patten  v.  Patten,  75  111.  446;  Wil- 
liams V.  Hugunin,  69  111.  214;  IS  Am. 
Rep.  607;  Haight  v.  McVegh,  69  111. 
624;  Halley  v.  Ball,  66  111.  250;  Cook- 
son  V.  Toole,  59  111.  515. 

Indiana:  Kantrowitz  v.  Prather,  31 
Ind.  92;  99  Am.  Dec.  5S7;  Liudley  v. 
Cross  31  Ind.  106;  99  Am.  Dec.  610; 
O'Dady  v.  Morris,  31  Ind.  Ill;  Mont- 
gomery v.  Sprankle,  31  Ind.  113;  Bel- 
lows v.  Rosenthal,  31  Ind.  116;  Put- 
nam V.  Tennyson,  50  Ind.  456  (these 
cases  hold  that  the  wife's  separate  prop- 
erty is  liable  for  her  contracts  made 
directly  for  its  improvement,  but  is 
not  liable  for  her  general  engagements, 
although  made  for  her  own  benefit  and 
on  the  credit  of  her  separate  property, 
when  they  were  not  e.vprossly,  in  very 
terms,  charged  upon  it);  Miller  v.  Al- 
bertson,  73  Ind.  .343;  Vail  v.  Meyer, 
71  Ind.  159;  Smith  v.  Smith,  80  Ind. 
267;  Wooden  v.  Wampler,  69  Ind.  88; 
Jackman  V.  Nowling,  69  Ind.  188;  Pat- 
ton  V.  Rankin,  68  Ind.  245;  34  Am. 
Rep.  254;  Williams  v.  Wilbur,  67  Ind. 
42;  Smith  v.  Howe,  31  Ind.  233;  [Har- 
rell  V.  Harrell,  117  Ind.  94.] 

Kansas:  Miner  v.  Pearson,  16  Kan. 
27;  Tallman  v.  Jones,  13  Kan.  438; 
Faddis  v.  Woollomes,  10  Kan.  56; 
Larimer  v.  Kelley.  10  Kan.  298;  Wicks 
V.  Mitchell,  8  Kan.  SO;  Deering  v. 
Boyle,  8  Kan.  525;  12  Am.  Kep.  480; 
Going  V.  Orns,  8  Kan.  85;  Knaggs  v. 
Mastin,  9  Kan.  532;  Monroe  v.  May, 
9  Kan.  466. 

Kentucky:  Young  v.  Smith,  9  Bush, 
421  (income  of  her  separate  estate  lia- 
ble for  her  debts  contracted  for  sup- 
port of  herself  and  children);  Penn  v. 
Young,  JO  Bush,  626;  Hannon  v.  Mad- 
den, 10  Bush,  664;  Moreland  v.  My- 
all, 14  Bush,  474;  Uhrig  v.  Horstman, 
8  Bush,  17-;  Lillard  v.  Turner,  16  B. 
Mon.  374;  Biirch  v.  Breckinridge,  16 
B.  Mou.  482;  63  Am.  Dec.  553. 


1126 


EQUITY    JURISPRUDENCE. 


1682 


legislation  concerning  married  women's  jDroperty,  and  are 
not  affected   by  its  provisions.     These   modern   statutes 


Maine:  Sampson  v.  Alexander,  66 
Me.  182;  Mayo  v.  Hutchinson,  57  Me. 
546;  Bean  v.  Boothby,  57  Me.  295; 
Hanson  v,  Millett,  55  Me.  184;  Duren 
V.  Getchell,  55  Me.  241;  Beals  v.  Cobb, 
51  Me.  3!8;  Winslow  v.  Gilbreth,  50 
Me.  90;  Brookings  v.  White,  49  Me. 
479;  Springer  v.  Berry,  47  Me.  330; 
Eaton  V.  Nason,  47  Me.  132;  Beale  v. 
Knowles,  45  Me.  479;  Hancock  Bank 
V.  Joy,  41  Me.  568;  Merrill  v.  Smith, 
37  Me.  394;  Southard  v.  Piper,  36  Me. 
84;  Southard  v.  Plummer,  36  Me.  64; 
Johnson  V.  Stillings,  35  Me.  427;  Howe 
V.  Wildes,  34  Me.  566;  Motley  v.  Saw- 
ver,  34  Me.  540;  Eldridge  v.  Preble, 
34  Me.  148;  Clark  v.  Viles,  32  Me.  32; 
McLellan  v.  Nelson,  27  Me.  129. 

Maryland:  Wilson  v.  Jones,  46  Md. 
349  (it  must  affirmatively  appear  that 
her  contracts  were  made  with  direct 
reference  to  her  separate  estate,  and 
with  the  intention  to  charge  it);  Kerch- 
ner  v.  Kempton,  47  Md.  568;  Trader 
V.  Lowe,  45  Md.  1;  Plummer  v.  Jar- 
man,  44  Md.  632;  Oswald  v.  Hoover, 
4.-}  Md.  360;  Hoffman  v.  Rice,  38  Md. 
284;  Rice  v.  Hoffman,  35  Md.  344; 
Warner  v.  Dove,  33  Md.  579;  Barton 
V.  Barton,  32  Md.  214;  Kuhn  v.  Stans- 
field,  28  Md.  210;  92  Am.  Dec.  681; 
Smith  V.  McAtee,  27  Md.  420;  92  Am. 
Dec.  641;  Niller  v.  Johnson,  27  Md. 
6;  Six  V.  Shaner,  26  Md.  415;  Buchanan 
V.  Turner,  26  Md.  1 ;  Cooke  v.  Hus- 
bands, 11  Md.  492;  [Girault  v.  Adams, 
61  Md.  1;  Fowler  v.  Jacob,  62  Md. 
326  (intent  to  cliarge  may  be  shown 
by  circumstances):  Wingert  v.  Gordon, 
66  Md.  106.] 

Masxaclntieits  (Liability  very  re- 
stricted: See  quotations  ante,  in  note  3 
under  §  1126):  Nourse  v.  Henshaw, 
123  Mass.  96;  Merriam  v.  Boston  etc. 
R.  R.,  117  Mass.  241;  Pierce  v.  Kit- 
tredge,  115  Mass.  374;  Towle  v.  Towle, 
114  Mass.  167;  Stevens  v.  Reed,  112 
Mass.  515;  Heburn  v.  Warner,  112 
Mass.  271;  17  Am.  Rep.  86;  Faucett  v. 
Currier,  109  Mass.  79;  McChiskey  v. 
Provident  Inst.,  103  Mass.  300;  Laba- 
ree  v.  Colby,  99  Mas.s.  559;  Eastabrook 
V.  Earle,  97  Mass.  302;  Tracy  v.  Keith, 
11  Allen,  214;  Rogers  v.  Ward,  8  Allen, 
387;  85  Am.  Dec.  710;  Willard  v.  East- 
ham,  15  Gray,  328;  77  Am.  Dec.  366; 
Commonwealth  v.   Williams,  7  Gray, 


337;  Conant  v.  Warren,  6  Gray,  562; 
Beal  V.  Warren,  2  Gray,  447.  [See 
also  Fowle  v.  Torrey,  135  Mass.  90; 
Porter  V.  Wakefield,  146  Mass.  25.] 

Michigcm:  Burden  o  v.  Amperse,  14 
Mich.  91;  90  Am.  Dec.  225;  Glover  v. 
Alcott,  11  Mich.  470;  Watson  v.  Thur- 
ber,  11  Mich.  457;  Farr  v.  Sherman, 
11  Mich.  33;  Starkweather  v.  Smith, 
6  Mich.  377;  Durfee  v.  McClurg,  6 
Mich.  223;  [Insurance  Co.  v.  Wayne 
Co.  Bank,  68  Mich.  1 16  (contract  must 
clearly  appear  to  have  been  made  with 
intent  to  bind  her  separate  estate).] 

Minnesota:  Northwestern  etc.  Co.  Vi 
AUis,  23  Minn.  337;  Wampacii  v.  St. 
Paul  etc.  R.  R.,  22  Minn.  34;  Spencer 
v.  St.  Paul  etc.  R.  R.,  22  Minn.  29; 
Leighton  v.  Sheldon,  16  Minn.  243; 
W^illiams  v.  McGrade.  13  Minn.  46; 
Rich  V.  Rich,  12  Miim'.  468;  Wilder  v. 
Brooks,  10  Minn.  50;  88  Am.  Dec.  49; 
Carpenter  v.  Wilverschied,  5  Minn. 
170;  Carpenter  v.  Leonard,  5  Minn. 
155. 

Mississippi:  Musson  v.  Trigg,  51 
Miss.  172  (the  instrument  creating 
the  wife's  equitable  separate  estate  is 
the  measure  of  the  extent  and  mode  by 
which  she  may  bind  it  by  contract; 
the  statutes  regulating  her  power  to 
make  contracts  concerning  her  legal 
separate  property  have  no  application); 
Morrison  v.  Kinstra,  55  Miss.  71  (her 
contract  to  purchase  land  on  credit 
creates  no  liability  against  her  separate 
estate);  Ogden  v.  Guice,  56  Miss.  330; 
[McDougal  V.  People's  Savings  Bank, 
62  Miss.  663.] 

Missouri  (The  English  doctrine 
seems  to  be  accepted  to  its  full  extent. 
Her  separate  estate  is  liable  for  her 
notes  and  other  written  contracts,  the 
intent  to  charge  it  thereby  being 
necessarily  inferred;  even  in  her  gen- 
eral verbal  engagements  the  intent 
will  be  presumed,  unless  the  circum- 
stances show  that  credit  was  not  given 
to  it):  De  Baun  v.  Van  Wagoner,  56 
Mo.  347,  349  (her  note  or  other  written 
form  of  promise);  Gay  v.  Ihm,  69  Mo. 
584  (her  covenant  to  pay  rent  in  a 
lease);  Hooton  v.  Ransom,  6  Mo.  App. 
19;  Morrison  v.  Thistle,  67  Mo.  596 
(her  note);  Nash  v.  Norment,  5  Mo. 
App.  545  (her  general  engagements  are 
presumed  to  be  on  the  credit  of  her 


1683 


CONTRACTS    OF    MARKIKD    WOMKN. 


1120 


giving  to  the  wife  a  legal  separate  eslato  Imvo,  in   mni- 
bination  with  the  equitable  doctrine  concerning  married 


separate  property);  Dameron  v.  Jami- 
8on,  4  Mo.  App.  299  (her  deed,  in  M-liich 
her  husband  does  not  join);  Pratt  v. 
Eaton,  65  Mo.  157  (her  general  en- 
gagements and  promises);  .Maguire  v. 
Maguire,  3  Mo.  App.  458  (her  written 
contract);  Meyers  v.  Van  Wagoner,  56 
Mo.  115  (her  note);  Lincoln  v.  Rowe, 
15  Mo.  571  (note  by  herself  and  her 
husband);  Kimm  v,  Weippert,  46  Mo. 
532;  2  Am.  Rep.  541  (the  same); 
Schafroth  v.  Ambs,  46  Mo.  114  (the 
same);  Pemberton  v.  Johnson,  46  Mo. 
342  (note  for  the  price  of  land  pur- 
chased); Miller  v.  Brown,  47  Mo.  504; 
4  Am.  Rep.  345  (her  verbal  contract); 
Boeckler  v.  McGowan,  9  Mo.  App. 
373  (damages  for  the  breach  of  her 
written  agreement);  Metropolitan 
Bank  v.  Taylor,  53  Mo.  444;  62  Mo. 
338  (her  notes);  Clark  v.  National 
Bank,  47  Mo.  17;  Burnley  v.  Thomas, 
63  Mo.  390;  Eystrav.  Capelle,  61  Mo. 
578;  Gage  V.  Gates,  62  Mo.  412;  Davis 
V.  Smith,  75  Mo.  219;  Klenke  v. 
Koeltze,  75  Mo.  239;  Boatmen's  Sav. 
Bank  v.  Collins,  75  Mo.  280;  Staley  v. 
Howard,  7  Mo.  App.  377. 

JS^ehraska:  McCormick  v.  Law  ton, 
3  Neb.  449;  Webb  v.  Hoselton,  4  Neb. 
308;  19  Am.  Rep.  638;  Davis  v.  First 
Nat.  Bank,  5  Neb.  242;  25  Am.  Rep. 
484;  Aultman  v.  Obermeyer,  6  Neb. 
260;  Hall  v.  Christy,  8  Neb.  264;  Sa.v. 
ings  Bank  v.  Scott,  10  Neb.  83;  Bar- 
num  V.  Young.  10  Neb.  309. 

iVeio  Hani-p<hire:  Cooper  v.  Alger, 
51  N.  H.  172;  Bachelder  v.  Sargent, 
47  N.  H.  262;  George  v,  Cuttincj,  46 
N.  H.  130;  88  Am.  Dec.  195;  Hill  v. 
Pine  River  Bank,  45  N.  H.  300;  Pat- 
terson V.  Patterson,  45  N.  H.  164; 
Shannon  v.  Canney,  44  N.  H.  592; 
Ames  V.  Foster,  42  N.  H.  3S1;  Wood- 
ward V.  Seaver,  38  N.  H.  29;  Albinv. 
Lord,  39  N.  H.  196;  Bailey  v.  Pearson, 
29  N.  H.  77;  Blake  v.  Hall,  57  N.  H. 
373;  Muzzey  v.  Reardon,  57  N.  H. 
378;  Whipple  v.  Giles,  55  N.  H.  1.39; 
Hammond  v.  Corbett,  51  N.  H.  311; 
[Parsons  v.  McLane,  64  N.  H.  478.] 

New  Jersei/:  Homoeopathic  Mat. 
Life  Ins.  Co.  v.  ^Marshall,  32  N.  J.  Eq. 
103  (her  mortgage,  to  secure  a  del)t 
contracted  for  the  benefit  of  her  sep- 
arate estate,  although  not  acknowl- 
edged  in   any  way,  creates  a   cliargo 


enforceable  in  eouity);  Huyler's  Ex'rs 
V.  Atwood,  26  N.  J.  Eq.  504  (her  ct.n- 
tract  to  pay  otf  a  mortgage  on  land 
conveyed  to  her);  Pierson  v.  Luiii,  25 
N.  J.  Eq.  390  (debt  for  benefit  of  the 
estate);  Perkins  v.  Elliott,  23  N.  J. 
Eq.  526  (not  liable  for  her  contract  of 
suretyship,  unless  it  ajipears  that  she 
or  tlio  estate  is  brnelitetl  thereby); 
Merchant  v.  Thompson,  34  N.  J.  Eq. 
73  (her  mortgage  to  secure  a  debt  of 
her  husbantl,  or  of  a  third  person); 
Porch  V.  Fries,  IS  N.  J.  Eq.  204:  Dilts 
v.  Stevenson,  17  N.  J.  Eq.  407;  Beals'a 
Ex'r  v.  Storm,  26  N.  J.  Eq.  372;  Vree- 
land  V.  Vreeland,  16  N.  J.  Eq.  512; 
Bel  ford  v.  Crane,  16  N.J.  Eq.  265;  84 
Am.  Dec.  155;  Vreeland's  Ex'rs  v. 
Ryno's  Ex'r,  26  N.J.  Eq.  160;  Arm- 
strong v.  Ross,  20  N.  J.  Eq.  109; 
Compton  V.  Pierson.  28  N.  J.  Kfj.  229; 
Johnson  v.  Vail,  4  N.  J.  Eq.  423; 
Jolinson  V.  Cummins,  16  N.  J.  Eq.  97; 
84  Am.  Dec.  142.  [Contracts  between 
husband  and  wife  are  still  enforceable 
only  in  equity:  Farmer  v.  Farmer,  39 
N.  J.  Eq.  211;  Wood  v.  Chetwood,  44 
N.  J.  Eq.  66.  Executor}'  contr.icts 
for  payment  of  debts  of  thiril  persons 
cannot,  under  the  statute,  be  enforced, 
but  after  they  have  l)ecome  executed, 
she  cannot  rescind:  Warwick  v.  Law- 
rence, 43  N.  J.  Eq.  179;  3  Am.  St. 
Rep.  299;  W^alter  v.  Dixon  Crucible 
Co.,  47  N.  J.  Eq.  342.] 

New  York-:  Yale  v.  Dederer,  IS  X, 
Y.  265;  72  Am.  Dec.  503;  22  N.  V. 
450;  78  Am.  Dec.  216;  68  N.  Y.  329 
(this  leading  case  holds  that  the  sep- 
arate estate  is  liable  for  the  wife's 
contracts, — 1.  When  the  considera- 
tion is  directly  for  the  bemrit  of  tlie 
separate  property  and  on  its  credit, 
although  nothing  is  expressly  said  iu 
the  contract  about  its  being  thus  a 
charge;  and  2.  Any  other  contract, 
whatever  be  its  nature  or  purpose, 
and  although  it  does  not  beiietit  her 
separate  property,  when  in  tlie  very 
terms  of  the  contract  slie  expressly 
charges  it  upon  her  separate  estate, 
and  if  the  contract  is  written  this 
intent  must  be  expressed  in  the  writ- 
ing'); Ballin  v.  Dillaye,  .S7  N.  Y.  35; 
Owen  V.  Cawley,  36  N.  Y.  600:  Van- 
derliej'den  v.  .Mallory,  1  N.  Y.  4")2: 
Jaques    v,    Meth.     Epis.     Church,    17 


§  1126 


EQUITY    JURISPRUDENCE. 


1684 


women's  contracts,  created  a  very  anomaloii-s  condition  in 
the  jurisprudence  of  most  of  the  states, —  an  extension  of 


Johns.  548;  8  Am.  Dec.  447;  Dyett  v. 
North  Am.  Coal  Co.,  20  Wend.  570; 
32  Am.  Dec.  598;  Gardner  v.  Gardner, 
7  Paige,  112;  Knowles  v.  McCamly, 
10  Paige,  .342.  For  decisions  under 
the  existing  statute,  see  post. 

North  Carolina:  Hall  v.  Short,  81 
N.  C.  273;  Pippen  v.  Wesson,  74  N.  0. 
4.37;  Webb  v.  Gay,  74  N.  C.  447; 
Manning  v.  Manning,  79  N.  C.  300; 
28  Am.  Rep.  324;  Kirkman  v.  Bank 
of  Greensboro,  77  N.  C.  394;  Knox  v. 
Jordan,  5  Jones  Eq.  175;  Harris  v. 
Harris,  7  Ired.  Eq.  Ill;  53  Am.  Dec. 
393;  Frazier  v.  Brownlow,  3  Ired.  Eq. 
237;  42  Am.  Dec.  165;  [Dougherty  v. 
Sprinkle,  88  N.  C.  300;  Flaum  v. 
Wallace,  103  N.  C.  296  (limitations  or 
special  provisions  in  the  deed  of  set- 
tlement must  be  strictly  pursued); 
Thurber  v.  La  Roque,  105  N.  C. 
310;  Farthing  v.  Shields,  106  N.  C. 
295;  Thompson  v.  Smith,  106  N.  C. 
357;  Wood  v.  Wheeler,  106  N.  C. 
513.]      . 

Ohio:  Avery  v.  Vansickle,  35  Ohio 
St.  270  (is  liable  for  deficiency  arising 
at  a  foreclosure  sale,  on  her  mortgage 
to  secure  her  note);  Williams  v.  Urm- 
ston,  35  Ohio  St.  296;  35  Am.  Rep. 
oil  (her  note  as  surety,  her  intention 
to  charge  her  separate  property  thereby 
is  presumed);  Rice  v.  Railroad  Co.,  32 
Ohio  St.  380;  30  Am.  Rep.  610  (in  her 
general  engagement,  an  intent  to  deal 
on  the  credit  of  her  separate  estate 
must  be  shown);  Levi  v.  Earl,  30  Ohio 
St.  147  (the  same,  and  her  separate 
estate  not  liable  for  her  mere  accom- 
modation indorsement,  without  any 
further  evidence  of  an  intent);  Phillips 
V.  Graves,  20  Ohio  St.  371;  5  Am.  Rep. 
675  (liable  for  her  note  given  for  her 
own  debt);  Patrick  v.  Littell,  36  Ohio 
St.  79;  38  Am.  Rep.  552;  Fallis  v. 
Keys,  35  Ohio  St.  265;  Swasey  v. 
Antram,  24  Ohio  St.  87;  Jenz  v. 
Gugel,  26  Ohio  St.  527;  Meiley  v. 
Butler,  26  Ohio  St.  535;  Westerman 
v,  Westerman,  25  Ohio  St.  500;  Logan 
V.  Thrift,  20  Ohio  St.  62;  Clark  v. 
Clark,  20  Ohio  St.  128;  Allison  v. 
Porter,  29  Ohio  St.  136;  Machir  v. 
Burroughs,  14  Ohio  St.  519;  [Eliott 
V.  Lawhead,  43  Ohio  St.  171.] 

Oregon:  Kennard  v.  Sax,  3  Or.  263, 
267;  Brummet  v.  Weaver,  2  Or.   168; 


Starr  v.  Hamilton,  1  Deadly,  268;  Dick 
V.  Hamilton,  1  Deady,  322. 

Penmylvania:  Bower's  Appeal,  68 
Pa.  St.  126;  Speakman's  Appeal,  71 
Pa.  St.  25;  Silveus's  Ex'rs  v.  Porter, 
74  Pa.  St.  448;  Berger  v.  Clark,  79  Pa. 
St.  340;  Lippincott  v.  Leeds,  77  Pa. 
St.  420;  Wright  v.  Brown,  44  Pa.  St. 
224;  Bear's  Adm'r  v.  Bear,  33  Pa.  St. 
525;  Walker  v.  Reamy,  36  Pa.  St.  410; 
Trimble  V.  Reis,  37  Pa.  St.  448;  Thorn- 
dell  V.  Morrison,  25  Pa.  St.  326;  Peck 
V.  Ward,  18  Pa.  St.  506;  Shnyder  v. 
Noble,  94  Pa.  St.  286;  Appeal  of  Ger- 
mania  Sav.  Bank,  95  Pa.  St.  329;  Innis 
v.  Templeton,  95  Pa.  St.  262;  40  Am. 
Rep.  643;  Sawtelle's  Appeal,  84  Pa. 
St.  306. 

Rhode  Island:  Eliott  v.  Gower,  12 
R.  I.  79  (a  wife  may  charge  her  equi- 
table separate  estate  by  any  written 
contract  which  expressly  states  her 
intention  to  charge,  or  by  a  verbal 
declaration,  if  the  contract  is  for  tha 
benefit  of  herself  or  of  her  separate 
estate);  Angell  v.  McCuUough,  12 
R.  I.  47  (her  legal  statutory  separate 
estate  is  not  liable  to  such  equitable 
charge);  Petition  of  O'Brien,  11  R.  L 
419;  Berry  v.  Teel,  12  R.  L  267,  268; 
Warner  v.  Peck,  11  R.  L  431;  [Fallon 
V.  McAlonen,  15  R.  I.  223.] 

South  Carolina:  Adams  v.  Mac-key, 
6  Rich.  Eq.  75;  Magwood  v.  Johnston, 
1  Hill  Eq.  228;  Cater  v.  Eveleigh,  4 
Desaus.  Eq.  19;  6  Am.  Dec.  596;  James 
V.  Mayraut,  4  Desaus.  Eq.  591;  6  Am. 
Dec.  630.  For  decisions  under  exist- 
ing statute,  see  -post. 

Tennessee:  Owns  v.  Johnson,  8  Baxt. 
265  (not  liable  for  her  debt  for  money 
borrowed  to  pay  off  a  mortgage  on  her 
land);  Myers  v.  James,  2  Lea,  159 
(the  authority  expressly  given  in  the 
instrument  creating  her  equitable 
separate  estate  measures  her  power 
to  bind  it  by  contract;  when  such  in- 
strument gave  her  power  "to  sell, 
mortgage,  or  lease,"  her  mortgage  or 
trust  deed  to  secure  a  debt  contracted 
for  the  benefit  of  her  separate  estate 
creates  a  valid  charge);  Robertson  v. 
Wilburn,  1  Lea,  633  (in  absence  of 
express  authority  as  above,  she  can- 
not bind  her  separate  property  by  her 
note  as  surety);  Davis  v.  Jennings,  3 
Tenn.  Ch.  241  (in  absence  of  express 


1685 


CONTRACTS    OF    MARRIED    WOMEN'. 


§  11120 


a  jurisdiction  most  distinctively  equitable  to  an  ordinary 
legal   ownership    of  property.     When    the   common-law 


authority  aa  above,  her  contract  to 
sell  land  will  not  be  enforced);  Arring- 
ton  V.  Roper,  3  Tenn.  Ch.  572  (in  ab- 
sence of  express  authority  as  above, 
her  notes,  although  expressly  charged, 
create  no  liability);  Chatterton  v. 
Young,  2  Tenn.  Ch.  708;  Moseby  v. 
Partee,  5  Heisk.  2G;  Shacklett  v. 
y     Polk,  4  Heisk.  104;  Head  v.  Temple, 

4  Heisk.  34;  Hughes  v.  Peters,  1  Cold. 
67;  Young  v.  Young,  7  Cold.  461; 
Sherman  v.  Turpin,  7  Cold.  3S2;  [Bed- 
ford v.  Burton,  106  U.  S.  341;  Menees 
V.  Johnson,  12  Lea,  561;  Warren  v. 
Freeman,  85  Tenn.  513;  Eckerly  v. 
McGhee,  85  Tenn.  661.] 

Texas:  Hutchinson  v.  Underwood, 
27  Tex.  255;  Hamilton  v.  Brooks,  51 
Tex.  142;  Hall  v.  Dotson,  55  Tex.  520; 
Bradford  v.  Johnson,  44  Tex.  381; 
Wallace  v.  Finberg,  46  Tex.  35; 
Rhodes  v.  Gibbs,  39  Tex.  432;  Fergu- 
son V.  Reed,  45  Tex.  574;  Gregory  v. 
Van  Vleck,  21  Tex.  40;  Cartwrightv. 
HoUis,  5  Tex.  152;  Hollis  v.  Francois, 

5  Tex.  195;  51  Am.  Dec.  760. 

Veiinont:  Dale  v.  Robinson,  51  Vt. 
20;  31  Am.  Rep.  669  {is  liable  for 
debts  contracted  for  its  benefit,  or  for 
her  benefit  on  its  credit);  Priest  v. 
Cone,  51  Vt.  495;  31  Am.  Rep.  695 
(contracts  to  obtain  necessaries  for  her 
separate  estate,  or  for  herself  and  fam- 
ily on  its  credit);  Webster  v.  Hildreth, 
33  Vt.  457;  78  Am.  Dec.  632;  White 
V.  Hildreth,  32  Vt.  265;  Peck  v.  Wal- 
ton, 26  Vt.  82;  [Sargeant  v.  French,  54 
Vt.  384  (credit  must  be  given  to  the 
estate,  and  not  to  the  individual).] 

Virginia:  Harshberger's  Adm'r  v. 
Alger,  31  Gratt.  52  (the  intention  to 
charge  her  separate  estate  must  ap- 
pear); Garland  v.  Patnplin,  32  Gratt, 
305  (her  equitable  separate  estate  is 
liable  for  her  bond;  the  intention  to 
charge  it  will  be  presumed);  Burnett 
r.  Hawpe's  Ex'r,  25  Gratt.  481  (the 
same  as  to  her  bond  as  surety  for  her 
husband);  Muller  v.  Bayly,  21  Gratt. 
521  (and  her  deed  of  trust  or  mort- 
gage to  secure  her  husband);  Frank 
y.  Lilienfeld,  33  Gratt.  377  (the  cor- 
pna  of  the  personalty,  and  the  rents 
and  profits  only  of  her  realty,  belong- 
ing to  her  equitable  separate  estate, 
are  liable  for  her  general  debts;  but  it 
teems  the  land  itself  may  be  liable  for 


a  contract  specifically  charged  upon 
it);  Triplett  v.  Romine's  Adm'r,  .S3 
Gratt.  651;  Peni^  v.  Whitehead,  1? 
Gratt.  503;  94  Am.  Dec.  478;  [French 
v.  Waterman,  79  Va.  617  (following 
Frank  v.  Lilienfeld);  Jones  v.  Degge, 
84  Va.  685;  Crockett  v.  Doriot,  85  Va. 
240  (her  contracts  cannot  bind  her 
after-acquired  separate  estate,  either 
statutory  or  equitable).] 

West  Virginia:  Radford  v.  Carwile, 
13  W.  Va.  572  (only  the  rents  and 
profits  of  her  separate  real  estate  are 
liable.  Her  equitable  separate  estate 
is  liable  for  any  engagement  which 
would  create  a  debt  if  she  were  a 
feme  sole,  except  on  a  bond  or  cove- 
nant without  consideration.  Her  en- 
gagement, in  order  to  bind  such  sep- 
arate estate,  need  not  be  for  her  own 
benefit,  or  for  that  of  tiie  separate  es- 
tate, but  her  contract  of  suretyship 
must  be  in  writing,  in  order  to  bind 
it);  Weinberg  v.  Rempe,  15  W.  Va. 
829;  [Camden  v.  Hiteshew,  23  W.  Va. 
236;  Howe  v,  Stortz,  27  W.  Va.  555.] 

Wisco7isin:  Beard  v..  Dedolph,  29 
Wis.  136;  Todd  v.  Lee,  15  Wis.  365; 
16  Wis.  480;  Krouskop  v.  Shontz,  51 
Wis.  204;  37  Am.  Rep.  817;  McKes- 
son V.  Stanton,  50  Wis.  297;  :JG  Am. 
Rep.  850;  Meyers  v.  Rjdite,  46  Wis. 
655;    Conway  v.   Smith,  13  Wis.  125. 

United  States:  Bank  of  America  v. 
Banks,  101  U.  S.  240;  Cheeverv.  Wil- 
son, 9  Wall.  108,  119. 

States  in  which  the  wife  is  person- 
ally liable  on  her  contracts,  where  she 
has  a  legal  or  statutory  separate  estate. 
For  the  purpose  of  completing  the  view 
of  the  modern  legislation  on  this  sub- 
ject, I  add  a  few  decisions  illustrating 
the  statute  which  renders  such  con- 
tracts enforceable  against  her,  aa 
though  she  was  a  feme  sole,  by  ordi- 
nary legal  actions  and  pecuniary  judg- 
ments. These  decisions  do  not  belong 
to  equity,  but  they  may  throw  some 
light  on  the  question,  What  contracts 
do  charge  her  separate  estate? 

California:  Wood  v.  Orford,  52  Cal, 
412;  Parry  v.  Kelley,  52  Cal.  334; 
Marlow  v.  Barlew,  53  Cal.  456;  Alex- 
ander V.  Bouton,  55  Cal.  15;  [Bull  v. 
Coe,  77  Cal.  54;  11  Am.  St.  Rep.  235; 
Goad  V.  Moulton,  67  Cal.  537;  Burkle 
V.  Levy,  70  Cal.  250.] 


§  112G 


EQUITY    JURISPRUDENCE. 


1686 


dogmas  were  to  be  invaded,  when  the  wife's  legal  estate 
and  title  were  to  be  removed  from  all  interest  and  control 
of  her  husband,  and  she  was  to  be  permitted  to  make 
contracts  based  upon  its  ownership,  the  better  policy 
would  have  been  to  abrogate  her  common-law  incapa- 
cities entirely,  and  to  render  her  contracts  enforceable 
against  her  as  though  she  were  single  by  legal  actions 
and  pecuniary  recoveries  of  judgment.  In  a  few  states 
the  legislatures  have  carried  this  legal  reform  to  its  logi- 
cal results,  and  have  thus  produced  a  system  which  is,  in 
my  opinion,  consistent  with  itself,  and  simple  and  prac- 
tical in  its  operation.  To  furnish  some  illustrations  of 
the  workings  of  this  system,  and  to  present  a  complete 
view  of  the  reformatory  legislation  dealing  with  married 
w^omen's  property,  I  have  placed  at  the  end  of  the  foot- 
note a  few  important  decisions  based  upon  these  statutes, 
although  their  subject-matter  does  not  strictly  belong  to 
equity  jurisprudence. 


Colorado:  Wells  v.  Caywood,  3  Col. 
487;  Coon  v.  Rigden,  4  Col.  275. 

loioa:  Mitchell  v.  Smith,  32  Iowa, 
484,  487;  First  Nat.  Bank  v.  Haire,  36 
Iowa,  443;  Miller  v.  HoUingsworth, 
36  Iowa,  163;  Spafiford  v.  Warren,  47 
Iowa,  47;  Sweazy  v.  Kammer,  51 
Iowa,  64'-»;  [Wasson  v.  Millsap,  77 
Iowa,  762.] 

New  Jersey:  Hinkson  v,  Williams, 
41  N.  J.  L.,  35;  Wilson  V.  Herbert,  41 
N.  J.  L.  454;  32  Am.  Rep.  243. 

Nevada:  Darrenberger  v.  Haupt,  10 
Nev.  43;  Beckman  v.  Stanley,  8  Nev. 
257;  [Cartan  v.  David,  18   ISTev.    310.] 

New  York:  Corn  Exch.  Ins.  Co.  v. 
Babcock,  42  N.  Y.  613;  1  Am.  Rep, 
601;  Maxon  v.  Scott,  55  N.  Y.  247; 
Hier  v.  Staples,  51  N.  Y.  136;  Hinck- 
ley v.  Smith,  51  N.  Y.  21;  Frecking 
V.  Rolland,  53  N.  Y.  422,  426;  Blanke 
V.  Bryant,  55  N.  Y.  649;  Loomis  v. 
Ruck.  56  N.  Y.  462;  Manhattan  etc. 
Co.  V.  Thompson,  58  N.  Y.  80;  Cash- 
man  V.  Henry,  75  N.  Y.  103;  31  Am. 
Rep.  437;  Tiemeyer  v.  Turnquist,  85 


N.  Y.  516;  39  Am.  Rep.  674;  Ackley 
V.  Westervelt,  86  N.  Y.  448;  McKeon 
V.  Hagan,  18  Hun,  65;  Williamson  v. 
Dufify,  19  Hun,  312;  Embree  v.  Frank- 
lin, 23  Hun,  203;  People  v.  Williams, 
8  Daly,  264;  (Saratoga  Co.  Bank  v. 
Pruyn,  90  N.  Y.  256;  Coleman  v.  Burr, 
93  N.  Y.  17;  45  Am.  Rep.  160;  Dick- 
erson  v.  Rogers,  114N.  Y.  406;  Hen- 
dricks V.  Isaacs,  117  N.  Y.  411;  15 
Am.  St.  Rep.  524;  Manchester  v.  Tib- 
betts,  121  N.  Y.  219;  18  Am.  St.  Rep. 
816;  Third  Nat.  Bank  v.  Guenther, 
123  N.  Y.  568;  20  Am.  St.  Rep. 
780.] 

South  Carolina:  Belzer  v.  Campbell, 
15  S.  C.  581;  40  Am.  Rep.  705;  Clink- 
scales  V.  Hall,  15  S.  C.  602;  Ross  v. 
Linder,  12  S.  C.  592;  [Habenicht  v. 
Rawls,  24  S.  C.  461;  58  Am.  Rep.  268; 
Gwynn  v.  Gwynn,  27  S.  C.  525;  Greig 
V.  Smith,  29  S.  C.  426;  Brown  v. 
Thomson,  31  S.  C.  436;  17  Am.  St. 
Rep.  40;  Gwynn  v.  Gwynn,  31  S.  C. 
482;  Building  and  Loan  Ass 'a  v.  Jones, 
32  S.  C.  308.] 


J 


^^Nm^r^ 

>msmi'^^ 

f^ft 

c>.e*   ^ 

■f^'' 

il  ^^5 

l(Jt 

u.y/\;Niji.L/:j. 


mm' 


^':^/^4IT\n..JC^■ 


PI.^J> 


^         ^ 


^a3Alr' 


V)f-CALIFO% 


OP-CAilF(% 


''^•AHVH3n-# 


"'^'"^■^^  ^s\U;UNlVtK>i/^ 


;=JlV 


^7Tlnw\'.cm^^' 


dOS-ANGti/^j. 


LK"  buJlHlK',  H 


AA    000  820  384 


UNIVERSITY  OF  CALIFORNIA   LIUK AKV 

Los  A  nicies 

This  book  is  DUE  on  the  last  date  stamped  below. 

FEB  3     'i^'^ 

SEP  3  0  B78, 

y  T  1 1 1978 

\       ^  1980 

\     ^'^ 

\ 

\ 

\ 

m 

.  w' 


t;*  V  •  ^  '.' 


,  { \   ■  '  y ,       t  '\   .i  if- 


/^/'yV\?y.V'- 


